Learn, Organize and Simplify
Despite how anxious it makes everyone involved, talking about death and the related end-of-life financial planning actually isn't the hardest conversation most of us will ever have with our parents. (And no, the birds and the bees talk isn't it, either.) Surprisingly, nearly 40 percent of us find talking to an elderly parent about permanently parking the car more difficult than talking about death [source: Rosenblatt].
Car discussions aside, 24 percent of adults consider final arrangements the worst topic of conversation imaginable [source: Rosenblatt]. This is the kind of sensitive conversation for which you want to set aside time. As you begin, be sure anyone who should be part of the conversation is involved, including any siblings you have. Tread cautiously and gently. Offer your help, rather than dictating what will be (or should be) done, and consider bringing in a third-party adviser (such as an attorney, financial adviser or medical professional) for support and facilitation.
Don't be afraid to acknowledge that the conversation is difficult and uncomfortable, but don't lose sight of your goals. There are four important things you're trying to learn about your parents' finances and records: their current expenses and income; their current financial situation and financial records; their legal documents (and attorney information); and where everything can be found.
First, look at the big picture. Before you can dig more deeply into the nuts and bolts, try to learn about the current financial landscape by asking about their budget. Talk about how much their monthly income is and where it comes from (such as a pension or investments), in addition to what their monthly expenses and debts are (such as their mortgage, car payments and credit cards). Creditors have a limited amount of time to collect unpaid debts after a passing, and some debts won't need to be repaid, but it's better to know what debts you'll be facing before you face them.
Review all financial account and investment information, and the contact information for your parents' accountant or financial planner, if applicable.
You want as much information and as many specifics as you can get in answer to your questions, or going through the exercise won't be as beneficial in the end. Working together, take inventory of everything. Now is also a good time to organize. Keep copies of important documents in a safe deposit box (rather than a strongbox) and make sure you know where the key is kept. Retain recent records, but shred all those old utility bills your mom's had boxed up since the '70s — your parents don't need them now, and you won't need them later.
Make copies of important financial information and legal documents, including:
- Wills (but keep in mind that copies of wills can be contested in court; this is for information only)
- Insurance policies (including life insurance and long-term care insurance)
- Health care directives
- Durable power of attorney
- Financial records and account numbers
At the very least, you're looking for policy numbers, names of institutions (such as banks or mortgage companies) and important associates (such as your parents' attorney and financial adviser), and contact information for each. At the very least, learn where important documents and other information is stored, and be sure you have access. If, for instance, a bank account is in one person's name and that person dies, the funds then are considered part of the whole estate, and you can't access them.
This is also the time to consolidate and simplify. Over time, people tend to accumulate bank accounts. Consolidate your parents' accounts, including credit cards, checking/savings accounts and investment accounts — and be sure someone else will be able to access the remaining accounts if your parents are unable. Also consider simplifying their financial affairs by using tools such as automatic bill pay (just be sure you know the password).
Once the necessary documents are gathered, review them before they're stored to be sure they're current. Double check the details, such as beneficiaries and authorized decision-makers. Are documents original, and do official papers such as wills, trusts and health care directives (such as a living will) reflect your parents' current wishes?