When thinking about our financial future, we usually think about planning for ourselves- our retirement, our children’s college education, but have you planned for your parents? If they have not properly planned for their future, when they retire or get sick you could find yourself taking care of them as well as yourself. This could derail your financial plans, possibly creating a vicious cycle where you in turn end up being financially dependent on your children.
You may be lucky, and your parents have saved an adequate nest egg, both for regular day to day living post retirement as well as unforeseen circumstances such as illness. But don’t assume that is the case. It is important to ask your parent some key questions to know if a plan needs to be made for their care in their golden years.
Do they have a retirement plan?
It may be uncomfortable talking about money with your parents but if you address these issues now before there is an emergency you are likely to make better, more levelheaded decisions. Review your parent’s net worth by adding up the value of their assets and subtracting their liabilities. Bear in mind that things like a house are not ready cash as those type of assets would take a while to liquidate if that becomes necessary. Based on their current monthly living expenses, how long would the money they have last? Is there any debt that needs to be paid off e.g., a mortgage or other loan.
Do they have health insurance or long-term insurance to cover care costs? What are their wishes if they get sick. Are they open to the idea of nursing home? Can they be cared for at home? What will that cost? These are all hard questions but essential to keeping your parents’ and your financial futures intact.
Do they have a will?
Some people are superstitious about making a will but as soon as you have assets you should have a will. Ask your parents if they have a will and where to locate it. If they don’t, consult an estate lawyer to help them make a will and to get advice on how they should hold their assets e.g., in a trust. While you are at it, make sure you are aware of their other affairs e.g., where they have their bank accounts and investments and whose names are on them. This may also be a good opportunity to determine who will be given power of attorney and financial oversight of your parents’ accounts. A power of attorney will authorize a trusted person to manage their finances in the event they can no longer.
The saying goes, “Once a man, twice a child”. Change is hard for anyone. It is a hard day when you find the roles reversed and you are the one parenting your parents but planning while things are good and preparing for the worst (which may never happen) will empower the family with an action plan.
Toni-Ann Neita-Elliott, CFP is the Vice President, Sales & Marketing at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual, and institutional investor. Visit our website at www.sterling.com.jm
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