How to be prepared to help our parents make financial decisions when they need it most
Tips to make the tough talk easier, and what to address at a minimum.
If your parents are aging or if a parent's health is declining, it's likely that you've considered, maybe even worried, about their long-term situation. But how much do you know about your parents' finances? If you're like a lot of Canadians, you probably have no idea what your parents want you to do with their money when they're no longer able to make those decisions. A 2017 CIBC poll found that 62 per cent of Canadians with a parent over the age of 65 admit they have not yet had the money conversation mainly because it makes them uncomfortable.
Look, it's a difficult topic, and a personal one, but one that you probably want to address if you're going to be of practical and not just emotional support for parents when they need it. So how can you help your parents and yourself prepare?
Ease into it
Acknowledge that it's an uncomfortable topic — aging, money, health wishes — not exactly the fun topics. "I think the important thing is to broach the subject from a place of love and compassion," says Shannon Lee Simmons, a certified financial planner and author of Worry-Free Money. Let your parents know you're interested in knowing their plans. They probably want you to step in but might be afraid to ask. The poll found that 89 per cent of Canadians with children also want their adult children to be ready to step in and help with care and financial support.
One way is to join them in their meetings with their advisory team. "Ask to come with them to a meeting with their financial planner or investment manager," says Simmons. "Let the parents run the meeting. Don't barge in. Just sit there and listen and be supportive. Your job is just to see what's going on and not to pass judgment on your parents' financial decisions.
Know the paperwork
As parents get older, it's important that they have up-to-date paperwork and have it stored in a safe place. That way you know where everything is and can access them in the worst case scenario. This includes things like wills, tax information, bank account information, insurance and investments. Know exactly where your parents keep this information: it could be in online, in their safety deposit box or their home safe.
Consider a Power of Attorney
A Power of Attorney is a legal document that gives a person the authority to manage your property and finances on your behalf. When it comes to working with your parents, this document can help your parents decide how to they want their money managed.
Simmons says "Essentially, if something happened to an aging parent and they couldn't manage finances unexpectedly, an adult child should be able to step in and help if they've got Power of Attorney for property. This is, of course, assuming that adult children have their parents' best interest at heart."
There are two types of Power of Attorney, the general one which allows someone to manage your finances while you're mentally capable; and there's the enduring or continuing power of attorney, which lets your attorney act on your behalf for your finances and property should you become mentally incapable. Decide which one is right for you and your parents.
Keep the conversation going
This isn't something that can be organized in one day. Financial situations and your parents' decisions can change so keep talking with them about it. Help them find expert advisors that they like and have their best interests in mind, and work with them to create a plan and a Power of Attorney that works for their needs.
The uncomfortable conversations aren't great but having them now can help you avoid future fights and the stress if something happens and a parent is unexpectedly incapable of making financial decisions.