A Critical Conversation

Tips for starting a dialogue with your parents that’s crucial to preserving family wealth

One reason parents may not want to talk to an adult child about their finances is such a conversation shifts the dynamics of the relationship.

“It takes away your parents’ authority, their standing, the respect they may feel they’ve earned because now you’re acting as a peer to them or even a parent,” says Pamela Brown, Ph.D., a clinical psychologist based in Philadelphia. Another reason such a conversation may be difficult is it deals with plans put in place to handle illness and death. “Bringing up any issue that reminds someone of their mortality is usually a difficult one, even if you have a great relationship,” Brown adds.

A strained relationship between a parent and child only compounds the problem because parents may suspect that the child is just looking for money or worried about an inheritance. “They may feel like the child’s meddling in their financial affairs or trying to take advantage and exploit them,” Evans-Motte says.

There’s also the issue of time. Important conversations about money should take place face to face, and it may be impossible to talk about everything that needs to be discussed in one fell swoop. To maximize your chances of having a productive discussion, find a time and place where there are as few distractions as possible, suggests Brown. To spark the conversation, it may also help to take your family member to a seminar or workshop on financial planning.

Enlisting a third party such as a financial adviser or estate planning attorney to facilitate the conversation may also make the person feel more at ease. Finally, acknowledge that the other person may not feel comfortable talking about his or her finances with you. If that’s the case, consider enlisting another family member. “Have some alternative resources available for them,” Brown says.

Having this conversation won’t be easy, and you may be tempted to put it off for later. But doing so means you’re less likely to be financially prepared if a parent or elderly relative runs into a financial bind or experiences a health crisis. “The earlier you start, the more choices you have,” Evans-Motte says.

The Heart of the Matter

So what should a conversation with your parents entail? You want to find out as much as possible, but there are four key areas that must be addressed, experts say.

1. Day-to-day expenses “You really need to have a good idea of what the cash flow is,” says Lanta Evans-Motte, a financial adviser in Calverton, Maryland. “Does the parent have enough money to cover current expenses and is that anticipated to continue?” It’s important to factor in inflation and unexpected expenses that might arise, such as costly home or auto repairs.

2. Retirement income The simple truth is that traditional pensions based on an employee’s salary and years of service at a particular company are quickly disappearing. As a result, it’s important to ask parents who are still working about how much they’re contributing to retirement accounts such as a 401(k) or IRA.

3. Insurance Health insurance is

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