When seniors and their adult children get together, small talk about family matters comes easily. It's the Big Talk about financial matters that is more difficult -- specifically, who will make decisions if the parent is unable to.
Nearly 70 percent of adults say "major barriers" prevent them from discussing who will make financial decisions for aging family members, according to a new survey commissioned by the National Endowment for Financial Education. The biggest barriers are resistance from parents and unwillingness of children to broach the subject.
"The children think it's intrusive," says the endowment's president, Ted Beck. "And maybe the parent does, too." The Denver-based, not-for-profit research organization offers educational training and materials about personal finance.
The longer seniors put off talking about who will make decisions for them if they become incapacitated or suffer mental decline, the more likely a health crisis will force decisions to be made they never would have wanted. Beck says discussions should begin when the parents are able to manage their own finances, because it's easier to talk about who will make financial decisions when no financial decisions need to be made. Once a senior begins to show cognitive decline, it is not only harder to have the discussion, but financial damage already may have taken place. The survey found that 47 percent of people who experienced some degree of cognitive decline paid their bills late or didn't pay them at all, and 21 percent had depleted their savings accounts.
Beck says the best outcomes occur when the senior initiates the discussion. "The parent should lay out a game plan," he says. The parent should choose one child to be the "point person" for all financial and health-related decisions. "If you are going to agree to be that person, you may have to do some homework," Beck says. "They've picked that person usually for trust but not necessarily for knowledge."
Be aware that your parents' finances may be a puzzle. It is not unusual for seniors to have numerous savings and investment accounts spread across several financial institutions.
The adult child in charge should keep the rest of the family updated at least every six months. "The last thing you want is second-guessing," Beck says. "Fights that have been simmering since middle school will come up again."