Tackling tough money conversations with your parents

Date Posted:Thu, 25th Jan 2024

Tackling tough money conversations with your parents

Talking about money with your parents can be fraught with obstacles, not least that they may feel it’s their job to educate and support you – rather than the other way around. But as parents age, money may become an area which creates worry and concern for them. If this is the case you might want to provide them with some help and advice – if and when they need it. As part of our tough conversations series, Stuart McCulloch, Market Head in the Middle East, considers some of the discussions which might be useful to bring up with your parents.

 

 Discussing finance with your parents can feel awkward, especially if they’ve been the ones who you’ve turned to for advice about money. But as your parents age it may be that the tables begin to turn. You may feel it’s sensible to try to talk to them about their wishes for their estate, and any generational wealth too or you may find that, when it comes to money, they want you to take more of the reins and help them manage their financial affairs more regularly.

There are also some practicalities to consider. We’re all living longer than ever before, and this can mean there might be some additional complications, not least the expectation that your parents may face periods of ill health when finance becomes something they can’t or don’t want to manage. Having the right plans in place to ensure that you can step in, if and when you need to, is important.

Financial conversations with your parents can be particularly emotive, especially if they are beginning to struggle with their own independence and are becoming more reliant on you or other family members. It might be difficult for them to accept that they need help and support, and money may have been an area which has been something they’ve kept to themselves for some time.

So you might need to pick a suitable moment and use some tact – it may take some time and several conversations before they open up about their wishes, plans and if any help is needed. It can sometimes be easier to start conversations by talking about your own plans or bringing up some relevant news in the media such as the state pension or the cost of living, and inviting them to share their thoughts.

Living longer

Life expectancies are rising around the world, so supporting your parents with aspects of their financial planning as they age could be a situation that you might face. And of course rates of dementia are rising too so managing your parent’s finances for the short or long-term, as well as your own, could be something you need to take on.

Understanding your parent’s financial aims, and what matters to them, is a great starting point; it’s always better to have conversations ahead of time rather than trying to unpick things down the line. You can then be confident that you’re making the right decisions on their behalf if and when you need to. So chat to them about what matters to them. What do they want to spend money on? And what don’t they?

A good start might be to start to think about roles and in what circumstances these need to take effect. For example, your parents might be happy managing day to day expenses but want more help and support with investments and estate planning – perhaps by including you in meetings with their financial planner or chatting through any recommendations they’ve received about their pension or Will.

Along with offering practical help, you may also need to broach long-term care costs. Your parents may have specific wishes about what they do and don’t want – some are happy to consider a residential facility and others may prefer to stay in their own home with daily homecare support. You might also need to broach how this can be funded and by whom. They may be happy to sell the family home to release funds for care or want to avoid this at all costs.

Considering generational wealth

Those in their 60s and 70s (the baby boomers) have found themselves with more wealth than any other generation. Working out how to manage generational wealth – especially if the concept is a new one for your family – can feel overwhelming. For most people the main aim is to enjoy the financial freedom which wealth can offer, before passing the remainder down to younger generations with as little tax as possible. If your parents are in a strong financial position, it’s important to ensure they’re aware of their situation and have sensible plans in place. This may seem unnecessary but if your parents have lived in the family home for many years and settled a mortgage some time ago, they may not have a true appreciation of the property’s value, alongside their pensions and other assets. And whilst they may be able to leave their estate to one another without Inheritance Tax being a factor, there could be a hefty bill to pay once their estate transfers to you and any siblings. Another aspect to bear in mind is that your parents may be keen to see the impact of any inheritance they want to make, perhaps by leaving an early financial gift to help you with a step up the property ladder or support grandchildren with school or university fees. This can also help negotiate the ‘seven year rule’ which dictates that Inheritance Tax (IHT) still applies if your parents have gifted money or assets to others, but don’t live for more than seven years after doing so.

Being practical

As with all aspects of finance, planning is vital and some key tools can help ensure peace of mind for you and your parents. The first is making sure they have a valid Will, it’s up-to-date, and that you know where the original is held. Either working through the Will preparation process with them or understanding the wishes included in this important document can help enormously.

Another useful step is making sure your parents have a Power of Attorney, so that you or someone else they trust can step in and manage their finances in an emergency or if they become unable to do so. There are different Powers of Attorney covering finance and healthcare and working through the process can be a good prompt for some of the tough conversations you might need to cover about their wishes for the future.

Talking about finance with your parents can be difficult, especially as it might touch on some tricky issues including loss of independence, inheritance, ill health and care plans. But tackling these conversations can help you feel reassured that, as and when the time comes, you’ll be making decisions which you know they will support and be proud of.

Stuart McCulloch

Market Head, Middle East

E. info@thefrygroup.ae

 

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