Free Talking with Aging Parents About Finances - Montana

Talking with Aging Parents about Finances
by Marsha A. Goetting, Ph.D., CFP®, CFCS, Extension Family Economics Specialist and Professor, Montana State University, Bozeman, and Vicki L. Schmall, Ph.D., former Extension Gerontology Specialist and professor, Oregon State University, Corvallis

MontGuide
MT199324HR revised 12/08

Provides strategies for dealing diplomatically with family finance issues with aging parents.

Sometimes people hesitate to discuss financial concerns with their parents for fear of appearing overly and adult children will face the challenge of talking about interested in their inheritances. After all, talking about the financial issues associated with potential chronic passing on Mom and Dad's money usually means illness, disability, mental incapacity or death. Rationally, talking about the circumstances under which it will be we may know that the best way to minimize feelings transferred. Few of us want to start a conversation with, of helplessness and stress is to plan ahead. Emotionally, however, we may find it difficult to talk about these issues. "Dad, when you die..." or "Mom, if you become unable to make decisions...." The situation can be more complicated if there have been Planning ahead requires years of underlying tensions or anticipating negative situations misunderstandings among parents Each family is unique. While ­ dependency, disability, and their adult children. this publication speaks to incapacity, and death ­ and This fact sheet provides strategies the grown children of aging exploring solutions to these to help overcome barriers that often uncertain, hard-to-face parents, the authors recognize hinder conversations with aging problems. Discussion of such family members about money. that in some families it may topics can make everyone feel It also explores alternatives to be the parents who need to uncomfortable or uneasy. Most consider if a parent is healthy but of us do not like to think of the persuade their children to needs assistance with finances, day when our parents may not and examines legal options if one talk about future financial be able to manage their finances. or both parents should become arrangements. We hope that In fact, parents themselves incapacitated. worry about becoming mentally the material included here Strategy No. 1: Plan ahead incapacitated, outliving their will be helpful to older family Many families do not discuss retirement savings, or facing members trying to get finances until a crisis occurs bankruptcy caused by long-term ­ when it may be too late. health-care costs. Some may have reluctant "youngsters" to Once a parent suffers mental heard the sobering statistic that help them plan for the future. incapacity, options are reduced, more than 90 percent of elderly and procedures become more nursing home residents find complicated and costly. In addition, others including themselves in poverty within a year of entering the home. social workers, physicians, lawyers, judges, and courtDespite these anxieties, there are good reasons to plan appointed guardians and conservators may become ahead. If families understand the financial and legal issues involved in the decisions. Although such professionals involved in planning for incapacity, they may protect typically are competent, they may be unaware of a parents' assets from mismanagement, fraud or exploitation parent's wishes because their involvement was initiated by others. Although it will not reduce the emotional pain after mental capacity became an issue. that accompanies disability, planning ahead can:
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· helpavoiddecision-makingintimesofcrisisandmake decisions easier in difficult times;

Remember, it's difficult for many people to talk about finances, especially when discussing incapacity and inability to manage. Talking about potential loss of · reduceemotionalandfinancialupheavallateron; control can be even more difficult if the older person is · ensurethatyourparents'life-style,personalphilosophies already experiencing health changes. Grief, frustration, uncertainty and anger may be expressed. Feelings are and choices are known before the time comes when likely to be particularly strong if your parent fears that they are not able to participate in making decisions; he or she is giving up control. Even if these feelings are · increasetheoptionsavailabletoolderpersonsandtheir not verbalized, be aware that your parents may have families; them. Be sensitive to and acknowledge your parent's feelings and preferences, recognize his or her needs to be · decreasethepossibility independent and in control, that the family will have to and do all you can to maintain engage in more intrusive, Be sensitive to and your parent's dignity. restrictive activities, such Try to imagine how the acknowledge your parent's as taking court action to situation looks and feels from seek a guardianship or feelings and preferences, your parent's perspective. Ask conservatorship; yourself, "How would I feel if I recognize his or her needs · reducedisagreementsamong were in Dad's shoes?" Give your siblings about "what Mom parent your attention, listen to to be independent and in or Dad want" and how what is said and communicate control, and do all you can to assets should be handled. your understanding. Parents who sense empathy and maintain your parent's dignity. Planning ahead does not understanding are more likely prevent all problems, but it to listen. does provide parents with A good way to start a more options and enables discussion is for all family members to express good their families to act more effectively. intentions and a willingness to listen carefully. The objective is to set the right tone. Avoid an aggressive Strategy No. 2: Talk among family members approach that may sound like a power play. Don't say, Discuss the future with family members while all parties "I know you're going to have financial problems as you are comparatively healthy and financially secure. Perhaps get older, and I know how to solve them for you." Make the issue could be raised as a result of a life event, such as a friend's move into a long-term care facility, the extended it very clear that you are acting out of concern, not self-interest. An effective way to express this concern is hospitalization of a relative following a heart attack or the to begin with "I" instead of "you." "I'm worried that if death of an acquaintance who had no will. something happens to either one of you, we won't know Another way to begin a conversation is to share your what to do." Or, "With the rising costs of health care, preferences and plans in the event of your own serious I'm concerned that a major illness could wipe out your illness or death. This may open the door to discussion. resources." Remember, mental incapacity is not always a function Respect your parents' right to make choices as long of getting older; a debilitating accident could happen as they are capable of doing so. In some cases, an older to anyone, regardless of age. Parents may question the person's view of what is best for them may differ from that motives of adult children who express concern about of other family members. This does not mean that any parental finances but have not prepared their own living one view is wrong. Differences of opinion may result from wills, durable powers of attorney or powers of attorney different attitudes, values or desires. Even if you disagree for health care. with their choices, show respect for your parents' right to When and where discussions are held can have a make choices ­ it's essential for an open discussion. tremendous impact on outcome. If possible, avoid Unless your parent clearly has passed the point of discussion of finances during such emotionally demanding events as holiday celebrations. A relaxed, shared effective functioning, you should not presume to decide what is best for him or her. As long as your parents are activity, such as walking, golfing or baking may diffuse some of the tension when the conversation turns to money. healthy and capable, the participation of other family
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members in their financial affairs should be by invitation only. Although it may be frustrating to you, it is perfectly legitimate for parents to say that there are some topics they choose not to talk over with the "kids." They have a right to financial privacy! If your parents don't feel comfortable talking directly with you about their personal finances, suggest that they talk to another family member, an attorney, or a financial advisor who specializes in working with older persons. Another possibility is to send your parents appropriate books or articles from financial magazines and newspapers. MSU Extension publishes MontGuides (fact sheets) on estate planning, living trusts, powers of attorney and living wills. (See "Further Information" on p. 7 of this MontGuide). Other sources of information include the American Association of Retired Persons, the Montana Office on Aging, and Area Agency Offices on Aging. (See list of organizations on p. 7 of this MontGuide).

Family finance discussion points
Do you have a will? If so, where is it located? Have you granted someone a durable power of attorney? If so, who has the power, and where is the document located? Have you written a power of attorney for health care? If so, who has the power, and where is the document located? Do you have a safe deposit box? Where is the box located and where is the key? Where is the list of contents? What is the location of essential personal papers--birth and marriage certificates, dissolution of marriage documents, Social Security and military service records? Where are life, health and property insurance policies kept? Have you made a list of investments (savings accounts, certificates of deposit, stocks and bonds, etc.)? What are the mailing addresses of the institutions that have the investments? Have you made a list of the personal and real property that you own? Where is the list located? Who are your financial advisors? What are their names and addresses? Have you developed a letter of last instruction? If so, where is it located? If you have a retirement program, is there a death benefit for survivors? If so, whom should the survivors contact? Do you have a living will? Is your living will registered at the Montana End-of-Life Registry? (See MontGuide MT200602HR, Montana End-of-Life Registry.)

Strategy No. 3: Hold a family meeting Another approach is to hold a family meeting. Phone or write your parents and explain that you and your siblings would like to discuss some concerns at a convenient time when the family is together. The family member most likely to be listened to may be the best person to make the call to the parents. If a phone call or letter initiating a discussion about these issues would upset your parents, you may want to wait until the family is together. At that time you can explain that you would like to have a family conference to discuss financial decisions that would have to be made if one or both parents developed a chronic illness, became disabled or mentally incapacitated, or died. If possible, however, avoid emotionally charged and tiring times for the talk. Involve appropriate family members. Your parents' wishes should determine who takes part in the discussions. Some families have found it advisable to include as many members of the immediate family as possible. Excluding an adult child without his or her agreement may result in problems later. If a parent has divorced and remarried, it is appropriate to include the new spouse in the discussions. Parents should decide whether or not they are comfortable with sons- and daughters-in-law present. Regardless of who is involved, everyone should respect the parents' need for privacy regarding their financial specifics. If family relations are so tense that some adult children will not participate in a family meeting if other siblings are present, it may help to suggest that an outside person

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Adult children who try to make financial decisions such as a lawyer, advisor, social worker, or family counselor or therapist facilitate the meeting. Often, the for their parents during the meeting because they think mere presence of an "outsider'' will keep the mood calm they are the "experts" can become the focus of resentment and businesslike and will keep the conversation on course. from both the parents and siblings. Keep in mind that the However, an outsider's presence may prevent openness purpose of the meeting is to discuss money issues and the among family members. You decide what's appropriate for parents' wishes, not to demonstrate the financial wisdom of the siblings. your situation. Prepare for the meeting. Before the family meeting, Follow up on the discussion. At the end of the make a list of concerns to be discussed and questions that meeting, review the notes and encourage everyone to act must to be answered. (See promptly on any decisions that were made. A son may check list of discussion points p. 3.) Family members may have on the costs of long-term care Remember that some insurance while a daughter gets a parents may not feel to maintain a delicate balance copy of the living will declaration. comfortable divulging all One parent may visit the Area between providing assistance this information. It is not Agency on Aging, while the other important that everyone and assuming control. Your writes AARP for information. know the details of their Other actions may involve setting parents' financial situation. parents are likely to resist up a meeting with an attorney What is important is that strongly if you take a "parentor financial planner to answer the parent has: questions about estate planning like" stance with them. · gatheredtogether and other matters. If parents are financial information, too frail to accomplish the tasks, · madeknowntoatleast jobs can be divided among family one family member the members based on time available, skills and geographic location of important papers, proximity. However, parents who are capable can do the · preparedforthepossibilityofincapacity,and tasks themselves. · consideredhowtopayforlong-termcareshouldthe Remember to appreciate your parents' capabilities. Too need arise. often, when people become frail we tend to focus on what they can no longer do. Although the proportion of older Before initiating the discussion, decide who will take persons reporting difficulty with one or more personal notes. At least one person should record any items that require follow-up, such as confirming who was designated care activities rises from 15 percent for people aged 65­69 to 49 percent for people 85 years old and older, to have power of attorney or checking into the cost of it's important to focus on what your parent can continue long-term health care insurance. to do and allow him or her to retain as much control as At the meeting, start with the basics. Begin by possible over his or her finances. making a list of where financial documents are kept. Important records include savings and investment Alternatives and legal options accounts, Social Security numbers, insurance policies, Some parents have difficulty accepting any kind of pensions, contracts, and debts. And while you are financial counsel, especially from their adult children. expressing concern about your parents' financial records, Family members may have to maintain a delicate balance you should also be able to account for your own. Your between providing assistance and assuming control. Your parents may question your sincerity if you say they should parents are likely to resist strongly if you take a "parenthave this type of list when you don't have one. like" stance with them. Be willing to compromise. For example, a mother who has said she would not go to a nursing home may Helping out with money management prefer that alternative to living with a daughter whose Older persons with limited mobility, low vision, loss of home is 1,500 miles away. Whereas in a local nursing hand dexterity, or failing memory may ask for assistance home friends and relatives could stop by and visit, in her in managing their finances. Needs may be limited to help daughter's community the mother may know no one with reading fine print, balancing a checkbook, preparing beyond her immediate family. checks for signature, or dealing with Medicare and other benefit programs. People who are home-bound because
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of poor health, but still able to direct their finances, Explore the full legal consequences of a joint tenancy with may need someone to pay the bills. By reason of severe an attorney before selecting this option. disability, some older persons need someone to manage all Representative payee. If disability makes it hard for of their financial affairs. a parent to manage pension or public benefit income, There are several options for older people who need an adult child, other relative or caregiver may become a assistance in managing their finances or who may need Representative Payee to receive and disburse funds for assistance in the future. These include joint checking the disabled person. Social Security, Veterans Affairs and accounts, powers of attorney, living trusts, appointment of other public agencies may appoint a representative payee a representative payee, conservatorship, and guardianship. if a beneficiary is unable to manage funds. Government Each alternative agencies prefer to appoint a has advantages and spouse, a relative such as an disadvantages that adult child, or a friend. There are several legal options for must be weighed in To arrange for representative older people who need assistance light of your family's payee status, contact the circumstances. appropriate agency for an in managing their finances or who Joint checking application form and instructions. may need assistance in the future. accounts. Joint Medical confirmation that the checking accounts older person is not able to manage These include joint checking provide an easy way his or her benefit payments is to sign checks and required. The benefit agency accounts, powers of attorney, pay your parent's bills provides instructions on how the living trusts, appointment of a while your parent keeps funds are to be held, accounted a sense of control, for, managed and disbursed. representative payee, particularly if he or she Power of attorney. A power conservatorship, and guardianship. retains the checkbook. of attorney is a written document A joint account can in which a person (the principal) be established by gives another person (the putting your name on the signature card as an additional attorney-in-fact) legal authority to act on his or her behalf authorized signatory or by having your name added on in financial transactions. Having confidence in the person both the checks and signature card as joint tenants with to whom a power of attorney is given is critical. Since right of survivorship. Because such a designation means no one supervises the person who has power of attorney, the joint owner will have as much access to the account abuses are possible. as the parent, a family member who would be tempted to A person may give either a general power of attorney or convert the account to his or her own benefit should not a special power of attorney. A general power of attorney be designated. is a broad grant of power for the person named as the A joint account with right of survivorship means that attorney-in-fact to perform any financial transactions on when one owner dies, the account automatically belongs behalf of the principal that the person could do himself to the survivor. Other family members would not receive or herself. A special power of attorney is limited in any of the assets in the joint account. This designation scope, authorizing the designated person to do a limited supersedes any bequests written in a will. number of financial transactions or one transaction such For example, Mrs. Jones wrote in her will that she as withdrawing a specified sum of money from a savings wanted the balance in her $10,000 checking account to account to pay bills. A power of attorney can be granted go to her daughter, Susie. Unfortunately, the assets didn't to last for a specific period of time such as a month, or for go to Susie because Mrs. Jones had the account in joint an indefinite period of time. In either event, the principal tenancy with right of survivorship with her son, Johnny. If retains the right to revoke or withdraw the power at Mrs. Jones had had the account in her name only, Johnny any time upon notice of intent to the attorney-in-fact would not have received the $10,000. Instead, the money and other interested persons. The power of attorney would have gone to Susie as indicated in Mrs. Jones' will. automatically terminates on the death or mental incapacity of the principal. If not properly handled, a joint account can present complications in terms of taxes, eligibility for government benefits and disposal of funds at death for either party.
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A durable power of attorney does not terminate if the person granting the power becomes mentally incapacitated. A durable power of attorney can also be written so that it "springs" into existence only if and when a person becomes incapacitated or incompetent, as diagnosed by a physician, and is unable to direct his or her own affairs. However, such a "springing clause" must be defined very clearly or it may not be honored by financial institutions. (For more information, see MontGuide MT199001HR, Power of Attorney.)

Understanding the financial and legal issues involved in planning for incapacity may help to protect parents' assets from mismanagement, fraud, or exploitation by family members, other caregivers or guardians.

Living trust. A living trust is another way a person can assure management and protection of assets if he or she becomes incapacitated in the future. A trust is an arrangement whereby designated assets are transferred from one person (grantor) to another person (trustee) who holds and manages the assets for the benefit of the beneficiary. The grantor, trustee, and beneficiary may be the same person or they can be different. The trust agreement contains specific instructions about the management and distribution of the assets to the beneficiary. For example, a mother may name herself as trustee of the assets until she becomes incapacitated, at which time her daughter will take over the duties of trustee. Unlike a will, a trust is not subject to probate and does not generally become a matter of public record. Get an attorney's help in setting up a trust to protect everyone's interests. The person drafting the living trust should understand restrictions on Medicaid eligibility

for beneficiaries of living trusts, particularly if there is any possibility the person may need long-term care. (For more information, see MontGuides MT199612HR, Revocable Living Trusts, and MT199511HR, Medicaid and Long-Term Card Costs.) Conservatorship. A conservatorship is a courtordered protective relationship whereby an individual is appointed to manage another person's financial affairs after that person has become unable to do so. An attorney must file a petition with the court and a judge decides if the older person is legally competent. Other rights such as the right to vote, to marry or to write a will remain intact. The conservator is responsible to the court and must make an annual accounting. Guardianship. A guardianship is a court-appointed protective arrangement for a person found to be incapacitated and in need of someone to oversee his or her personal freedom of movement and decision-making so that essential requirements for physical health and safety will be met. Montana law defines an incapacitated person as "anyone who is impaired by reason of mental illness, mental deficiency, physical illness or disability, chronic use of drugs, chronic intoxication or other cause to the extent he or she lacks sufficient understanding or capacity to make or communicate responsible decisions concerning his/her person." A guardianship may be used only as is necessary to promote and protect the well-being of the incapacitated person. A limited guardian has rights, powers and duties specifically listed by the court.

Summary People over age 55 represent 21 percent of Montana's residents. The Census Bureau projects that the percentage will increase to 26.4 percent by the year 2010. Although it is difficult for any of us to face the possibility of dependency, disability, or incapacity ­ not only of our aging parents but also of ourselves, planning ahead is wise. Planning can help families avoid disagreements over care and finances and help alleviate the stress of making difficult choices in crisis situations. Understanding the financial and legal issues involved in planning for incapacity may help to protect parents' assets from mismanagement, fraud, or exploitation by family members, other caregivers or guardians.

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Further information: MontGuides
Montana State University Extension publishes other fact sheets written to assist families with estate planning. All of them are available on the Web; go to http://www.montana.edu/estateplanning
Accessing a Deceased Person's Financial Accounts (MT200301HR) Annuities (MT199213HR) Custodial Accounts for Kids Under Age 21 (MT199910HR) Designating Beneficiaries through Contractual Arrangements (MT199901HR) Dying Without a Will in Montana: Who Receives Your Property? (MT198908HR) Estate Planning in Montana: Getting Started (MT199508HR) Estate Planning for Families with Minor Children (MT199117HR) Federal Estate Tax (MT199104HR) Gifting: A PropertyTransfer Tool of Estate Planning (MT199105HR) Lending Money to Family Members (MT199323 HR) Letter of Last Instructions (MT198904HR) Life Insurance: An Estate Planning Tool (MT199211HR) Medicaid and Long-term Care Costs (MT199511HR) Montana Rights of the Terminally Ill Act (MT199202HR) Power of Attorney (MT199001HR) Non-Probate Transfers (MT199509HR) Probate in Montana (MT199006HR) Property Ownership: Estate Planning (MT198907HR) Revocable Living Trusts (MT199612HR) What is a Personal Representative? (MT199008HR) Who Gets Grandma's Yellow Pie Plate? Transferring Non-Titled Property (MT199701HR) Wills (MT198906HR)

For paper copies of these fact sheets, contact your county or reservation MSU Extension office or Extension Publications, P.O. Box 172040, Montana State University, Bozeman 59717; (406) 994-3273.

Organizations
Montana Department of Public Health and Human Services Senior and Long Term Care Division 111 N. Sanders, Room 210 Helena MT 59604 Toll Free: 800-332-2272 www.dphhs.mt.gov Area Agencies on Aging Toll Free: 800-551-3191 AARP 601 E Street NW Washington DC 20049 888-687-2271 www.aarp.org

Sources
American Association of Retired Persons. Tomorrow's Choices: Preparing Now for Future Legal, Financial and Health Care Decisions (PF4224 D13479). (December 1990), 1­64 Fanning, D. Waiting for the Dough. Worth (February/March 1992), 87­91 Granovsky, N. Money Talks for the Sandwich Generation. Texas Agricultural Extension Service, May 1989 Metzen, E. Intergenerational Equity: Essential Ingredient for a Cohesive Society. Journal of Home Economics 83:4 (1991), 22­2 Rosenfeld, J. The Legacy of Aging: Inheritance and Social Disinheritance in Social Perspective. Norwood, N.J.: Ablex Publishing Co. (1979) Schmall, V.L., and T. Nay. Helping Your Older Family Member Handle Finances. Pacific Northwest Extension Publication PNW 344 (August 1989), 1­7
Simon, R. How to Talk to Your Parents About Money. Money (December 1991), 145­153 U.S. Department of Commerce, Economics & Statistics Administration, Bureau of the Census. Statistical Abstract of the United States, Vol. 12 (1991), 12 U.S. Senate. Developments in Aging: A Report of the Special Committee on Aging, Vol. 3 (1987), 29

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Acknowledgments
This MontGuide is adapted from the authors' article in the Journal of Home Economics, Volume 85, No. 1, Spring 1993, pp. 42­46. It has been reviewed by representatives from the Business, Estates, Trusts, Tax and Real Property Law Section, State Bar of Montana. The authors express appreciation to Montana Extension agents and other MSU faculty for their valuable suggestions.

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File under: Family Financial Management (Estate Planning) Revised December 2008 1000-1208SA