As life expectancy continues to rise, so does the likelihood that you will inevitably have to step in at some point and help your parents make financial and other decisions. Consider that 16 percent to 25 percent of people aged 65 and older have mild cognitive impairment, which will adversely affect their financial decisions.1
That’s important: Researchers have found that investors with reduced cognitive function take more risk and earn lower returns in the stock market.2
Certainly, it’s never pleasant to discuss one’s mortality, but putting off a conversation could mean that you’ll be left scrambling to help your parents protect their hard-earned assets.
Becoming more aware now will mean that you can make sure that financial matters are handled in a way that reflects their wishes.
Experts advise that you begin while your parents are healthy, so you can introduce the subject slowly and continue the conversation over the years, instead of waiting until they have declined cognitively, or an urgent matter arises.
What are the topics you’ll need to cover?
- Do they have enough income and assets to see them through a long retirement?
- Where are their assets held?
- How have their investments performed? Do they have a financial advisor and a financial plan?
- What kinds of insurance and coverage do they have? If those aren’t enough, how would they want the shortfall to be paid? How would they fund home healthcare or nursing-home expenses?
- Where do your parents want to live in the future? Would they prefer to sell their house and move to an assisted living facility?
Do they have the necessary legal documents? They’ll need:
- A will, which directs the distribution of most of their property upon death.
- Advanced medical directives that speak for your parents if they become incapacitated: A healthcare proxy appoints an individual to make medical decisions if they’re unable to communicate, and a living will states their wishes in regard to end-of-life medical treatment.
- Power of attorney, which authorizes someone to make business or legal decisions on their behalf.
Where are all important papers kept?
- Know where to find their important financial statements, legal documents, tax returns, etc.
- Make sure you are listed as a co-renter of a safe deposit box, so you’ll have access if a parent passes.
What creditors do they pay regularly?
- You’ll need to know who gets paid, and when.
- Talk to your parents about making you a cosignatory on a checking account so you can access checks to pay bills if they’re unable to.
- See if they’re willing to consider ways to simplify their finances, cutting back on credit card use and the checks that need to be written, by establishing automatic bill pay.
I would be happy to connect you to one of the elder law specialists in our UBS Attorney Network, to secure the appropriate documents and get further guidance. With your parents present, we can delve into the important questions that need to be answered and the decisions that must be made. Let’s talk about it.
1The Healthy Brain Initiative: A National Public Health Road Map to Maintaining Cognitive Health , Centers for Disease Control and Prevention and the Alzheimer’s Association. Chicago, Illinois: Alzheimer’s Association; 2007.
2Korniotis, G., and A. Kumar. 2005. “Cognitive Abilities, Investor Sophistication, and Investment Decisions.” Behavioral Finance, Kent Baker and John Nofsinger, eds. Hoboken, NJ: John Wiley and Sons.
Attorneys in the Attorney Network are independent of, and unaffiliated with, UBS Financial Services Inc. These attorneys may refer clients to UBS Financial Services Inc. but receive no compensation from us for these referrals. Neither UBS Financial Services nor its Financial Advisors provide legal or tax advice. Please consult with your personal legal and/or tax advisor regarding your individual circumstances.
This article was originally published in the December/January 2016 issue of Worth.