Right about the time many Baby Boomer clients stop supporting their adult children and start focusing on a looming retirement, they may be confronted with an unfortunate and unforeseen new duty: caring for an elderly parent who is in financial, physical, and mental decline.
The situation can be sensitive at best, and explosive at the worst. Here's a checklist you can use to help middle-aged clients delicately get a handle on their parents' legal, health, and financial affairs.
Recent tax returns
A good opening line clients can use to get the conversation with their parents started is to ask, “Did you get your taxes in on time?” Not only are taxes a timely topic, but the older folks probably fear the wrath of the IRS at least as much as they worry about discussing money with their kids.
If the parents did file, you might offer to review the returns with the clients to make sure the figures are accurate, any IRA RMDs have been taken (and taxed), and that all potential deductions and credits were received.
You can bone up on some of the unique opportunities available to taxpayers of a certain age by getting Publication 554 (Tax Benefits for Seniors) at www.irs.gov.
Another advantage of reviewing the tax returns is that you and your clients can “reverse engineer” it to find out where the parents' money is invested, and the type of income it's generating. As you are well aware, since most “safe” investments offer next to nothing in yield right now, many investors on a fixed income are forced to dip into principal, take on more risk than they should, or both.
Offering an objective analysis and opinion of the parents' current arrangements could discover some dangerous areas, offer relief to confused older parents, and eventually even get the money under your auspices.
But at a minimum, you should suggest that the clients introduce themselves to their parents' current financial advisor, and add themselves as an interested third party for monthly statements and tax information.
A trip to the attorney's office
Many octogenarians haven't updated their legal papers for ages, if they ever addressed the subject at all. So the next step in the process is to find out if the papers exist, where they are, and do they reflect the parents' current situation and wishes.
In the likely event that the parents live in a different state than you and/or your clients, you can look for an attorney by both location and specialty by visiting www.lawyers.com.
Of course beneficiary designations and heirs should be brought up to date, as should any exposure to potential estate tax liabilities. But you can also weigh in on making any of the parents' charitable intentions come true in an efficient manner.
Finally, you can position yourself as the family's primary financial advisor by offering to host and coordinate any necessary meetings between your clients, their parents, and/or the clients' siblings.
If your office phone system doesn't offer the necessary technology for a phone conference, you can set one up yourself relatively easily with a service like the one at www.freeconference.com.
Health and wealth
Along with designating at least a durable power of attorney for the parents' financial issues, a good attorney will recommend establishing the same provision for health care.
Your clients should also have “HIPAA” proof documents that authorize them to obtain information about their parents' medical condition, especially if the older folks are moved to a different, unfamiliar health care or assisted living facility.
A more delicate subject to address is “advance directives,” such as living wills. The conversation is certainly difficult, but doing so now while the parents are relatively well may ease the family's stress and pain if parents experience a rapid decline in health.
Your clients can also find out more about their parents' current or future nursing home or assisted living facility by going to www.medicare.gov/nhcompare/. It's an especially useful tool if the clients are thousands of miles away from where their parents live.
More help, and more money?
Another area you and your clients can go to find help for their parents is the National Council on Aging's “Benefits Check-Up” (www.benefitscheckup.org). At the site your clients can find out various ways to not only protect their parents, but also qualify for assistance (financial and otherwise) in covering food, medical, utility, and other living expenses.
Your clients and their parents may also benefit by visiting www.caring.com, a free, ad-supported site that attempts to guide the millions of adults who are or will be caring for older friends and family members.
Hopefully, your Boomer clients put in this predicament will live long enough and be fortunate enough to one day be cared for by someone else, as well.
CFP© is Principal/Owner of McKinley Money LLC, an independent registered investment advisor. He is also the author of the book Make Your Kid a Millionaire (Simon & Schuster), and provides speaking and consulting services on family financial planning topics. Find out more at www.advisortipsheet.com.