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There are few things more awkward to talk to your parents about than money. Especially when it’s their money you want to talk about. But unfortunately, it’s a conversation that needs to happen earlier than you think.

Over 70% of adults don’t have a will and nearly 50% of them are over age 55. And the number of adults with estate plans has decreased by almost 25% since 2017.

If your parents don’t have the right documents or are hiding financial information then helping to care for them can become a huge burden on everyone involved.

Financial Journalist and author Cameron Huddleston knows this well. In her book Mom and Dad, We Need to Talk, Huddleston shares her story of waiting until it was nearly too late to talk to her mom about her finances. She also shares others stories of lengthy and expensive legal battles that could’ve been avoided with the right conversations at the right time. Listen to Podcast 326 to hear our conversation with Cameron and more about why we shouldn’t delay having this discussion with our parents.

When Should You Talk to Your Parents About Their Finances?

It’s never too early to talk to your parents about their financial situations. In fact, the earlier you start, the better.

When you start early you can talk in hypotheticals and avoid referencing scenarios that might sound accusatory. If you wait until there’s an emergency then emotions and fear can get in the way of productive conversation and negatively impact their decisions.

More importantly, if you wait until they’ve been diagnosed with an incapacitating condition then they legally won’t be able to sign some of the important documents you need to help carry out their wishes. And that’s when the time-consuming and expensive court proceedings ensue every time anyone needs to make a decision on their behalf.

Have financial conversations with your parents when they’re healthy and in a setting that’s private. Avoid conversations like these on holidays because they’ll be more focused on enjoying the celebration or hosting people and may not be as receptive.

Finally, wait to talk to them until after you’ve talked to your siblings. Your siblings don’t need to be present for the conversation but make sure you let them know what you’re doing, why you’re bringing it up and get any input they might have in case your parents ask.

What Financial Matters Should You Discuss With Your Parents?

You don’t need to know everything about your parents’ financial lives. Start as vaguely as you need to and as they become more comfortable talking about money, make sure to discuss these four important documents that’ll protect both of you from unnecessary hardship.

1. Last Will or Living Trust

A will or trust indicate how you want your property and other assets divided after your death and who’s responsible for distributing them. A will is a legal document that and can be changed or revoked at any time up until the person’s death or the person becomes unable to make sound decisions.

A trust is a legal arrangement that allows a third party to manage and distribute your assets in life and after death. Trusts offer more control of assets, but they’re more expensive, difficult to set up, and require continual management.

Many people have the impression that you don’t need a will or trust unless you have a lot of assets and nothing could be further from the truth. A will states who you want taking care of your children and how you want to be cared for.

It’s essential your parents have a will or trust. If they don’t decide where they want their assets to go, the state will decide and it could cost you up to 4% of your parent’s estate in attorney fees and court costs.

Creating a will or trust is easier and more affordable than ever. Companies like Trust & Will offer state-specific estate planning and information to help you decide which route is right for you.

2. Financial Power of Attorney

The financial power of attorney is a legal document that grants someone the authority to make financial decisions for you.

Huddleston’s biggest wake-up call to the importance of a power of attorney came when she saw her mom was having memory problems but waited until just before she was diagnosed with Alzheimer’s to get one signed.

If she’d waited for that diagnosis her mom wouldn’t have been considered mentally competent enough to sign them and Huddleston would’ve had to go to court anytime she needed to make a financial decision on her behalf.

A stroke or coma also prevents your parents from signing a power of attorney so make getting this document a priority. If your parents don’t want to give anyone power of attorney right now that’s fine, too. They can opt to sign a springing power of attorney that “springs” into effect upon the occurrence of a certain event.

3. Advance Health Care Directive

An advance health care directive, also called a living will, is a legal document that spells out your wishes for medical care and procedures should you become unable to communicate them. Decisions including feeding and breathing tubes, life support, pain management, life-sustaining medical treatments, and more are all laid out in this document.

The directive also includes a health care power of attorney, a legal document that assigns someone the responsibility of making healthcare decisions on your behalf. Just like the financial power of attorney your parent must be considered mentally competent in order to sign it.

Once your parents have one, encourage them to give a copy of their advance health care directive to their doctors to keep with their medical records.

4. Important Financial Information

Make sure your parents have all their important financial information in one place that’s easily accessible should it be needed. A binder or safe with their information in it will come in handy.

Some items to include in the binder are:

  • Social Security numbers
  • Medicare or Medicaid numbers
  • Driver’s License numbers
  • Account numbers, usernames, and passwords for all financial accounts and subscriptions
  • Locations of house keys and keys for bank lockboxes
  • Home safe combinations or keys
  • Location of property deeds, appraisals, and car titles

What if Your Parents Are Hesitant?

It’s very likely your parents won’t want to talk about these things with you. They may have been taught money is taboo or maybe they’ve mismanaged their money and don’t want you to feel like you have to care for them.

Whatever the reason is, there are ways to bring up the conversation gradually that get you the information you need and respects their independence.

Ask questions that focus on what they want life to be like as they age rather than directly about money. Their answers are likely to give you clues as to what their money situation is like.

Related: DR Podcast 299: How to Help Others with Their Financial Struggles

You can also ask them for advice or their opinion on anything related to finance or estate planning. The answers might lead them to open up about what they’re doing regarding the matter.

Stay Positive and Be Sensitive

“You want to find a way to focus on the positive,” Huddleston says. “Planting these seeds in your parent’s head will at least hopefully get them thinking.”

You don’t need to know everything that’s going on behind the scenes of your parent’s life but opening the lines of communications and finding out if they have important estate planning documents will help you both have smoother transitions down the road.

Author Bio

Total Articles: 10
Jen Smith is a personal finance writer and creator of ModernFrugality.com. She and her husband paid off $78,000 of debt in two years, and now she's passionate about helping everyday people gain control of their spending and optimize their income. When she's not writing, Jen is figuring out life as a new mom and enjoying as much time as possible in the Florida sun.

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