My father was never a financial whiz, but he was plenty capable of handling finances for himself and his wife. Or so we four siblings — and he — believed.
At 86, he had to give up tennis. By 87, his health was fading. As the child with geographic proximity, it was my job to look through his files.
It wasn’t long before I realized that Fred, a “financial consultant” he’d met at a church-sponsored seminar, had “invested” $50,000 in what was supposed to be a Lutheran church fund. When I requested copies of the paperwork, Fred sent a Word document on a blank page without letterhead — and without any legal validity.
What ensued was downright ugly, complicated by pride (my parents’), and accusations (by Fred) that we kids were trying to “steal” money.
In these pre-Madoff days, the Collier County Sheriff’s Office declined to get involved in what was clearly small-scale fraud. Despite the best efforts of an experienced journalist (myself) and a former gubernatorial candidate (my sister), Fred walked away with money that could — and should — have gone to my stepmother.
It’s not just fraud that can complicate aging. As our parents — and we — age, memory, pride, illness and an ever-changing universe can lead to unpaid bills, confusion and less-than-optimal decisions — a situation poignantly depicted in the recent film, Nebraska. Although we may try to deny it, the clock is stacked against us. As our bodies wane, so does our financial acumen. Research at the University of Miami indicates that investors over 70 underperform when compared to younger investors.
And it’s not always the parents who are the problem. Sometimes, grown children are reluctant to face conversations about the inevitable.
Financial experts and those who have faced such scenarios offer these tips:
▪ Discuss potential problems before they arise. The best-case scenario is to for parents and grown children to discuss financial wishes and end-of-life planning before there’s a crisis. A transition — such as retirement or selling the family home — offers a timely opportunity for both parties. If children are initiating the topic, they should do so gently, says Nancy Stein, a Miami epidemiologist who runs SeniorityMatters.com, which helps family caregivers identify resources for aging parents. As a starting point, “ask if it would be OK if you go with your parents to see their financial advisor, so that person knows you,” she suggests.
▪ Have an agenda. Decide what issues you want to discuss and how you want to frame the conversation. If there’s a problem, “talk to all the siblings, so you’re all on the same page,” Stein says. Respect is key. “Treat them like a peer,” she says. “Don’t tell them what to think or that you don’t think they’re doing a good job.” Instead, she advises telling parents that you’re concerned and want them to be safe. Above all, she says, “listen to your parents.”
▪ Set aside dedicated time to start the conversation. That doesn’t mean the Thanksgiving table. In most cases, unless there’s an unreliable family member (such as someone with a drug problem), include all adult stakeholders. Recognize that this first conversation may only be a door-opener.
▪ Consult a trusted outsider. If there’s resistance, ask if you can all visit with the financial advisor, a trusted family member, a clergy member or a psychologist who can help create neutral ground for both parents and children. “We have situations where the parents have everything taken care of and in good shape, and they might have children who think their parents don’t know anything,” says Ben Tobias, president of Plantation-based Tobias Financial Advisors. In other cases, parents’ abilities have slipped and action is required.
▪ Create an “emergency book” or resource binder. It should list advisors, accounts, doctors, insurance policies, lawyers, living wills, medical powers of attorney and other critical information in a single place. Be sure a responsible friend or family member knows where to find it.
▪ Consider engaging a trained “daily money manager,” especially if parents and children live far apart, or parents are uncomfortable with sharing information directly with children, Stein advises. Look for a manager who will communicate with all parties. Check www.aadmm.com for resources.
▪ Plan beyond finances. Take care of legal documents such as living wills and medical powers of attorney, and give copies to relevant doctors. But beyond that, Tobias says, be sure parents and children discuss what the parents want if they get sick. “Some people will want the best quality of life possible while they’re alive, while someone else might want to start treatment early to prolong life,” he says.
▪ Communicate about special wishes. If a parent plans to divide an estate unequally, they should explain to all parties why — while everyone is still alive — and be sure the arrangement is in writing. If there are items that a parent particularly wants to go to a specific person, that should be put in writing as well. “It’s all communication,” Tobias says. Otherwise, “you can have a family destroyed for no good reason.”
▪ Be clear about responsibilities. Don’t give the same authority to more than one person, Tobias says; it’s a recipe for disagreement. If parents want responsibilities to be divided, its better to give one child the legal responsibilities and another child the medical power of attorney.
▪ Have a legal power of attorney — but keep it safe. Tobias suggests putting it in a safe deposit box where it can be accessed, and activated, but only in an emergency.
▪ Revisit the family plan. “Once the conversation gets going, it usually just continues as everyone gets more comfortable,” Tobias says. If that’s not the plan, he advises, have a family review at least every other year.
Outsiders can help
Whether your parents (or you) turn to a banker, a family lawyer or a financial consultant for advice, Carolyn Rosenblatt, author of books including ‘The Family Guide to Aging Parents’ and ‘Guide to Working With Aging Clients,’ suggests addressing these questions at age 65:
- If you became impaired for any reason and could no longer make financial decisions for yourself, who would you want to take over for you?
- Have you signed a durable power of attorney appointing that person to specifically act on your behalf if you became incapacitated?
- Would you be willing to sign a waiver of your privacy rights that allowed your financial advisor to contact someone you've appointed if they became concerned about your mental capacity to make safe financial decisions? Have you given that person authority to act on your behalf?
- (If appropriate:) Have you had any conversations to help your heirs prepare for handling the inheritance you plan to leave them?