|Financial planning for older parents
is a family affair
Dealing with finances and your
folks wasn't easy when you were 12 years old and asking for a bigger
Guess what? As the years have passed,
it's gotten harder.
Many baby boomers, already struggling to keep
their own children and lives on track, now are grappling with a
whole new set of responsibilities, including helping an aging mom
and dad deal with money.
Planning too often
For many middle-aged children, the issue of parental care --
financial and otherwise -- comes as a surprise.
Financial advisers regularly find that most
adult children do not talk with their parents about planning for
the parents' retirement years. By the time a child does have to
step in, they often do not know what to do or where to turn.
And that could be costly -- for everyone.
That's why it's imperative parents and their
grown kids confront
the difficult issues of money -- how much a parent has to live
on, what might be left to heirs, how to pay for medical care --
before an emergency arises.
Three, sometimes competing,
There are three critical issues that families need to evaluate
when it comes to looking at parental financial needs, according
to Charles DiVencenzo, vice president and director of advanced product
marketing with Hartford
Life in Simsbury, Conn.
The first is the parents' retirement income
situation. Do they have enough to live comfortably?
Second is the capacity for wealth transfer.
What do they want to leave and what is the most efficient way to
Finally, there is the ever-present power issue.
How much control over finances does a parent need or is willing
"Sometimes they compete with each other,"
DiVencenzo says. "The more income you want now, the less there
will be to transfer. People have to figure out what they need from
these three variables."
This simple evaluation process is the beginning
of estate planning. And it's something that every family, not just
the wealthy, needs to think about.
Basic estate planning
The advantage of a well-thought-out estate plan is that it allows
the estate owner, regardless of income or assets, to control his
or her legacy. If you don't do it, the government -- federal and
often state, too -- will make the decisions about your property.
Financial planning experts recommend that everyone
should have the following in place:
- A will that outlines final wishes;
- A health-care power of attorney so that your
representative can make medical decisions for you if you are unable
to do so;
- A living will, if it meets your religious
beliefs, that goes a step further and prohibits extraordinary
medical procedures in treating irreversible illness; and
- A financial power of attorney, also called
a durable power of attorney, that allows your designee to handle
your financial affairs if you're incapacitated.
A will is critical because it details exactly
how you want your assets dispersed. Without one, the probate court
process will allow the state to distribute your property, meaning
that assets might not end up where you had envisioned. Someone you
wanted to inherit property might not, while others could get more
than you think they deserve.