AARP's Five Tips for Starting a Conversation about Money Matters
By Jean Setzfand, Vice President, Financial Security, AARP Education and Outreach
During the holidays, many of us will be spending more time with our families and aging parents. Sometimes it's surprising to witness a decline in health -- especially mental health -- since we last saw them. Often, whether it's out of respect for our parents or simply our own discomfort, we choose to overlook the visible signs of difficulty or "diminished capacity." Without help, a family member with cognitive impairments could quickly blow his savings or, worse, fall victim to scam artists and fraudsters. If you want to help an aging relative with his financial decisions, follow these five AARP tips on how to get started.
Tip #1: Broach the Subject
Start the conversation with a positive question like, "How I can help make sure that your finances are handled with your wishes in mind?" Assure him that you're looking out for his best interests. It's important to tread carefully; some families find the best way to avoid family friction is to hire a certified financial planner or accountant to help. Visit www.aarp.org/protectyourfinances.
Tip #2: Size up the Situation
Ask for your parents' permission to review their bank account and investment information, insurance policies, mortgages and deeds, other loans, pension and Social Security statements.
Tip #3: Calculate Net Worth
You and your parents should know their net worth -- the difference between all their assets and all their liabilities. Be sure to list all bank accounts and stock, mutual funds and bond holdings. Don't forget the contents of a safe-deposit box. It's wise to be conservative, so underestimate the value of assets and overestimate the cost of liabilities.
Tip #4: Draft a Budget
Help your parent(s) draw up a relatively simple budget. Even if they've kept only simple records, you should be able to tell what their expenses are from old bills. Discuss what their future needs are likely to be. Visit www.aarp.org/protectyourfinances for more information.
Tip # 5: Plan Ahead
Talk to your parents about getting their legal affairs in order and their wishes in writing. Steps they may need to take include: designing a will or other estate plans; designating a financial decision-maker through a power of attorney; buying Medigap, life or long-term care insurance; and creating legal documents to guide future health-care decisions. For more information, go to http://www.aarp.org/money/estate-plannin....
For some, the capacity to handle financial affairs is one of the first to go as we age. But people with mild cognitive impairment may still have the legal and emotional capacity to designate a trusted person to act as their financial agent, and it doesn't have to involve going to court. A few simple advance planning tools -- including a power of attorney, joint bank accounts and trusts -- can go a long way toward protecting vulnerable parents.
It might feel overwhelming or inappropriate to talk to your parents about their situation or to offer help, but it can be one of the most caring things you ever do. In fact, consider it your holiday gift -- rather than wrapping up another cheesy tie, consider giving them the more valuable gift of "financial caregiving."
Take AARP's online quiz to see if you can recognize the signs of diminished capacity in your loved one, http://www.aarp.org/money/scams-fraud/in....
Please visit www.aarp.org/protectyourfinances to find more information on these and other financial issues.
Jean C. Setzfand is Vice President of the Financial Security Team in the Education and Outreach group at AARP. She leads AARP's educational and outreach efforts aimed at helping Americans achieve financial 'peace of mind' in retirement.