I know. I get it. Who wants to talk about planning for the death of a loved one or how our aging parents want to live their golden years. It's not an easy conversation and some are down right uncomfortable talking about it.
I've seen first hand how not talking about your expected retirement lifestyle, last wishes, and whether or not you have a will or trust can really divide a family. The sooner you start the conversation the better.
Caring for an aging loved one can be expensive and emotionally taxing. Planning ahead can help all involved to be prepared. Here are 5 things to consider talking about with our aging parents to ensure that everyone gets and remains on the same page as we continue to honor our elders.
1. Estate Planning: Do you have a Will or Trust?
Having a Will or a Trust will save a family a whole lot of time and heartache. This is something we would want our parents to address sooner rather than later. But first, let's understand the difference between a Will and a Trust so that we know which document will be needed.
Many people decide to create a Will because it is quick, easy and cheap. It is basically a written document that spells out a persons last wishes for their possessions and naming guardianship. It becomes active once the Will writer dies. This document can be changed and updated until the date of death.
A Trust becomes active immediately and are a bit more intricate and complicated. You will likely need a lawyer to establish your Trust. When creating a Trust, you are essentially transferring your estate into the name of the Trust and a Trustee will manage the title and/or assets for the benefit of a third party (probably the heirs).
Don't fall into the misconception that because you don't have a lot, you don't need either one of these documents. You can have both documents if you wish, but the first step is to learn more about both.
This is a high level description of Wills and Trusts and there are several different types of Wills and Trusts. There is a plethora of information out there to help you along this journey. Financial Freedom is a book that I recommend you can start with.
2. Where do you want to live?
This isn't the time to make assumptions. Go ahead and ask what their plans are. Do they plan to live in their existing home? Is that home paid off? Do they expect to move in with you or your siblings? Do they plan to buy an RV and hit the open road?
Asking these questions will enable the entire family to begin planning and won't be blind sighted by the cost of their decision.
3. Do you feel financially secure?
This question may take time to answer. This may require some additional digging and additional conversations to be able to lay the entire financial picture out.
First, you can address the emotional feeling of whether they feel financially secure or not. Are they worried about money? Worried about being a burden to their children? Or do they feel like they are in a good place?
Then, address the financial situation. Take a tally of all assets and liabilities and estimate out their projected income in retirement and compare it to the projected liabilities.
You can access a free Net Worth spreadsheet to keep track of the assets and liabilities. Click here.
This can be a hard conversation because no one really wants to talk about losing their loved ones in death. But there are a couple of things to consider here:
What are your burial plans? This can include any funeral arrangements, burial sites as well as financial arrangements.
I had always assumed that my parents would want to be buried somewhere in our home state but when I asked my mother where she wanted to be buried, she said she wanted to be buried in the same cemetery as her mother. But when I asked, "What about dad? Is he supposed to be buried two states over in a place he has no connection to as well?" She stopped to think and admitted that she hadn't really thought of it like that. To be fair, this question came not too long after her mother passed away, so she was feeling a deep connection to her home town and her mother. Then she said that she would start looking for two available burial plots for the both of them to be buried together here in Georgia.
Moral of the story, don't assume that these things have been thought out. Start the discussion and write these wishes down.
5. Do you have Long-Term Care Insurance
Like most insurances, it's expensive to have but you want to have coverage in case you need it. No one buys car insurance know that they will total their car tomorrow, but you carry the insurance because you may total your car or someone else may hit your car (...and it's also a requirement to have car insurance).
The premiums on Long-Term Care Insurance can be high, but the cost to have to pay for assisted living or a nursing home are even higher. The optimal time to buy Long - Term Care insurance is between 55 and 65 years of age. Find an insurance broker that you trust to discuss your options and how it can fit into the retirement budget.
There's a lot to talk about when planning for the future. My hope is that these questions can help you start the conversation with your aging parents so that everyone is financially and emotionally prepared. All of these topics don't have to be discussed at once but start the conversation sooner rather than later.