No one enjoys talking about difficult money matters with those close to us, especially our parents. However, as our parents approach their latter years, it could be important to discuss a few financial matters with them. While it can sometimes be difficult to bring up these subjects, it can often be necessary for fulfilling their wishes and to ensure that they have the financial means to live comfortably as they age. Below are some of the financial questions you should consider asking aging parents.

Is there a Will?

I’ve talked extensively about the importance of young professionals having a Will, and the same holds true (arguably more so) for our parents. A Will helps to decide how a person’s estate is divided when they die. If there is no Will in place, their wealth will be distributed based purely on the laws of intestacy. This could result in people receiving money that don’t necessarily deserve to. The last thing you or your parents want is a dispute or you fighting with siblings or other close relatives.

For a Will to be legally-binding, it’s best to get help from a lawyer and have a Will professionally written. A Will can be amended at any time – it’s never too early to write a Will. If they don’t have one – go ahead and get started on that now!

Have they appointed a lasting power of attorney?

A lasting power of attorney can be given control over various matters if someone is unable to handle these matters due to poor health. A LPA can make decisions about healthcare on someone else’s behalf and be given power to manage their property and assets.

It’s worth knowing who your parents have appointed as LPA, or to make sure they’ve done so. Ideally it should be someone that can be trusted with such matters. If someone cannot make their own decisions and there is no LPA in place, it is still possible to apply for deputyship (which grants similar responsibility) but the process can be a little more tricky. I’ve seen this personally on both sides of my family, and we were always thankful to have had the power of attorney in place.

Will their estate be liable to inheritance tax?

As you discuss their final wishes and review their Will, you’ll probably start wondering about any inheritance you’ll be getting, and what type of a tax might accompany that. Although it’s unlikely that you’ll have an inheritance tax (it starts at $5.3 million) – it’s at least worth confirming based on your federal/state rules and your tax situation.

There are legal ways to avoid paying inheritance tax (or ways to reduce it) that your parents may be able to look into. For instance, some parents will gift their property to children before they die or put money into trusts. Smart planning early on can help you avoid paying tax that you don’t have to!

What insurance do they have in place?

Health insurance could help to pay for essential medical care and potentially nursing care. Life insurance could help to pay for a funeral. The fact of the matter is that we are more likely to consume healthcare as we age, and healthcare is not cheap. Health insurance will go a long way in helping control those costs.

It’s worth knowing whether your parent has any of these schemes in place. You don’t want to fork out thousands on nursing home care only to find out later that they had insurance to cover it, or spend thousands on a funeral only to find out they were covered by life insurance. Potentially it could be a policy they had long ago and had forgotten about!

Have they already looked into funeral arrangements?

Funerals can be very expensive. Life insurance can be one way of paying for these. Others may contribute to pre-payment schemes, effectively paying for their funeral in advance. In other cases, savings may be set aside for funeral costs. 

It’s worth asking whether your parents have set up any schemes. You don’t want to pay for a funeral out of your own pocket only to find out that your parents already had a funding option in place. 

Summary

Money conversations are never easy with family, especially not our parents! However it’s important to ensure there’s good communication and a good plan in place as they age!

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