We know talking about money with your parents can be difficult. Sensitive and upsetting at best and for some families – taboo. However, it’s among the most important discussions you’ll ever have with them and here we identify THREE conversation starters that may help you to get them talking.
The goal is for you to understand and support your parents’ money decisions now, so that later, when they are no longer able, you can advocate on their behalf and fulfil their wishes.
It’s that moment when the shoe swaps to the other foot, and you as your parents’ adult child, must consider their future with them as they grow older.
‘With’ being the operative word, and that’s because attempting to tell your parents how they should manage their affairs, could very likely result in them telling you to butt out.
Ideally, these types of discussions should occur when parents and their offspring are at an age and stage of life when they can fully appreciate the financial status of the family.
However, for many older generation parents talking about money just isn’t the ‘done thing’, so that makes it up to the adult children to ask.
Your objective should be to understand their wishes, the decisions they may have made to date and the money choices that may need to be reconsidered as their circumstances, and those of their beneficiaries, change.
In our experience there are three questions that need to be asked. However, when you ask them, and whether you ask all three at the same time, will depend on how you gauge their willingness to discuss these matters with you.
Question 1: Do you have a Will, Enduring Powers of Attorney and more importantly, an Estate Plan?
Rather than assume your parents each have a Will and Enduring Powers of Attorney in place, it’s best to confirm it. If they say, no, they need to be encouraged to arrange them as soon as possible. If they say yes, the next question to ask is: When were they last reviewed?
If their Wills and Powers of Attorney haven’t been updated for years, there’s every chance laws and numerous circumstances may have changed – marriage and divorce; a death of a beneficiary or the arrival of grandchildren; a family fallout or reconciliation are all matters than can impact the wishes outlined in a Will.
Many people, particularly older people, think a Will and estate plan are one and the same. Not so. An estate plan may deal with matters not covered by a Will and these commonly relate to assets not included in a Will (e.g. jointly held assets or assets in a Trust or a company). The broader scope of an estate plan often considers asset protection and tax effectiveness in the transfer of assets to beneficiaries.
Question 2: Do they have enough and will their retirement savings see them through?
If your parents are unsure if they will have enough money to see them through their retirement and the aged care stage of their life, it’s time to find out.
Many older parents (those in their 80s and 90s) will only have savings, proceeds from the sale of assets and the aged pension to see them through to the end of their lives.
Parents aged in the 60’s and 70’s will very likely have some superannuation as the Superannuation Guarantee was introduced in 1992. However, that’s not to say they’ll have enough. According to the Governments Money Smart* website, a couple who wish to live a comfortable retired lifestyle from 65 years of age until they pass away in their 80s, will need to own their own home, be eligible for a partial Government pension and have savings or income streams that will generate $63,352 each year.
A quick check of bank and superannuation balances will provide a good indication of whether your parents are on track to live with financial independence or if extra steps need to be taken.
These steps may include recommending your parents get financial advice that will provide them with financial modelling based on their current income, super and assets so they may be confident their financial strategy will meet their needs.
Then if their needs cannot be met, it creates advance notice for them (and you) so how they will fund their lifestyle as they age can be reconsidered.
Questions 3: Who are their advisers and where’s the documentation?
When completing their Will and estate plan, your parents will have up to three key advisers.
Ideally, you’ll know your parents’ solicitor, but at the very least ask your parents where they keep their Will, Powers of Attorney and other important documents so you can find them when the time comes.
Your parents will likely have an accountant as well, who will understand and take care of tax matters (which can be complex) and any impacts on beneficiaries of the estate.
Similarly, they should have a financial adviser.
In our experience, as financial advisers we have intimate knowledge of our clients’ entire financial life – their goals, views and values. We also have details about superannuation and investments such as shares and properties along with any insurance policies that need to be claimed or cancelled. And, we are very often the central coordinator collaborating with the solicitor and accountant to ensure the financial aspects of the Estate are managed appropriately.
Knowing the answers to these questions, will help you to understand your parents’ wishes, the plans they have in place, and who can help you deal with your parents’ affairs when they can’t.
We understand these are difficult discussions, and invite you to contact us if we can be of assistance. We are both knowledgeable of the process and perhaps most importantly, we offer an arms-length perspective, often not possible when family members discuss sensitive matters.
To find out more about the value of advice, and how to share it with those you love, please contact Brett Cribb, Steve Nicholas or James Marshall on +61 (0)7 3007 2007, alternatively please email info@stratusfinancialgroup.com.au, and let’s make it happen.
Stratus Financial Group helps professionals, executives, business owners, families and retirees manage their complex financial affairs and coordinate their professional advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.
*https://moneysmart.gov.au/grow-your-super/how-much-super-you-need
