Helping aging parents manage financial affairs

Discussing critical estate planning issues with aging parents can be daunting, which is probably why such discussions often never take place. One survey showed that 70% of adult children 25 and over had not had an in-depth discussion with their parents about key issues such as wills, health directives and inheritance plans.

"Very few people talk with close family members about important financial topics, such as level of financial security, plans for living arrangements in retirement, inheritance or long-term care," according to "Family and Retirement: The Elephant in the Room," a study done last year by Merrill Lynch and Age Wave.

In a survey commissioned by the National Endowment for Financial Education in 2012, similarly seven in 10 respondents said barriers, including family dynamics such as defensiveness, denial, embarrassment and sibling rivalry, prevented their families from openly communicating about who will make financial decisions when a parent is incapacitated.

Certainly these are difficult topics, but they can be tackled and resolved with a non-threatening, step-by-step approach, according to Arthur L. (Tim) Clements III, who handles trust and estate planning, probate and trust administration and trust and probate litigation at Nicola, Gudbranson & Cooper LLC.

First, let your parents know that you are concerned about what to do if something were to happen to them. Possibly they have already made arrangements. Don't pry about finances, but ask if they have done any estate planning and, if so, whether they have wills, a trust and powers of attorney. If they have taken these steps, get contact information for their lawyer for future use.

Ask your parents for more details about the documents: Is there a living will, a health care power of attorney, a durable power of attorney? What do the documents say about who in the family has what responsibilities? If they've made no plans, suggest that they work with an estate planning attorney to prepare the necessary documents.

Broaching the topic can be very tricky, but it's really a case-by-case situation, depending on comfort levels. For example, doctors can be helpful in starting the conversation when a parent is beginning to struggle with driving and other daily activities.

If you have siblings, the conversation can get very complicated very quickly. Transparency with siblings is extremely important. Practicalities need to be taken into account—such as who lives near your parents and who is in the best position to help them with medical issues, financial issues, daily needs and so forth. Those who live out of town might be able to handle some tasks such as research, e-mailing and phone calls to share the burden.

To access your parents' accounts, you need a durable power of attorney. Even with a durable power of attorney, be respectful and ease into your new role for parents whose health is declining. For example, you might write the checks for them, but let them sign the checks after showing them the bills.

To take care of your parents' finances, you need to know their assets, liabilities, income and expenses. If you don't have this information, look at a recent tax return to identify sources of income and collect their mail for at least three months to find out about bills, income, bank and brokerage accounts and taxes. They may also be banking online, so be sure to identify user names and passwords for all those accounts.

Your parents might have both a lawyer and a financial adviser who have put things in order. Even so, sudden illness or diminishing health will ultimately place the burden upon you and your siblings. Early communication may not make the process pleasant, but will help tremendously.