Sept. 08–What should you do when your aging parents’ financial problems become your problems? This is one of the most ticklish and emotionally complex challenges I face as an advisor.
We Americans are notoriously private about financial matters; it’s common for adult children and parents to share very little in the way of financial information.
This kind of privacy can come back to bite us, however, when issues or problems our aging parents face become our financial problems, too. Here are two examples, concerning people I know, of how adult children tackled these issues.
1. Janice and her mother, Joy.
Janice’s mother, Joy, is in her early 80s. Her father passed away several years ago. Both parents grew up in the Great Depression and led relatively frugal lives. Joy remains fiercely independent and still lives in the same suburban home her parents bought 50 years ago. Janice never inquired about her mother’s financial well-being — and her mother never would have shared any information, anyway, believing that money matters are “private.”
This situation worked well until her mother calls her one day, out of the blue, and asks for a substantial loan, which Joy promises to repay in a few months. This alarms Janice.
After digging more deeply into the situation, Joy reluctantly confesses she’d been approached by phone several months ago by a man she now considers to be “a friend.” She enjoys speaking with him daily. After gaining Joy’s confidence, this friend began to ask for money to help him out of a “tight financial situation.” Over several months, Joy mailed him a total of $18,000 in checks.
But then Joy felt like a complete fool when Janice pries the information out of her and tells her a scam artist is victimizing her. Janice isn’t able to determine the extent of Joy’s problem since her mother alludes to certificates of deposit and other assets, but she won’t share the information with her daughter.
The daughter locates a financial advisor to assess her mom’s situation. Janice pays the advisor, on behalf of her mother, but she understands their discussions must be confidential since Joy otherwise won’t agree to any meetings.
Over a period of weeks, the advisor made suggestions to Joy on how best to deal with this situation. Although the advisor didn’t share particulars with Janice, he indicated he was successful in terminating Joy’s contact with this scam artist.
Joy is doing better now. She’s agreed to allow her daughter to help her review her checking account statement each month so Janice can spot any issues early.
2. Fred and his parents.
Fred and Dora, my clients, are in their 40s. Fred’s parents — who are in their late 70s — are financially comfortable and in relatively good health. There is little exchange of financial information between Fred and Dora and his parents.
In discussions with the son, though, it’s clear that longevity is in their family, and Fred is concerned that his parents won’t always be in a comfortable financial situation. His parents don’t trust advisors and have been reluctant to seek advice for decades.
Fred convinces them to meet me on condition that I protect his parents’ privacy — they indicate otherwise. The parents tell me they have charitable intent and also want to give part of their future estate to Fred and his sister. Our talks reveal that their estate documents are over 20 years old and they’re concerned about having enough money to cover long-term care if both of them need it. They’ve seen friends spend down their entire retirement savings to cover this care, rendered when they no longer can see to their daily needs.
Fred’s parents don’t have any financial problems now, but that could change if they live into their 80s and 90s. Fortunately, I’m able to work with them and an estate attorney to draw up new, relevant estate documents. We also discuss if long-term care insurance makes sense or not at this late date.
While Fred and Dora are not directly involved in any way, they’re satisfied that several sets of objective eyes (estate attorney, insurance agent, elder-care lawyer) are reviewing his parents’ situation to avoid severe planning gaps down the road. The younger couple obviously stand to benefit from this, as prospective beneficiaries of a portion of his parents’ estate, yet their motive is to make sure his parents don’t make costly financial mistakes that come back to plague them.
Financial planning isn’t always a family affair, but my clients, whether parents or children, benefit from the process. As an advisor, I want to be there to deflect any potential threats to my clients’ well-being down the road. Bringing a financial planner into the picture with an objective viewpoint can be a win-win for all generations concerned.
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Eve Kaplan, CFP, is a fee-only advisor in Berkeley Heights, N.J. Kaplan Financial Advisors is a Registered Investment Advisor in New Jersey and New York.
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