How to Talk to Your Parents About Their Money

By Christine Benz, Morningstar

Many adult children are taking a greater role in their aging parents' financial lives, a natural outgrowth of increased longevity as well as rising rates of dementia and Alzheimer's disease in the senior population. Yet getting involved in their parents' financial affairs isn't always easy or natural for children, and some miss the signs that their parents need a helping hand to help them navigate their money matters. Here are some tips from Wall Street Journal reporter Jeff Opdyke from his latest book, Protecting Your Parents' Money: The Essential Guide to Helping Mom and Dad Navigate the Finances of Retirement

(1) Pay attention to what's going on with your parents or grandparents. A few years ago, I was at my grandmother's house (she essentially raised me, so I see her as my mom) and I noticed she had a copy of Rolling Stone magazine on her coffee table. Now, my grandmother is in her 90s and would not know the Jonas Brothers from the Doobie Brothers, so there's no way she'd have purposefully subscribed to Rolling Stone. Clearly, she'd been sold the subscription by a telemarketer. But the event prompted me to talk to her about her finances and ask her how I might help her in the future avoid these kinds of unnecessary costs (she lives on a fixed income, so I know wasted expenses can be detrimental in the event she needs a nursing home or some form of assisted living). I reminded her that I'm here to help her deal with the finances of aging. She called me months later to help her and my aunt understand the pros and cons of a reverse mortgage and ultimately to guide them through the process.

So, pay attention with your eyes. And pay attention with your gut. You know when things don't feel right. Go with those feelings and begin to look and listen for signs of financial duress/stress in your parent's life.

(2) Adult children are often scared to talk to a parent for one of two reasons: One, they're uncomfortable contemplating their parent's mortality and, thus, want to avoid discussing it; or two, they think Mom/Dad has no interest in talking about such a personal topic.

Whatever the case, the reality is that one day this problem is going to simply drop into your lap, either because your parent died or becomes somehow incapacitated. And suddenly you or someone in your family is going to be forced to deal with all the stuff that must be dealt with, such as bills, account statements, insurance policies, retirement accounts, pensions, and what to do with the house or the car. There are so many end-of-life issues that have to be wrapped up or managed, and it's far better to go into that eventuality with some level of preparation and knowledge, instead of having to face it blind.

The only way to get that knowledge is to realize that the only person who can help you is your mom or dad. You'd be surprised how many parents actually want to have this conversation but are too scared to approach you because they think you don't want to talk. They want someone whom they can trust but don't want to feel they're imposing on you. So buck up and dive in. It's the best way to begin dealing with an issue that you're going to be forced to deal with at some point anyway.

(3) When it comes to retirement communities, what can your parent afford? Retirement communities can be very--very--expensive. At the high end are continuing-care retirement communities (so-called CCRCs) that are designed like small neighborhoods or high-end condominium complexes. Mom/Dad move in long before they need any kind of care, and as they progress through retirement, they move into an assisted-living center that's part of the community and then into a nursing home, also part of the community, if needed. It's a great transitional design because the elderly really dislike leaving the comfort of what they know as normal. But CCRCs are pricey because they're part real estate investment, part assisted-living/nursing home. They start at $100,000 or more to buy a unit, and then cost a few thousand dollars a month in fees. So they are only for parents who can afford the cost, or for families who will pay those costs for Mom/Dad (you recoup all or more of the cost when you sell the unit after a parent dies or moves into the nursing home permanently).

At the other end of the spectrum is nursing home care paid for by Medicaid. That's for who are effectively indigent retirees who do not have the assets necessary to pay for a nursing home on their own.

In the middle is a wide range of housing options ranging from private-pay nursing homes to communal homes. What's right for your parent boils down to a few questions:

1. What can Mom/Dad (of the family) afford?

2. Where does Mom/Dad want to go, based on what is affordable?

Once you and your parent have decided on what's affordable, you need to do your homework to find the best option. That's largely a word-of-mouth campaign. You can check all the various state agencies that keep track of local elder-care facilities, and you can find those by checking with your local area Agency on Aging. But the real test is how the people you know rate the places you're investigating. Ask around. Everyone who has dealt with this with their own parents has a story to tell. Talk to co-workers and friends. They or their circles of friends, family, and acquaintances will steer you in the right direction based upon their personal experiences and recommendations.

The biggest question is affordability. Does your parent--or do you or other family members--have the financial wherewithal to pay for a private nursing home? They can run $50,000 a year or more, depending on what part of the country you live in and the amenities that are included or which Mom/Dad need. If you or your parent cannot afford the costs, then you have to look to Medicaid facilities.

Beyond costs, the biggest question is safety. Does the nursing home you're considering have a good track record, or is it marred by violations? One of the biggest worries that adult children have when it comes to nursing homes is the nagging concern that Mom/Dad are not being treated well. That leads to feelings of guilt and depression, which, in turn, makes it harder on you to deal with your parent's aging process. To allay those concerns, do your homework to find the best nursing home that your parent can afford or is eligible for under Medicaid.

Most states regulate nursing homes, and you can contact the local state agency that keeps those documents and request copies of the various violations. Again, you should contact the local area Agency on Aging (they're in every community) and ask which agency in your state keeps tabs on nursing homes, or ask if they have any local rankings or ratings for area nursing homes.

(4) The best approach is the most honest and straightforward approach. So just come out and ask. "Mom, Dad, you're reaching an age where you might need to have someone step in and act in your best interest in an emergency, and I would like to be there for you in that event. I know there are private documents and accounts you might not want to share with me, and I know you might have bequeaths in your will that you don't want me to know about. But you're going to need an advocate one day who can take control when you don't have the ability any more. So I'd like to make a time to talk to you about all that I might need to know to serve that roll for you when it becomes necessary."

Straightforward and honest. You might not find Mom/Dad give you the keys to the kingdom immediately, but you have begun the process. And you will find in most cases that a parent will open up at some point and let you in. That's how you begin to broach the topic. Once you're in the door, you will have free reign to ask about wills and any other estate-planning documents.