Notes, Views, and the Occasional Provocation October / November 2013 

We're fielding more questions from clients regarding how to help with the finances of a parent who is aging. To address this, I wrote the "nuts and bolts" article below, then realized I needed to vent a little.

A lot of advice treats parents as "an enemy that must be neutralized." That's profoundly unfair, as I try to explain in the "First Things First" article. If you have suggestions drawn from your own experience, I'd love to know, so please write or call.

It's been a busy autumn with media requests. The New York Times alternative-investment article does a good job, and the Bloomberg piece is unusual, recording an extended conversation I had with the reporter during the debt-ceiling crisis (remember that?) a few weeks ago. In the ABC local news segment on the Twitter IPO, there's an amazing pile of donuts at the headquarters.

Thank you for reading and have a Happy Thanksgiving.

Best Regards,

Milo Benningfield

Talking To Parents About Money – First Things First
Laying the groundwork for a conversation with parents about money is as important as the conversation itself. more

Talking To Parents About Money – The Nuts and Bolts
Here is a blueprint for how to talk with parents regarding their finances and the different ways an adult child can help. more

BFA Media Quotes
Recent media quotes. more

Talking To Parents About Money – First Things First
We're approaching the holidays, when families reconvene from distant parts after long absences and gather round the table and hearth once more. Now is the time, according to many personal-finance articles, when adult children are supposed to grab the bull by the horns and do something they have likely long delayed: have "the talk" with their parents.

This talk, unlike the one that parents were supposed to have with their prepubescent children, is not about sex, it's about money – the aging parents' money – an equally taboo topic.

It's hard to imagine a better way to ruin a holiday gathering than a money conversation with parents, but the articles tell us the stakes are high. Our parents' financial capacity could slip away at any moment. If that happens, a team of eldercare professionals from social agencies and the legal system will swoop into the home and begin bringing messy financial details to light, humiliating our parents, and wresting control from them and us forever.

The sense of fear and urgency – "talk before it's too late" – in these types of articles makes my blood pressure rise. A sense of despair settles on me as I think about all those families in the world whose lives will eventually be upended.

To be sure, there are some helpful suggestions here and there for how to conduct a money conversation, but much of the advice (quoted below) feels like recommending pliers for dental work:

  • We should sneak into the conversation by talking about our own finances. ("Hey, Dad, I've just made a Will; have you?")
  • We should patronize our parents. ("Make them see themselves as maintaining a sense of control.")
  • To get them to open their finances, we should offer carrots. ("Tell them you might be able to save them some money on their cable bill.")
If some of this tweaks our conscience, the articles suggest, we need only remember the parental pathologies we're supposedly up against:
  • "Many elders have an attitude of secrecy about their financial situation."
  • They have other "deeply ingrained attitudes," too, like their custom and habit of relating to us as, well, parents.
  • If confronted incorrectly, their need for control can slam the door in our face.
My fervent hope is that this type of fear-based advice rolls off adult children and their aging parents like butter off a hot turkey. Here, instead, is what I would say:

Secrets Are Not Always Crazy
It's unfair to characterize parents' reluctance to talk about their finances with children as immature or crazy. Secrecy protects privacy, and as a society, we value privacy so highly that we give it constitutional protection even though privacy is never mentioned in the Constitution.

Parents sometimes have grounds to be suspicious of their children: children, along with parents' trusted advisors, are the people most likely to embezzle from them.

Just as professional organizers know that cleaning out a closet is about far more than the clothes, talking about money raises deep emotions. Sibling rivalries; uneven feelings about one's children; contemplating the last stages of one's life are all strong arguments against disclosing buried financial details.

Focus On Relationship First
To be a good financial counselor – which is what children are being asked to become with parents – you cannot parachute into your parents' lives and start talking nuts and bolts. You first have to show that you care. Words alone will probably not cut it. Have you been calling and visiting regularly over the years? Have you been good about making up after the inevitable family tensions and disputes?

Adult children sometimes complain that they can't talk to parents about money for fear of looking greedy. In my experience, this is typically a concern where the parent-child relationship is already strained for other (perhaps understandable) reasons. If you want to help your parents manage their resources, mend the broader relationship first.

Personal Finance Is The Problem, Not Parents
A lot of the personal-finance articles make it sound like parents have abdicated their responsibilities if they don't jump at the first invitation to discuss their money. However, a lot of the challenge with aging parents and money is that personal finance itself has become more complex over the years.

In the past, a child's duties were clearer: an aging parent moved in with a child, or a child went to live with the parent, or if there were no children or resources, the parent went to the poorhouse. It wasn't easy, but the path was more straightforward.

Today, we've institutionalized the aging process with programs like Social Security and Medicare, which blur how much children are supposed to be involved with a parent's finances. With the proliferation of financial products and changing laws and regulations, managing one's finances can seem like running a small business. Given this, is it any wonder that parents might hesitate before agreeing to rifle through their files?

Put Your Own Financial Shoes On First
In a perfect world, all of us, young and old, would be completely prepared for the moment we will leave this planet. We'd have all our papers in order and have let all the people we love know how we feel countless times. Before we start nagging our parents to spill their financial "secrets," we should get our own house in order.

Do we have our own estate-planning documents prepared? Have we arranged to disclose our passwords and hand over lockbox keys to a trusted friend or relative should the proverbial bus come along tomorrow?

Children will have a lot more credibility if they take care to shoe themselves before pointing at a parent's bare financial toes.

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Talking To Parents About Money – The Nuts and Bolts
A poll by the National Foundation for Financial Education a couple of years ago elicited the top ten reasons why families don't address parental money issues:

  • Fear of losing independence.
  • Refuse to recognize a problem exists.
  • Embarrassment.
  • Family doesn't talk openly about money.
  • Don't want to lose privacy.
  • Pre-existing tension among family members.
  • Don't know how to open the discussion.
  • Distrust family members.
  • Denial – "This won't happen to me."
  • Misconception that the family is prepared to handle cognitive-decline issues.
Given that formidable list of obstacles, how can adult children take a more proactive approach with parental finances? Given how different families are, there's no one answer, but here are some guidelines.

How To Talk
Ask Permission.
Asking someone permission to talk about a hard topic communicates that they're still in control. It also demonstrates that you care about their feelings as much as the subject.

By contrast, attempting to seize the moment and pounce on an event or communication as an excuse to talk increases the odds of having a door slammed in our face.

Use Active Listening
If you've successfully initiated a hard conversation, the job now is to nurture it. Staying immersed in your own thoughts while someone else speaks won't do the job. You'll need to practice what therapists call "active listening" in order to make the other person feel heard and understood:
  • Give your full attention to the other person.
  • Paraphrase what they say.
  • Check to see if you got it right.
  • Ask open-ended questions to keep the conversation going.
  • Inquire about their feelings and needs.
Breathe and Relax
Talking about money raises deep emotions. Faces constrict, bodies tense as the fear instincts take over. To counter this, take a moment before a conversation to breathe deeply and relax. If possible, think about conducting a conversation while doing something active like a nice walk outdoors.

What to Talk About
There are a variety of resources, some listed below, to help take an inventory of parents' finances – a useful first step. Remember to start small and take baby steps, since a good conversation can get quickly bogged down in the financial weeds.

There are three major areas to cover – financial, legal, and health. Here are some suggested questions in each area:

  • What are their income and expenses each month? How do they pay their bills?
  • Where are their bank accounts, investment accounts, and insurance policies?
  • If they have financial advisors, can you speak with them?
  • Where do they keep important documents such as tax returns, deeds, and mortgage information?
  • Do they have any of the basic documents in an estate plan – a will, trust, durable power of attorney for finances and healthcare directive?
  • If they have an attorney, can you speak with them?
  • What are their final wishes and desired funeral arrangements?
  • What medical insurance do they have besides Medicare?
  • Do they have long-term-care insurance?
  • Who are their doctors? May you speak with them?
How You Can Help
An adult child's role in helping a parent with finances falls into three potentially overlapping categories:

Confidant / Sounding Board
This means being a good listener and accepting invitations to discuss financial issues, rather than trying to direct the conversation. Over time, as trust develops, a deeper collaboration may develop, and the adult child may begin to play a more proactive role – for example, suggesting that a parent arrange for automatic bill payment or request their free credit reports once a year.

Financial Advocate
Just as we need "health advocates" to navigate the medical world these days, we need advocates to deal with financial institutions and service providers. An adult child can participate in conference calls with banks and investment custodians, attend meetings with accountants and attorneys, and generally help coordinate the efforts of advisors who, because they work on a transactional basis, may not see the whole picture.

Financial Surrogate
If disability makes it difficult for a parent to manage their finances, there are a variety of legal devices that enable a child make financial decisions for them. The laws and recommended practices vary by state, so you should consult an attorney in the state where the parent lives.

1. Durable Power of Attorney
A power of attorney is a written document in which a person (the principal) gives another person (the agent or attorney-in-fact) legal authority to act on their behalf in financial transactions. The nature and extent of the delegated authority can be crafted in a variety of ways, so an attorney's guidance is essential.

2. Trustee
A trust is an arrangement where designated assets are transferred from one person (grantor) to another person (trustee) who holds and manages the assets for the benefit of the beneficiary. Using a "living trust," a parent may name herself as trustee of the assets until she becomes incapacitated, at which time her daughter will take over the duties of trustee.

3. Representative Payee
If a parent's incapacity makes it difficult to manage pension or public-benefit income, an adult child may be designated to receive and disburse funds for the parent.

4. Joint Accounts
Many articles recommend joint checking accounts as an easy way for an adult child to assist a parent in paying bills. There are, however, a lot of legal and financial pitfalls with such accounts, causing many attorneys to recommend against them.

Resource List
There are many organizations and agencies available to help adult children and their parents work on personal finances. Here are a few resources to help get started:

"Caring for Your Aging Parents," Berman, Raeann and Bernard H. Shulman, MD (Sourcebooks, Inc. 2009). Good illustrations of many types of conversations between parents and children.

Consumer Financial Protection Bureau This new federal agency has a lot of good materials on its website. See, in particular, the "Managing Someone Else's Money" series of guides, describing the duties of guardians, trustees, and agents under a power of attorney.

"Protecting Your Parents' Money: The Essential Guide to Helping Mom and Dad Navigate the Finances of Retirement," Jeff D. Opdyke (HarperBusiness 2011). Written by a veteran Wall Street Journal reporter.

"What If . . . Workbook" A workbook created by a hospice worker to serve as an organizer for finances, including account numbers, contact information, and last wishes.

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BFA Media Quotes
KGO ABC7 News Interview, November 7, 2013
Business reporter David Louie interviewed Milo in a segment called "Twitter Makes a Big Splash in Wall Street Debut." Milo noted that "any IPO stock becomes a trading vehicle in the first few days after the IPO, and it's a guessing game about how much money the company will be eventually worth . . . It just doesn't have a track record. There may be some revenues, but we don't know what the profitability is going to be." See the video.

The New York Times, October 25, 2013
Milo was quoted in an article by Tara Siegel Bernard, "An Intriguing Product That's Too Complex For Many," which discussed new mutual funds that incorporate hedge-fund strategies. Milo urged caution, noting, "Most of them have short track records, obscure trading strategies and few to no adequate benchmarks to compare their performance to." He also described one sales strategy he's seen used to lure investors into these products. Read the article.

Bloomberg Ventured & Gained, October 11, 2013
In Bloomberg's personal-finance blog, under "How to Handle a Debt Default. You Know. Just in Case," reporter Ben Steverman sets forth an extended conversation with Milo regarding how to address the investment uncertainty caused by the debt-ceiling crisis. Read the article.

Money Magazine, October 1, 2013
In a special section on how best to use financial windfalls, Milo recommended taking a look at whether life-insurance coverage was adequate, noting that being under-covered was common. Read the article.

Thank you for reading. Please look for our next newsletter in January.

Best regards,

Milo Benningfield

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