Talking to Parents About Money
For parents and their children, aging presents a host of financial issues—on everything from managing finances to preparing for medical costs. Given the emotionally charged nature of the topic, adult children understandably shy away from the dialogue.
However, the right and well-timed conversation between children and parents helps everyone think through their options. It’s a tough conversation but an important conversation, since ultimately, if a long-term health care challenge is not planned for, that burden is likely to fall on the next generation. That’s typically not what parents want.
The best way is to broach the topic with empathy. Many parents are motivated by a desire to maintain independence and control over their lives. The good news is that advance planning will help parents to stay in control, particularly financially. To that end, here are some questions you should consider asking your parents:
Are your documents up to date?
Having documentation that will guide health and financial decisions is crucial. According to a 2015 survey by online legal service Rocket Lawyer , 54% of Americans ages 55 to 64 don’t have wills. But this checklist item is a must. A medical power of attorney names who will oversee health care and make medical decisions in the event of an incapacitating crisis, and a financial power of attorney appoints an agent to manage finances during that period.
Are you prepared for long-term-care costs?
Whether a parent needs in-home care or a nursing home, Medicare likely will not cover these costs, so it’s critical to have a plan for financing them. In most cases, those who don’t expect to have the money to pay expenses out of pocket may want to consider purchasing a long-term-care (LTC) insurance policy. (Medicaid will fund coverage only after a parent has become “impoverished,” and it offers limited choices with respect to facilities and care.)
Consumers have a greater variety of LTC insurance options than they did in years past. The traditional stand-alone LTC product is more straightforward in comparison to other LTC options: In exchange for annual premiums, you’ll only get a payout if you need care.
In contrast, newer, hybrid LTC products fuse long-term care insurance with a death benefit. These policies entail paying a lump sum up front to purchase a specified amount of coverage to help pay for long-term care expenses. If the policyholder doesn’t need the coverage but does need the money, he can surrender the policy in return for the principal that was paid in. Alternatively, if the policyholder dies before needing the payout, the policy pays a death benefit to their beneficiaries.
If you have a medical setback and need a rehabilitation facility for an extended period, how will you pay for it?
Medicare typically covers a large portion of the tab for physical rehab, but it’s important to determine how other out-of-pocket expenses will be covered. Additional issues may come up for parents who live alone such as who will watch the house and pay the bills while they’re away.
The important thing is to communicate that you respect what your parents are going through and send out a clear signal that you want them to have the highest quality of life they can get.
For more information, contact The Menashe Morley Group in the Rancho Santa Fe office at 858-381-8113.
The Menashe Morley Group, serving the community for over 30 years: David Menashe is a Senior Vice President and Wealth Management Advisor, and Bruce Morley is a First Vice President and Wealth Management Advisor and John Naviaux is a Financial Advisor for Merrill Lynch, Pierce, Fenner & Smith Incorporated. Past performance does not guarantee future results. Investing involves risk, including possible loss of the principal value invested.Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) and other subsidiaries of Bank of America Corporation (“BofA Corp.”) “Merrill Lynch” refers to any company in the Merrill Lynch & Co., Inc., group of companies, which are wholly owned by Bank of America Corporation. Investment products: Are Not FDIC Insured, Are Not Bank Guaranteed, and May Lose Value © 2014 Bank of America Corporation. All rights reserved.
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