Few conversations will feel as awkward as asking your parents about their finances.
It’s why many families avoid the topic for years or even decades – until a serious illness, incapacity, or bereavement forces it out into the open. Unfortunately by then, it’s often too late to avoid a lot of unnecessary stress, paperwork or disagreements.
As parents or loved ones age, balancing respect for their independence with the need to get their financial affairs in order becomes increasingly tricky.
But if adult children don’t have clear knowledge of key issues like wills, assets, care wishes and legal authority, they can be left making difficult decisions in the dark later down the line. There is also then little chance that their parents’ wishes will be fully known or met.
“Early conversations are the best way to avoid confusion and unintended consequences,” says Jeannie Boyle, chartered financial planner at EQ Investors.
“It’s not about control; it’s about ensuring that everyone’s wishes are understood and can be acted upon.”
You don’t need to pore over every penny, but you do need to know the essentials. Here are the crucial questions to ask your parents – sooner rather than later.
1. Do you have a record of your assets, and where is it kept?
The most common estate-planning mistake is simply not knowing where everything is. Current and savings accounts, pensions, insurance policies and investment statements should be stored in one place, complete with account numbers.
“If they haven’t already, ask them to keep it all in a folder in a safe, accessible place,” says Boyle. “Web-based storage services are increasingly popular. Digital storage can also prevent records from getting lost or falling into the wrong hands.”
A clear, organised record saves stress and time later and reduces the risk that important details will be overlooked.
2. Do you have a financial plan, and when was it last reviewed?
People are living longer than ever, meaning pensions and savings must last further into retirement. “A 65-year-old woman can now expect to live to 90 on average,” Boyle says.
Ask your parents about their income sources. Do they have a defined benefit pension paying a fixed income? Or are their savings invested in the stock market, with fluctuating values? Are they relying on state pensions alone for extra income beyond savings? Get details of any financial adviser, solicitor, or accountant they use.
If your parents plan to pass on wealth while still alive – an increasingly popular choice known as giving while living – this can reduce inheritance tax, but the rules are complex so consider taking professional advice and ensure records are kept.
