In working with financial planning clients for nearly 30 years, I’ve seen all kinds of scenarios play out when it comes to money at the end of someone’s life. One example is a couple who came to me seeking advice on what to do with an unexpected windfall. The wife’s mother had died and in the process of settling her affairs, they discovered she’d had some $2 million in savings. They were shocked. The elderly woman had lived very modestly and never let on that she’d just been sitting on a fortune. While it may seem like all ended well, the truth is, it could have been so much better.

The case had to make its way through probate court and the fees had eaten anywhere from five to ten percent of the woman’s life savings. It wasn’t just costly; it was time-consuming and mentally draining for the couple. If they had all just taken the time to talk as a family before the woman’s death, they could have established a living trust or payment-on-death designation of the assets. Our parents need to be warned that if they’re not willing to make these formal declarations at some point in their lives, their money may not always go to their children or grandchildren. Instead, an attorney’s children or grandchildren will stand to benefit and you can bet the IRS will too.

In that particular instance, there was more than enough money to go around, so no one was too upset by what happened. That’s rarely ever the case. Normally, it’s the lack of money, or more accurately, the lack of planning that sends people into my office. In simpler times, we were guided and reassured by what we called the "three-legged stool" of financial planning. Many people used to retire with Social Security benefits, a pension and private savings. Today, few people can count on a pension. Gone are the days of working for a company for 30+ years and anticipating your employer will reward that loyal service by taking care of you financially for the rest of your life.

The responsibility now rests squarely on our own shoulders, but that’s not where our attention goes. We pay bills, mortgages, student loans, support children and in some cases, even aging parents, and somewhere along the line, we forget to pay ourselves in the way of savings and end up broke. If this sounds like a place your parents are headed, you need to have a talk with them. The fact is we’re all going to die someday. It may be unpleasant, but it’s still going to happen. So why not be more open about it?

Some older folks can be defensive or dismissive when it comes to questions about their finances. In reality, some young people can come off that way too, but your parents, in particular, may see it as an unsubtle inquiry about your inheritance or an indictment of their overall competence. Approach the situation delicately. If your parents are still in debt, they may be even more reluctant to divulge actual figures. Make sure they know you’re trying to glean this information not to judge them, but to have a better understanding of where things stand so you can all prepare for the future. Even if they have Medicare, they should be setting aside some money for future health care expenses, as we’re all spending more for out-of-pocket medical costs than ever before. Together, hopefully, you can make some decisions. It might mean selling the family home, which can be tough and emotional. It might mean calling a professional, like a financial planner, reverse mortgage lender, credit counselor or sadly, even a bankruptcy attorney.

Whatever the situation, I can’t stress enough the importance of planning. Don’t get caught blindsided. We have to be astute. We have to pay attention. Otherwise, I’ve seen too many older folks have to go on public assistance and it becomes a sad final chapter to a lifetime of hard work. One of the easiest ways to broach the topic with your parents is to find a third-party news story. Start off the conversation with, “Hey, I just read in the newspaper or saw online about such-and-such topic. Mom and Dad, have you ever thought about this? Is this something we need to talk about?” Some of my clients have found this approach to be very effective, so I offer you this article. Use it as springboard to achieve financial peace of mind for you and your parents, so you can relax and enjoy what precious time you have left together.

Bill Demaree is president of Demaree Retirement Services.

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