February 9, 2022

Financial Planning for Aging Parents

In Family Needs, Financial Planning, Wealth Strategy

Eric Schuehle
Contributions from: Eric Schuehle

While you likely grew up in a household where your parents took care of you, what happens when the tables turn, and they need you to take care of them? On top of the unpleasant emotions of seeing a parent age or decline in health, this role reversal often leaves you responsible for your parents’ finances and estate. It is in these circumstances that you realize the importance of having a plan in place, as the negative consequences of not having things in order may fall on you.

Even if your parents are currently mentally and physically capable, it is important to make sure they are prepared for the latter years of their lives. Below are some considerations where advanced planning can make a world of difference for everyone involved.

Organize and Simplify Accounts

We would recommend having conversations with your parents to ensure they have an up-to-date list of all their assets, liabilities, and insurance policies. Be sure the list includes the name of the institution that holds each account. Create a list of important passwords, and for those more tech-savvy individuals, consider utilizing a password manager to keep track of logins. Remember to revisit your password list regularly and make updates overtime. Make a list of monthly payments and consider ways to simplify the bill-paying process.

See if your parents would consider consolidating accounts at one or two institutions to simplify tracking, and ideally add dual-factor authentication to their financial accounts for heightened online protection. Keep in mind that this added layer of security will make it more difficult for you to access the accounts if you need to log in and help with paying bills or reviewing transactions.

Assign Roles and Responsibilities

One out of three Americans over the age of 85 has Alzheimer’s disease.[1] There is a good chance that a time will come when at least one of your parents has some level of diminished capacity and may not be able to make thoughtful decisions for themselves. In a scenario like this, who would be responsible for making financial and medical decisions going forward?

While this can be an uncomfortable conversation, we recommend having it before any incapacitation occurs. Having simple Powers of Attorney written up will save you the trouble of going to court to request the right to help your parents when they need it most.

Your parents may even prefer to have you listed on their accounts for assistance with bill pay. We encourage you to talk directly with your parent’s estate planning attorney for additional guidance on the legal implications of any account titling decisions.

Get Wills and Trusts in Order

How many times have you heard a story in the news about a celebrity who died without a will and left their relatives and business partners with a raucous legal battle? Case in point: almost 40 years after his death, the family of Jimi Hendrix was still going to court to fight it out.

While you may consider your family above such squabbles, it is better not to test that assumption. You never know how money and the passing of a loved one will impact people. It is important for your parents to have a will that spells out their final wishes, including who will carry out those wishes as the executor of their estate.

This is especially important in situations with blended families. It is all too common for someone to neglect to update their will and leave an ex-spouse as the sole inheritor or executor of the estate. Not only do your parents need a will, but they also need to make sure it is updated to reflect their current situation and desired legacy.

The importance of double-checking beneficiary designations goes beyond just a will. Make sure your parents have gone through all their accounts, including life insurance policies, retirement accounts, and other savings to verify that their listed beneficiaries are correct.

While federal estate tax exemptions are currently set historically high (at $12.06M per person), the Washington and Oregon state estate tax exemption amounts are much lower ($2.193M and $1M respectively). Due to quickly accelerating property values, many Pacific Northwest residents will find themselves subject to state estate tax. Recommend your parents review an updated list of assets with their estate planning attorney to assess whether any changes to their estate plan are warranted.

It is also important to review their Power of Attorney to determine if it includes the power to gift. In some instances, it may make sense to execute last minute “deathbed gifting” in order to avoid estate tax.

Finally, your parents should ensure their Healthcare Power of Attorney is compliant with HIPAA regulations. Estate planning documents should be reviewed every three to five years at a minimum, and when there are pending changes to federal or state estate tax laws.

Have the Long-Term Care Conversation

If your mom is over 65, there is a 58% chance that she will need long-term care at some point, with an average need of about 2½ years of care. For your dad, there is a 47% chance that he will need long-term care.[2] Those numbers are high and should be taken seriously.

Your family should be on the same page with a plan to care for your parents when the time comes. Discuss topics with your family or parents’ attorney such as: who will provide care for them? Who will pay for the care? If available, does it make sense for them to purchase long-term care insurance? This decision is an individual one based on your parents’ financial situation. These policies often provide peace of mind since coverage helps offset potential care costs and helps preserve an inheritance for their children.

All too often, the most capable or local child ends up shouldering the entire responsibility. This could potentially lead to burnout and challenging conversations between siblings. Having a care plan in place can provide family members with the direction necessary to follow the wishes of their parents.

Maintaining Independence

We recognize that we do not live in a perfect world, and not everyone will have the desire for such transparent relationships with their family members. Discussing finances with your parents, siblings, or children could be an awkward topic, and some parents feel strongly about not wanting to be a “burden” on their children.

There are options for maintaining privacy while still implementing a plan, such as naming an independent executor, trustee, or powers of attorney. This way, a third-party professional will help monitor your parents’ estate and follow their exact wishes without complicating any family dynamics.

You Are Not Alone

It can be overwhelming to think about writing a will, planning care, and assisting with these critical decisions, especially considering all the emotions involved. Sometimes parents are not receptive to these discussions with their kids.

In these situations, it can be incredibly helpful to work with an experienced financial professional, someone who knows the ins and outs of latter-year planning. If you would like help planning for your parents’ future, please reach out to your Coldstream team. We also can refer you to aging life care experts or care management specialists who can help families navigate the options for aging well.


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