By Robert Powell, MarketWatch
Last Update: 7:00 AM ET Dec 31, 2012
Make no mistake about it, theres a large generational role reversal taking place in this country. Adult children are increasingly providing advice and counsel to their aging parents about a wide variety of financial and nonfinancial issues. And, they are being asked to answer questions about everything from Medicare to how to reinvest a maturing CD.
Knowing full well that you might be called upon to become a subject matter expert, if you havent already, we asked experts for some help.
Children of aging and/or disabled parents need to help their parents face up to the decisions they need to make now, said Chris Cooper, the owner and founder of ElderCare Advocates.
Below is what experts said adult children and aging parents ought to consider, now.
All of us are going to lose our ability to make more complex financial decision when we reach advanced ages, said Michael Finke, an associate professor at Texas Tech University. The problem is that we often dont recognize the decline, he said.
This is very similar to what happens to older drivers, he said. Since the decline is so gradual and consistent (we measure the decline in financial decision making at about 2% per year), we often dont recognize when we become vulnerable to making mistakes, said Finke.
So, his advice to aging parents and their adult children is this: Part of a retirement plan needs to be accounting for the decline in our ability to make these decisions, said Finke. That means sitting down with a trusted relative or financial adviser and putting a plan in place to delegate some decisions in advanced age, he said.
Selecting investments that require less active management, such as annuities or a managed payout mutual fund can also help. We need to not only protect our portfolio against market risk, we also need to protect it against the risk of cognitive decline, said Finke.
And for adult children, Finkes recommended the following: Create a plan with an older parent that includes establishing a power of attorney and allowing an adviser to contact a trusted child if they become aware that the parent is making financial mistakes.
Whats more, Finke advised doing this sooner rather than later. Putting the plan in place early in retirement before cognitive decline begins may be easier than convincing a parent who is exhibiting signs of dementia that they need to relinquish control of their finances, he said.
Jack Tatar, author of Safe 4 Retirement: The 4 Keys to a Safe Retirement, agrees. We all end up having the conversation, but usually too late, when mental capacities are diminished and certain expectations may be set, such as one siblings belief that they will get this or that.
Having these conversations, said Tatar, provide peace of mind for everyone. Allowing the retiring/retired parents to be more comfortable living out their retirement dream and providing the adult child with a major task done, he said. These conversations should result in documented plans, which should be updated regularly.
Get those documents in order
Speaking of documents, Tatar said, one major way adult children can help their aging parents is make sure all their affairs are in order. Adult children need to be sure that their parents have things documented such as wills, assets, end-of-life considerations, even their medications and health records, said Tatar, whose new book, Having The Talk with Your Parents About Retirement, will be published in January 2013.
In some cases, an adviser could be the central point of contact or the adult child, or both.
Where to live
Most aging parents will stay in their own home. That may be fine, but expand the discussion to ensure that they have thought about the natural changes in life, said Joe Coughlin, the director of the Massachusetts Institute of Technology AgeLab.
For example, more than 70% of Americans over age 50 live in suburban or rural areas. In those regions if driving is no longer a comfortable or possible option are there alternatives from walking to friends to alternative transportation? Coughlin asked.
Does where they choose to age offer quality health care to treat older adults who typically have multiple complex conditions and medication management issues? Retiring to the lake or mountains is a young persons gamewhile beautiful, few of those destinations offer transportation that is easily accessible or medical services beyond the local vet, Coughlin said.
This discussion and decision, Coughlin said, is best made with people you know and who care about you, and who are able to do the research about the possible alternatives and naturally think out the logical options and contingencies of a choice. You neither want to engage the family heavysay, the oldest son who is looking to seize the patriarchal mantelnor the family member or friend who might want to just keep everyone happy and is supportive of any decision regardless of its future impact, said Coughlin.
Cooper and others also said adult children need to address their aging parents estate-planning issues. Who will take over managing finances, paying bills, filing tax returns, handling property and investments, managing insurance policies and claims, and who will make medical decisions if the parent cannot speak for themselves?, Cooper asked.
Providing guidance to adult children or a partner is critical in the event that disease or death make it impossible for you to articulate your preferences or make choices on your own, said Coughlin. This means working out with your spouse and those that you trustadult children, close friends or relativeswhat your intentions are, said Coughlin. This goes beyond wills and do-not-resuscitate (DNR) orders, this includes the introduction of your financial adviser, CPA, attorney or any other professional adviser to your trusted personal network of family and friends so they can hear from you what your intentions and future desires are likely to be.
Harry Margolis of ElderLawAnswers said best thing kids can do is to get their parents to meet with an estate or elder law planning attorney to make sure that they have a management structure in place in case their capacity begins to flag.
Focus on making sure that there is a plan rather what the specifics of the plan. That way parents will be less threatened. Its not that the kids want the parents money, but that they want to make sure that they can help the parents when and if the time comes, Margolis said.
Yes, many seniors are worried about legal fees. But Margolis said some attorneys dont charge for the initial consultation. And for those that do, the children might offer to pay the fee so that its not an impediment to their parents doing the necessary planning, said Margolis.
Tatar also recommends talking not only about financial matters but also health-related issues. Although my parents did a nice job of setting up a single point of contact with their adviser and we had good documented financial plans, I knew nothing of their health situations and medication, which became an issue when my mom was ill and kept her real condition away from us, which unfortunately led to the unexpected loss of my own mother, said Tatar.
The best-laid retirement financial plans are often destroyed by health-related issues. So, children should ask their parents whether they have health conditions that could adversely affect their situation, Tatar said.
Asking a parent a question such as Do you have a health conditions that may have an impact on your situation? may provide the necessary information to address this before it creates a problem for them, said Tatar.
Adult children should also ask their parents about health-care treatments. What does the parent want if treating a disease such as cancer does not work or is killing the parent from the cure? asked Cooper.
Coughlin, for his part, posed these questions: Who do you want to provide care and how do you want it provided? If disease or a catastrophic health event was to occur, what are their wishes? Do they want to stay at home at all costs? Would they be willing to relocate to a continuing care retirement communities (CCRC) or nursing care facility if necessary? Have they prepared financially for the contingencies or researched what those care options might be?
This is best worked out with at least two people you trust with a professional, Coughlin said. Two gives you redundancy if something should happen to one, moreover, this should be done face-to-face with your attorney or other professional and the people you want making decisions in your stead. Together reduces the confusion and conflict later.
Whats your plan?
Tatar also said adult children should be aggressive about asking their parents what theyre going to do in retirement. Its critical for retirees to not only be physically activeexercise is no longer optional for an aging bodybut to build and nurture social relationships which will be critical to their well being in retirement, he said. Strong social structures are a vital element to living longer and happier in retirement.
Tatar also has some pointers for adult children who want to broach financial and other subjects with aging parents. You can start a discussion by referencing an article, or book that recommends it, or simply telling a story about a family member or family friends situation. Doing so can help you launch a discussion about How we need to discuss this so that doesnt happen to you, said Tatar.
Robert Powell is editor of Retirement Weekly, published by MarketWatch. . Follow his tweets here.
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