How to Talk to Your Parents About Money, Aging, and Death
By AJ Ayers, CFP, EA, CEP
I wish I could tell you that I have a 5-step solution for making this process easier, but I do not. It's something I struggle with personally and something nearly all of my millennial and Gen-x friends struggle with as well: how do we talk to our parents about money, aging, and death?
We love our parents and generally want them around and healthy for as long as possible, but when we add in the giant pink elephants of money and death into the conversation, things get a lot more complicated.
My own parents have been somewhat interested in the conversation around money and what happens after they pass away. I mean come on, I am a financial planner after all. But to be totally honest, our conversations haven't gotten that far. Both of my parents have promised me there is a will and they are working on “it” but we haven't actually sat down and discussed the money stuff in depth. I don't know where the investment accounts are, I don't know what's in the will, I don't know how I'm expected to be involved, and all of that scares me. I’m going to implement the process I’ve outlined below right alongside you.
The truth is, families are a lot more complicated these days. Blended and fractured families are more common than the perceived “norm” of college sweethearts that stay married till death. I don't have statistics on that, but anecdotally among my community and Brooklyn FI's client base, that is certainly the case. Our parents’ lives are more complicated than they used to be: they live abroad, they get divorced, they get remarried, they have children with other partners, they may not legally marry their life partner, they may live in more than one state during the year.
Unfortunately, most of these conversations around money and death don't get started until a tragic event. Maybe it's a car accident or a cancer diagnosis, or just simply the natural progression of age. As a financial planner, I'm always encouraging clients to be open and transparent about money with their partners (see my guide on getting married) and that advice extends to parents and children.
What I do know is that the only way to truly get a handle on this stuff is to start the conversation.
I HIGHLY recommend this article by Ron Lieber at the New York Times and then this book by Chanel Reynolds, What Matters Most. Seriously, you need to read the book or visit Chanel’s website. She went through a terrible tragedy and turned her knowledge into a helpful website with detailed checklists that I absolutely stan.
So here’s what you’re going to do: schedule a Zoom meeting with your parents or parent and get this stuff all out in the open. Doing this in person is probably a better idea but I don’t want you to use distance as an excuse to put this off for another few months or years. This isn’t going to be easy. There may be a few starts and stops and a few fights, but in the end, hopefully everyone in the family can see how getting organized now will lead to harmony later.
If the relationship is strained or there are multiple generations and siblings from different parents you’re probably going to need an assist from a professional.
Here are my suggested steps to start the conversation about money, death, and aging
Schedule at least two different two-hour time blocks to start the conversation. Schedule one session soon and then another follow-up session a few weeks later to give everyone time to think, digest, and gather missing information. I think that 3-4 weeks is best to give people enough time (but don’t push it out too far).
Have the conversation and take detailed notes. We’ve provided a list of talking points below. Then make sure everyone is very clear on action items. Action items could be: call the attorney to get the old will, schedule time to talk to the new estate planning attorney, or have the child email the advisor at Vanguard to introduce themselves. This is a good time to think about consolidating and simplifying accounts.
Have a follow-up conversation and take detailed notes. Now there should be clear action items like actually signing and witnessing of the will, or finalizing the estate plan with the attorney.
Check in 6 months later to make sure all the tasks and action items have been completed. Schedule time to check in and check off the boxes.
Tips to get organized
1. Put the most responsible person in charge who actually has the bandwidth to deal with all this stuff. If you have siblings (step + half too!), everyone needs to feel included. The most organized folks should be assigned the most important jobs (like scheduling the call with the estate planning attorney). A common mistake is to put someone in charge who is responsible but is actually just too busy to get on the phone with the bank.
2. Make digital copies of paper documents and save them to the cloud and share them with all siblings. Google Drive works well for this. Use a scanner app on your phone like Tiny Scanner and keep the originals in a safe place like a fire and waterproof safe or at the attorney’s office.
3. Start a shared secure accounts list (I like Gsheets best). Include the following information: the account type, how to access it, any relevant phone numbers or contact people. This is sensitive information so it’s okay to leave out account numbers and passwords. Just knowing that there’s an account at Wells Fargo and James Smith was the last advisor there can save a massive headache later.
4. Invest in a relationship with an estate planning attorney. We’re happy to make a recommendation.
5. Try to simplify as much as possible. Consolidate bank accounts and do the heavy paperwork lift NOW during this process. It’s a lot harder after the illness or death.
Key Topics to Discuss
1. Is there a will in place that needs to be updated?
Try to get the actual will. Oftentimes there is a will but it hasn't been witnessed and notarized (which means it's just a worthless piece of paper). Many families will find that the will is out of date and perhaps included an ex-spouse or doesn't account for major asset additions like a property purchase or successful business started after the original will was drafted.
If there isn't an up-to-date will in place, schedule time with a trusted estate planning attorney familiar with the laws of your state. We’re happy to provide a referral.
2. Do they have a financial advisor or planner or lawyer? If not, get one!
Talk about who the key advisors are here and reach out to them. At least introduce yourself as the child and get at least the name and numbers of the advisors listed on the investment accounts. For example, if your parent is/was a teacher, they might have a financial advisor they’ve worked with for years at TIAA. If there aren’t any professionals involved or your parents don’t like their assigned (or chosen) professionals, get new ones!! Look for a fee-only fiduciary financial planner who can help them get organized.
3. Who will be the executor or executrix of the will?
This is an important one and may not be decided quickly. Talk about who will be named the executor/executrix of the will. This person is responsible for managing the affairs and executing the deceased wishes. Often it’s the most responsible sibling or a trusted aunt or uncle or family friend. Try to pick someone of a younger generation. If your grandmother’s 1973 Stingray corvette is supposed to go to cousin Elvis, it’s the responsibility of the executor to get it to him. Executors are often compensated for their time and services.
If there’s a conflict or you anticipate there will be conflicts when your loved one passes, consider a third party, professional executor - an attorney or trust company. It could potentially save a lot of fighting and headaches but is more expensive than using a family member.
4. Who are the beneficiaries on the accounts? When were they last updated?
Many folks have a trust or a will in place, but don’t recognize that beneficiaries, transfer on death designations, and joint tenants with right of survivorship often, if not always, supersede those documents. Part of this review should be a comprehensive look at all account beneficiaries and any joint accounts to determine if they’re titled properly. Beneficiaries are very common in the area of retirement accounts, life insurance policies, annuities, and even investment accounts with a TOD, POD, or JTWROS designation. Just to be clear: if the new will says all the assets will be split between you and your two siblings but the million-dollar 401(k) has the ex-husband listed as the beneficiary, the ex-husband gets it all. Paper covers rock, beneficiaries override the will.
5. Is there life insurance or an annuity?
You will need to get the contact information and a most recent statement. These products will sometimes lapse or change hands if the premiums are not paid so you'll need to track down the current servicing company for the policy.
6. Do they have access to all accounts?
Make sure there is at least online access with a password that works, or a paper statement and the contact number of the person to call. Be prepared to do a lot of “forgot password” and two-factor authentication.
7. Is a Power of Attorney in place?
You’ll probably want to discuss one of these with your attorney or use a free service like Rocket Lawyer. A “springing” power of attorney allows the named person to access financial information and make decisions on behalf of the individual who has become incapacitated (usually through dementia). This one is incredibly important to get in place as soon as possible. There are many stories of a parent slipping into dementia and forgetting about large investment accounts that are then potentially lost forever. Once the illness sets in, it’s too late to have them sign a Power of Attorney. The Alzheimer’s Association is a great resource.
If there is one on file, it’s important to review when it was signed. A bank or investment institution is less likely to recognize a Power of Attorney that was drafted on a typewriter in 1985. It may be worth getting the documents updated to avoid that surprise later.
8. What sort of social security can they expect and are they already taking it?
If it doesn’t exist already, set up an account with the Social Security Administration and pull the most recent statement. That way, everyone will know what government benefits may or may not be coming.
9. Have they thought about end-of-life instructions?
This is a tough one but it’s SO important. Seriously, please read Chanel Reynolds’s book. An advanced directive will spell out which medical treatments you would like to receive should you end up on life support. A living will is one of the more common legal forms that individuals should consider. There are forms online to help but it’s definitely best to check with your estate planning attorney to understand the laws of your state. This one is especially important for unmarried individuals.
10. If they have reached the age of 72, are they taking the correct Required Minimum Distributions (RMDs) from retirement accounts?
The IRS doesn’t allow you to keep tax-advantaged money in your 401(k) forever. Tax-deferred accounts like 401(k)s and IRAs have a stipulation called an “RMD” that requires the account owner to withdraw and pay tax on a certain amount each year. The actual amount is usually calculated by the financial institution or financial advisor but there can be LARGE penalties if the RMDs are ignored. The actual calculation is a combination of the account owner’s age, life expectancy, and the amount of money in the account. RMDs for 2020 were waived due to the global pandemic. If you have already inherited a retirement account, you are likely also required to take RMDs, but the laws are different for the next generation so check with your financial planner.