This article has been submitted by Magenta Financial Planning
Talking about money with your parents can be difficult. However, these conversations can also be some of the most important ones you will have with those you love. It doesn’t need to be a full examination of their financial records, as you clearly don’t want to overstep any boundaries or cause offence. But there are also questions you need to ask to ensure your parents have prepared for the next stage of their lives, as well as helping you to know about any areas where you might need to provide support in the future, as early as possible.
Here are six important areas that should be discussed to ensure the best possible financial and lifestyle outcomes:
- Not telling their children where all their assets are, is one of the biggest mistakes made by parents when planning what to do with their estate. Asking your parents to put everything in one folder, in a safe, easily accessible place is a good idea, if they haven’t done so already. This should include bank, investment and pension accounts, including account numbers. Digital and online storage is increasingly popular and can help prevent files from becoming lost or damaged. It is important where parents are elderly, that passwords can be accessed.
- Assuming that they have a financial plan, your parents should be reviewing this regularly and maybe sharing it with the whole family. They may have planned for a certain life expectancy during their working life, which may now be a significant number of years longer. It is useful to understand the sources of your parents’ income especially when they retire. It’s also a good idea to know how to contact their solicitor, accountant and financial adviser if they are incapacitated or die unexpectedly.
- Make sure your parents have a will in place and that it is up to date. A will more than five years old should be reviewed to ensure it reflects your parents’ current wishes. It’s also a good idea to find out about any unusual or specific requests in their will now, to avoid any unexpected surprises when you least want to experience them. Knowing who the executors are is also useful – it might be you! In which case it is good to be prepared. Asking your parents to check the beneficiaries of any life insurance policies or pensions is also worthwhile, as these can override bequests in a will.
- Your parents may also have set up complex trust arrangements in order to save inheritance tax. If this is the case, it would be useful to know the value of their total estate so you know what the IHT liability might be. It is also good to know who the Trustees and beneficiaries are and what the general terms of the trust are.
- A lasting power of attorney, or LPA is a legal document which nominates a trusted friend or relative to look after their affairs if they are unable to do so themselves. It’s a sensitive issue to know when the time is right to activate the LPA, but it is worth putting in place long before you think you may need it, so you can make the right choices on your parents’ behalf if the time comes.
- Perhaps the most difficult issue, but one of the most important. If your parents can no longer manage in, or maintain their home due to age or illness, you need to know what their plans are and what they would be happy to do. Neither you nor your parents are likely to want to think about growing old and frail, but if you have the discussion sooner rather than later, it can make both the financial and emotional sides of dealing with matters surrounding care when the time comes, that much easier.
The success of discussions about all of the above will depend on often complex family relationships. Sometimes parents will refuse to give any information, believing it to be none of your business and themselves capable of dealing with everything. Others will welcome family involvement as they consider their wealth to belong to all generations and want to reduce any tax burdens.
You may worry that your parents will think you are “a money-grabbing vulture,” but if the discussions are handled sensitively, it will be clear that your concern is for their benefit. In our experience, it is better to discuss these issues sooner rather than later so that plans can be put in place to provide financial security, ensure a happy retirement/later years and reduce inheritance tax. Leaving these discussions until your parents are too old to be bothered, or when the planning options are very limited, does the whole family a disservice.
At Magenta, we specialise in whole family planning, ensuring that family wealth passes through the generations without being taxed and that the older people are secure and happy. If this issue is of concern, please do call us.