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Your parents' finances
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November 24, 1999: 6:24 a.m. ET
Baby Boomers are faced with a tough task: financial intervention
By Staff Writer Shelly K. Schwartz
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NEW YORK (CNNfn) - It may be the most difficult conversation you'll ever face: asking your aging parents if they need help managing their finances.
But for millions of middle-aged children, whose parents are living longer than ever before, it's become a fact of life that cannot be ignored.
"We have been dealing with this topic more and more," said Dennis Means, a certified financial planner in Denver who specializes in inter-generational financial planning. "That's just how things are evolving."
Unfortunately, that doesn't mean it has gotten any easier.
The subject of financial intervention alone is enough to strain an otherwise amicable bond between parent and child -- not to mention sometimes tenuous relationships among siblings.
"Some parents really have trouble having their kids know their business," Means said. "The parents of Baby Boomers, in particular, came through a generation where the father of the house usually did all the finances and the wife or mother may not even know everything, so it's hard to develop that line of communication."
Reading the signs
So how do you know when it's time to have the talk?
"There's no easy answer here," Frank Degen, a spokesman for the National Association of Enrolled Agents, said. "It's not like you can say (that) when the parent turns 72 they should automatically turn their finances over to their children."
Obviously, if your parent is suffering from a medical condition, or mentally debilitating disease, such as Alzheimer's, you should step in and encourage your parents to seek out professional advice. Letting them know you'll be there to help can be a great reassurance.
Also, if you notice your parents are forgetting to pay their mortgage or utility bills, or that they're having a hard time keeping up with tasks around the home -- you may also take that opportunity to ask if they need help.
Be prepared for some resistance, though. Even parents who admit they are having a hard time keeping track of monthly bills sometimes take offense at the mere mention of someone else assuming control of their financial affairs.
"A lot of parents are very reluctant to share their financial history," Degen said. "They might have a wonderful relationship with their children emotionally, but when it comes to finances, not too many are always ready to talk about that."
One other situation for which you may want to offer help is when the designated bill payer of the house -- oftentimes the husband in older generations -- passes away. The parent left behind may or may not be able to pick up where their spouse left off.
Beyond that, experts say it's really just a judgment call. A simple conversation about financial assistance years before help is actually needed can help pave the way for future discussions, which will put everyone more at ease if and when the time comes.
The approach
Experts say a good way to broach the subject is to level with your parents. Tell them you're concerned about their financial welfare and let them know you'll be there for them in whatever capacity they may need you.
Most of all, show them the respect they deserve.
"I would encourage the children to be open," Degen said. "Ask your parents in general terms if they want some help discussing it, or in setting up a meeting to talk about it with a professional."
You may want to suggest that the entire family meet with an expert who specializes in inter-generational financial planning. That way, there's an independent third party professional who can ask the pertinent, and sometimes difficult, questions that need to be addressed.
"The difficult parts is that the (middle-aged kids) feel they are put in a position where they have to make decisions for themselves and their older parents, yet it's difficult to understand the feelings and emotional worries that the older generation might have faced," said Marc Freedman, a certified financial planner and president of Freedman Financial Associates in Peabody, Mass.
Freedman's firm deals largely with inter-generational planning.
"The kids, for example, might feel that Mom and Dad should really consider nursing home insurance or pre-planning their funeral, but the parents maybe feel that by planning for it, it's like admitting they might be next [on the obituary pages]," he said.
Also, he said, be aware adults in their 70s and 80s sometimes put off basic estate planning because they feel that "once that is accomplished, there's nothing left in life to do."
One other way to ease into the topic is to ask your parents if they'd like duplicate copies of their monthly mortgage, credit card and utility bills sent to your home.
That way, the parent and child know there is someone making sure the bills get paid -- and the electricity stays on.
Don't get pushy
Not surprisingly, it's when children get too pushy -- no matter how well-intentioned they may be -- that parents get defensive.
"One of the biggest problems I see these days is when the children feel they have a right to an inheritance and a lot of times [they want to intervene on their parent's financial behalf] before they are ready and willing to do that," Degen said. "I know a lot of lawyers who say the first thing they do is take the parents into a room and ask them if they are ready for this."
Lawyers and financial professionals, he noted, have to know who they are working for.
If the parents indicate they'd like to turn over the bulk of their assets to the children, the financial planner and tax attorney will generally invest that money differently. They usually look for ways to shelter as much of that income from the Internal Revenue Service as possible. And sometimes, they suggest investment strategies with higher risk versus reward potential.
If it's the parents who need that money to provide for the remainder of their retirement, the money is generally put to work in less risky investments. And the attorney would instead be focused on wills and trust funds.
Make it legal
In all cases, experts say it's wise to do everything by the book.
For starters, that means having your parents sign a power of attorney granting you permission to make certain decisions on their behalf -- if they've agreed you are best able to manage their finances.
Means said that's especially true if your family is prone to squabbles.
"Powers of attorney are very important," he said. "There needs to be some agreement there legally that indicates permission has been granted so if other siblings or family members get involved then it's an absolute."
Means suggested however, that parents may also consider placing restrictions on how that power of attorney can be used.
"There should be some boundary that says the son or daughter who has this power of attorney can't take that money and buy property in Barbados or put it in certain risky investments like futures or options," he said.
Other legal documents, such as living trusts, are also important estate-planning tools. Means said all families should speak with a professional to decide which option is best for them.
Freedman agrees.
"I always recommend that our clients have a clear, current will, health care proxy and durable power of attorney," he said. 
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