How to Talk to Your Aging Parents About Their Finances
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Living is expensive, and unfortunately, so is dying. The cost of elder care isn’t a popular topic of discussion, and it can be daunting to have these heavy conversations with your parents. But if you don’t have these difficult talks, then you could be left confused and financially struggling, in addition to bearing the emotional toll of losing a loved one.
LendingTree reached out to certified financial planners, who gave advice on how to talk to your aging parents about the cost of elder care. You’ll also learn if you can inherit your parents’ debt, and how to manage debt from a departed family member.
- 5 tips for talking money with your aging parents
- The cost of elder care varies from family to family
- Will you inherit your parents’ debt when they die?
- What to do if you’re saddled with debt after a parent’s death
5 tips for talking to your parents about their finances
- Follow the 40/70 rule
- Manage your expectations
- Know what questions to ask
- Consider generational and cultural values
- Speak from the heart
1. Follow the 40/70 rule
If you wait for the perfect time to have this conversation, it may never happen. You should follow the 40/70 rule, meaning that you should talk to your parents about finances and elder care when you’re approaching 40 and they’re approaching or around 70.
“By this point, the children have had a chance to become financially independent and it’s early enough to make decisions about aging without feeling like anything has to happen immediately,” said Sean Pearson, a certified financial planner (CFP).
No question, it can be uncomfortable talking with your parents about their end-of-life care, their wills and their debt. You don’t want your parents to feel like you’re exploiting them, but you want to make sure their financial affairs are accounted for so that the next generation isn’t saddled with financial issues.
2. Manage your expectations
It’s a hard pill to swallow, but in-home care isn’t for everyone. In a perfect world, all seniors would have a loved one care for them as they age. That’s not possible for every family, though, which is why it’s so important to set a precedent with your parents about their elder care.
“As Americans are living longer, the chance that someone will need care beyond what a spouse or family member can provide dramatically increases,” Pearson said. “If you don’t plan, you are more likely to have few, if any, choices if you are unable to live independently, and your family will be responsible for the cost of care — both financial costs and time spent as caregivers, away from their work and family.”
3. Know what questions to ask
If you’re dealing with elderly parents who refuse help, you’re not alone; over 77% of children reported parents being stubborn about getting help with daily problems, found a 2015 study led by the New Jersey Institute for Successful Aging.
If you don’t know how to get through to a private parent, get the ball rolling with some thoughtful and important questions. You could consider asking:
- What are your wishes if you can no longer take care of yourself?
- Does your income cover potential elder care expenses?
- Do you have debt that could inhibit your ability to afford care?
- Do you have long-term care insurance?
- Are all of your documents, like a will or trust, up to date?
Asking the right questions will spur constructive conversations and make sure that no expenses are overlooked.
4. Consider generational and cultural values
Dennis Nolte, CFP, said that the silent generation and baby boomers are “perhaps more clandestine and independent about finances, or not willing to burden the kids.” Generational divides can cause a communication barrier if not addressed correctly.
Be sensitive about the subject, and consider any personal differences that might play into your parents’ plans for end-of-life care. For instance, if your parents are more secretive about their finances, don’t ask that they put all their finances on display for you. Instead, go through their financial planner, or even set up a consultation with an elder care attorney. This way, you aren’t mixing what your parents might see as “personal” and “professional” matters.
And if there’s one interpersonal communication rule that stands above all else, it’s this: Listen before talking and asking questions. At the end of the day, it’s your parents’ money and they’re the ones who can choose how to handle their finances.
5. Speak from the heart
When you’re preparing yourself for these conversations, come from a place of love and respect. “Sometimes parents think the kids are asking these questions just because they want their money,” said Marguerita Cheng, CFP. She has personal experience with the subject after asking her parents about their finances after the birth of her second child.
Being authentic goes a long way to having a meaningful and productive conversation about elder care. So, go in with the perspective of, “It would be inappropriate for me to make decisions for what you want.”
The cost of elder care varies from family to family
Understand that what works for one family may not work for yours. For instance, Cheng was able to keep her dad at home during his end-of-life care. He lived two houses down from her, and it made sense for him to stay put rather than go to a nursing home. Plus, Cheng speaks Mandarin and could communicate what her dad needed with nursing aides.
Some patients with long-term illnesses need more intensive care, which can be pricey. Arcadia, a healthcare analytics firm, looked at the amount of money people spend in their final year of life. They found the following costs for patients who died …
- At home: $4,760
- In the hospital: $32,379
- In hospice: $17,845
- In a nursing facility: $21,221
- In the ER: $7,969
Palliative care is at least partially covered by Medicare, but there’s often a gap between how much Medicare pays and how much end-of-life care can cost. For example, Medicare covers the medical services in a nursing home or assisted living facility, but it doesn’t cover the room and board. This gap in coverage can lead families to take on debt.
Will you inherit your parents’ debt when they die?
In most cases, no. However, there are exceptions. According to the Consumer Financial Protection Bureau (CFPB), you could be held liable for the debt of a deceased family member if:
- You cosigned on a loan with them
- You were a joint account holder
- A state law requires the executor of the deceased parent’s estate to pay an outstanding bill on a property that was jointly owned between you and a parent
While you likely won’t inherit your parents’ medical or credit card debt after death, you might choose to pay the costs of end-of-life healthcare, live-in nurses and funeral arrangements ー providing that your parent’s life insurance or estate doesn’t cover those costs. Debt can accumulate even if you aren’t exactly financially liable for a parent’s debt.
What to do if you’re saddled with debt after a parent’s death
- Know your rights when it comes to debt
- Refinance or consolidate with a new loan
- Work with a debt management professional
Know your rights when it comes to debt
A family member’s debts are paid from their estate. However, that sometimes isn’t enough, and the debt may go unpaid. According to Pearson, state Medicaid offices have attempted to recover the costs of nursing home care from a person’s estate and their beneficiaries.
If you’re the executor of their estate, debt collectors may contact you. Under the Fair Debt Collection Practices Act, however, you have the right to tell them to stop. You may also request more information about the loan. The CFPB offers a list of sample letters that you can use to send to a debt collector.
If you aren’t sure whether you’re responsible for a deceased parent’s debt, you may also speak to a lawyer.
Refinance or consolidate with a new loan
In some situations, children may be left with their parents’ debt or have debt leftover from end-of-life care. Common ways you could refinance or consolidate debt is with a personal loan, a balance transfer credit card or a home equity loan.
Use this table to compare your options:
Work with a debt management professional
It might be surprising and overwhelming to inherit debt from a parent when they die. Fortunately, credit counselors through nonprofit organizations can help you manage your debt and come up with a repayment strategy that works for you.
Your credit counselor can:
- Advise you on managing your debt
- Help you create a budget
- Offer free educational materials
- Create a debt management plan
Preparing your parents for elder care is no easy task. Talking money with your parents can be difficult enough as it is, so it’s even harder to navigate when you factor in touchy subjects like palliative care and outstanding debt. But when you equip yourself with the right knowledge and resources, conversations about aging can be positive and productive.