Monday, November 16, 2020

Mom and Dad, We Need to Talk

I wasn’t sure what to expect from Cameron Huddleston’s book Mom and Dad, We Need to Tak: How to Have Essential Conversations with Your Parents about Their Finances, but I was pleasantly surprised.  It’s well written and contains lots of practical advice about the steps we need to take to make it easier to help our parents as they age.  The book is U.S.-centric, so some of the more detailed advice is less useful to Canadians, but is still well worth a read.

A common theme throughout the book is that some steps with helping your parents need to begin long before they need help.  I’ve been in the position of rooting through a house full of papers trying to figure out what accounts there are and what bills need to be paid.  I can only imagine how much worse the experience would have been if I didn’t have a power of attorney document prepared in advance.

It’s tempting to decide that there’s no need to do anything right now because your parent or parents are fine.  However, when the time comes that they need help, you’ll need to know about their various accounts, and you’ll need to have power of attorney.  However, wills and power of attorney documents have to be set up while your parents are still competent.  As for their financial accounts, you’ll want them to at least tell you which banks and insurance companies you’ll need to contact.  The more information you have, the less you’ll need to play the role of “forensic accountant.”  In my case, I almost missed an account with about $40,000 in it.  Maybe there are others I did miss.  I’ll never know.

Huddleston covers many of the reasons your parents may resist talking about their finances with you.  They may consider money a taboo topic.  They may be worried about losing their independence and don’t want to think about aging and death.  They might be embarrassed about their finances, or they may think you’re just sniffing around for an inheritance.  The book covers a wide range of ways of moving forward despite resistance.

An interesting piece of advice is to make sure you and your siblings are on the same page before approaching your parents.  You won’t get very far with a discussion about finances or moving out of a house your parents can’t manage any more if your siblings are fighting you.

In one of the book's many examples, “Jason” used the 2008-2009 recession to broach the subject of finances with his mother.  He asked whether “she had been speaking to anyone about her retirement funds and if she had moved any of her holdings into a safe harbor type of situation to prevent any negative fallout from the market crash.”  This shows the importance of knowing what you’re talking about yourself before trying to help your parents.  Jason has bought into the myth that financial advisors can steer around market crashes.  He was advising his mother to sell out of stocks after they had already fallen to lock in her losses.

Another important subject for discussing with your parents is scams.  Huddleston gives a good list of red flags for scams including fees to collect winnings, calls from government agencies, emergency calls from grandkids, free lunches, and high-return investments with no risks.

Hudleston advises being careful about reverse mortgages because “deceptive marketing is common.”  The book contains no further information other than a reference to a Consumer Financial Protection Bureau (CFPB) document.  I found the following: “since January 2012 American Advisors Group’s advertisements misrepresented that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives. The company also falsely told potential customers that they would have no monthly payments and that with a reverse mortgage they would be able to pay off all debts. In fact, consumers with a reverse mortgage still have payments and can default and lose their home if they fail to comply with the loan terms. These terms require, among other things, paying property taxes, making homeowner’s insurance payments, and paying for property maintenance.”

Overall, I recommend this book to get useful information about making a very difficult time easier.  It’s hard to see your parents or other relatives decline with age, but the experience can be a whole lot worse without proper preparation.  Wills and powers of attorney need to be in place in advance.  Siblings need to come to agreement, and you and your parents need to make realistic plans about either aging in place or moving somewhere more manageable.

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