The John C. Bogle Center for Financial Literacy is pleased to sponsor the 34th episode of Bogleheads® Live. In this episode Cameron Huddleston. Cameron is a journalist and the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents About Their Finances.
Cameron answers audience questions about how to talk to your parents about their finances.
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Thank you for joining us for the 34th Bogleheads® Live, where the do-it-yourself investor community ask questions to financial experts live. My name is Jon Luskin, and I'm your host. Our guest for today is Cameron Huddleston.
Let's start by talking about the Bogleheads®, a community of investors who believe in keeping it simple, following a small number of tried-and-true investing principles.
This episode of Bogleheads® Live, as with all episodes, is brought to you by the John C. Bogle Center for Financial Literacy, a 501(c)(3) nonprofit organization dedicated to helping people make better financial decisions. Visit boglecenter.net to find valuable information and to make a tax-deductible donation.
Let's get started on today’s show with Cameron Huddleston. Cameron Huddleston is an award-winning personal finance journalist and author of, “Mom and Dad, We Need to Talk: How to Have Essential Conversations with your Parents about their Finances.” She is currently Director of Education and Content at Careful, the first service built to organize and protect aging adults’ daily finances.
Cameron Huddleston, thank you for joining us today on Bogleheads® Live. Let's start with a general catchall question. What do Bogleheads® need to know about talking to their parents about their finances?
Cameron Huddleston: The most important thing you need to know is that these conversations need to happen sooner rather than later. When I talk to people about this, the response I often get is, "Well, we're not there yet. My parents are still healthy. They're doing fine. I don't need to have these conversations yet because they're not having any health problems. I don't need to get involved with their care. I don't need to get involved with their finances."
But here's the thing: that's the perfect time to have these conversations. You don't want to wait until they're having health issues or they're having financial issues, because if you're waiting for that emergency to strike, then you won't necessarily have the details you need to get involved with their finances or their care. You might not have the legal right to get involved.
And emotions are going to be running high when there's an emergency. And really the last thing people want to talk about then are finances. And so, these conversations can't wait. They should be happening while your parents are relatively young and healthy. And if you can even have these conversations before they have retired, then great, go for it. Don't wait until they're in their seventies or eighties. It can be too late at that point.
Jon Luskin: I know in your book you share several examples of the impact of waiting too late. You mentioned one case study, Doug, where having waited too late, now he had to go through the process - through the courts - of getting a conservatorship on his father, which cost five figures and took several months to accomplish. Had his father set up power of attorney and a trust ahead of time, that would have been avoided.
Cameron Huddleston: Doug actually happens to be a friend of mine, super financially savvy guy. He's a financial blogger. He lived many states away from his dad. He was visiting his dad at one point and thought maybe there were some signs of memory loss and kind of touched on the topic of maybe having his dad name him as his power of attorney, and his dad just kind of brushed him aside and said, "No, I don't want to talk about that. I don't want to worry about that."
Well, in retrospect, Doug said, "Gosh, I should have pushed my dad harder at that point to have the conversation. I should have insisted that we talk about it," because what happened is a couple years later, Doug's dad ended up in the emergency room. Ends up being transferred to a skilled nursing facility for rehabilitation after this surgery and his dad already has Alzheimer's disease at this point, and Doug needs to access his dad's bank account to pay for those hospital bills and to pay for the nursing home.
And he can't because he hasn't been named his dad's power of attorney. And he talks to the bank and they're like, “I'm sorry. There's nothing we can't do for you. You're going to have to be named power of attorney, but it's too late because you have to be mentally competent to sign this document, and his dad has Alzheimer's disease. He's no longer competent. So, Doug has to go through the court process to be named his dad's conservator.
And like you mentioned, this took nine months and $10,000 of Doug's money to essentially put his dad on trial to prove that he's no longer competent. And Doug was also paying for his dad's medical bills and nursing home bills until he could get access to his dad's bank account.
And this can be avoided if you are willing to sit down and talk to your parents and say, "What sort of planning have you done? Do you have estate planning documents? Do you have a will or a trust? Have you named someone to be your financial power of attorney? Am I that person or is there someone else? Do you have a healthcare power of attorney? Someone who can make medical decisions for you if you can't? Do you have a living will that spells out what sort of end of life care you do or do not want?"
These documents have to be drafted and signed while you are mentally competent. If your parent is already experiencing dementia, if there's a stroke, if there's been an accident, it can be too late. Having these conversations early can help you ensure that these documents are in place and you need to know not just do they have these documents, but where are they, because they're not going to do anyone any good if they can't be found.
Jon Luskin: Absolutely do not wait. I'm going to move on to some questions that I got beforehand from the Bogleheads® Forums. This one is from username ‘Supergrover’ who writes: “When a parent says we've already discussed everything with the other child, and that other child is going to handle all that, do you press for more info to make sure they have more than just a will? Payment on death, transfer on death, et cetera? Should all siblings have a general idea of where documents are kept, how many accounts there are? Should parents tell all children the plan?”
Cameron Huddleston: It is a really tough position to be in to be named your parents’ financial power of attorney. It's a tough job. I was my mom's power of attorney. I managed all of her finances for many years when she had Alzheimer's disease.
And so if your parents haven't named you power of attorney, don't feel bad. Don't be jealous of your siblings.
But here's the thing: if your parents say that, then two things that you certainly need to do. You could say to your parents, “Oh, that's great. I'm glad you talked to my brother, my sister. It would make me feel good though just to get a general idea of where those documents are. A general idea of what your plan is and where you stand financially. Just ask to get some general information.
Then what you want to do is talk to that sibling. And make sure that indeed your parents have discussed everything with that sibling, and it's a good idea to also have some conversations to say, “Hey, look, mom and dad are entrusting you to manage their finances if they cannot manage them on their own, or they're entrusting you to manage their healthcare, or they've named you the executor of their will. Do you need any help from me? Is there anything that you would like me to do if you have to step into a hands-on caregiving role or a financial caregiving role?”
Let your sibling know that if you are willing to help that indeed you are there for your sibling. Because it can be, like I said, very difficult to be a caregiver. And a lot of times the person who is in that role isn't necessarily going to reach out for help. They just kind of expect siblings to chip in and when they don't, they just grow resentful.
Do all siblings need to have a general idea of where the documents are? Yeah, I think it's a good idea because if something happens to one sibling, then the other family members should know where to find those documents.
If you are a parent, do you have to tell all of your children about your plan? I think it's a good idea to, like I said, give all of your children a general idea of where you stand and what sort of planning you've done. But you don't have to share all of the details with all of your children if you don't want to, especially if there are children you don't trust.
But the child you have named as your financial power of attorney, your healthcare power of attorney, your executor, or your trustee, that child needs to know as many details as possible And, you don't have to tell them, but you at least need to write them down and tell your child where to access that information. Because if you have named someone as your power of attorney, your executor, your trustee, and you don't tell them the details about your finances it's like giving them the car keys but not telling them how to drive the car.
Jon Luskin: I think you nailed it. If something should happen to one sibling, then you want to have that backup. I'm always thinking about that worst case. Well, what if it doesn't go according to plan? Having that backup successor trustees, successor executors, that is going to help set up the parents for success.
Let's jump to a question from username ‘WoodSpinner’ from the Bogleheads® Forums who writes - and this is about talking to ‘WoodSpinner’s’ mother-in-law – so, ‘WoodSpinner’ says: "We are retired, financially stable, have good insights into planning and investing. The mother-in-law, she is retired, 91, and spends less than her social security and pension, and all her savings goes to a savings account.
Her main concerns are around estate planning and having family around to help her age. She avoids any discussion about potential long-term care costs or any sorts of investments."
Any thoughts on the situation, Cameron?
Cameron Huddleston: One of the ways that you can go about this is by focusing on when you're having these conversations, letting your mother-in-law know that you want to know what her wishes are so that you can follow those wishes.
Maybe even starting this conversation along the lines of, "Look, I know that you want to remain in your home as long as possible” because she probably does. Most people do. And so, you could say something like, "How can we help ensure that is possible? Is your home set up for you to stay here? Is it going to be safe? If your home has stairs, maybe we should consider moving to a place where there aren't stairs. Or if you need any sort of care – hands-on care - do you have any ideas about how you want that care provided to you? Are you okay with the idea of having a paid caregiver come into the home? Are you okay with the idea of an assisted living facility, a memory care facility?"
The key here is to let your mother-in-law know that you want to know what she wants so that you don't have to make decisions for her. Because a lot of times people are reluctant to have these conversations because they represent the possibility that they are going to lose independence and they're going to lose control.
And so you want to let them know, "Hey, you can remain independent as long as possible if we make a plan and we put things in place to help you maintain your independence. And you can maintain control by letting us know exactly what it is you want, so that if you do need any sort of care we can follow through on your care plan and we can follow through on your wishes."
Jon Luskin: This one is from username ‘MorgansRun’, who writes: “Dad will be 85 this January and Mom is 82. They haven't spoken a word about their finances and/or end of life with me or my brother and sister. Financially they're well off, but we don't know how to plan for their future. Maybe we don't need to, but dad just doesn't want to talk about it. How do we try to start or continue the conversation?”
And then username ‘Kookaburra’ had a similar question. How to talk to your parents that aren't really willing to engage.
Cameron Huddleston: You could use yourself as an example. "Hey, mom and dad, I just want you to know that we recently updated our estate planning documents and we want you to know where they are. Here they are. Here's where you can find them. By the way, if we needed to find your estate planning documents, where are they?"
Hopefully they've done them, they've drafted these documents and they can tell you, and they might say, "Oh, they are someplace safe." "Oh, that's great. I'm glad there's someplace safe, but we need to be able to find them in case there's an emergency. They're not going to do us any good if we can't find them."
And again, you could focus a conversation on their wishes. "I would love to know what your wishes are so that I can honor those wishes. I would hate to make some decisions about your finances that you wouldn't agree with. I want to be able to do everything the way you want it to be done. I want your assets to be handled in a way you want them to be handled. I want them to be distributed in a way you want them to be distributed."
So let your parents know that you want to be able to respect their wishes, but you've got to know what those wishes are.
Sometimes the way you can approach this is to also figure out what is that one thing that is going to prompt your parent to open up. And maybe dad is reluctant to talk about his finances, but he wants to make sure mom is taken care of. Maybe that's the way you approach it.
"Dad, I know you want more than anything to make sure that mom is looked after if you're no longer around. We need to know how to do that."
Or maybe dad has some things that are very important and valuable to him. Let your dad know, "Hey, I know you've got a lot of things that are really important to you, a lot of property, your assets. It would be good for us to know what's most important to you so that we can make sure that that item remains in the family. Or that we can make sure that if we need money to pay for your care that we're not going to sell that item is really important."
Finding that thing that's really going to perhaps prompt your parent to start opening up, finding that sort of sore point that gets them willing to start having these conversations can sometimes do the trick.
Jon Luskin: There's a couple points in your book that touch on this. I'll read a quote here.
["When it comes to talking to your parents about their finances, you don't get just one shot. And you certainly don't have to tackle all their financial planning issues at one time. In fact, it should be an ongoing conversation."
Sage advice. So, to address the questions we got from ‘MorgansRun’ and ‘Kookaburra’, hey, maybe you got a "no," but consider that it's a no for now.
In your book you write as people age, they tend to become even more mistrustful.
So that solution of writing it down, creating a system where you could access that information when needed, that can be a great way to bridge that mistrust gap.
Cameron Huddleston: If your parents don't want to tell you information about their finances, ask them to make a list of their accounts, of their assets, of their personal information. Social security number, Medicare number, where the lockbox keys are, where the property titles and deeds are located where those estate planning documents are, have them make this list and tell them when and how you can access it.
Because a lot of times this comes down to an issue of control and parents don't want to have these conversations because they feel like they're giving up control and they can maintain control by having this list and telling you when and how you can access it.
Jon Luskin: Cameron, another great point in your book that I just love is leverage the grandkids. Bring their grandkids over when trying to bring this subject up because that could possibly put them in a better mood. And in the book you write, “now you don't have to have the entire conversation, but at least you can bring up the subject and it might be easier to set up a successive meeting to spend more time without the grandkids in play. But at least having them there, that can put them in that better mood, being more willing to talk about it.” I love that idea.
Cameron Huddleston: Can't take full credit for that one because it was a financial advisor I interviewed for my book who had had the conversation with his parents. I walk people through the steps that he took, and that's something he did to introduce the idea of having these conversations with his parents.
He was visiting with them and like you said, brought the grandkids over so that his parents were in a good mood. They had had a family meal together, everyone's happy, they're relaxed, and then he said, "Hey, I'd like to have a conversation with you at some point your finances."
I know a lot of people think that with the holidays coming up, this is a great time to have the conversation. Sure. It doesn't hurt to, while the grandkids are there, bring up the idea of it. But I would caution you against trying to start this conversation in the middle of the Thanksgiving meal because there could be other family members there, cousins, aunts, uncles, friends, neighbors who don't need to be part of the conversation.
We all know that holidays can be a stressful time for some families and certainly if someone's had a little too much to drink at the holiday meal, then the conversations can go downhill. And so, I would caution you against trying to start the conversation right during the middle of Thanksgiving. You don't want to say, "Hey, pass the turkey and let's talk about your will."
But if this is the one time when you and your family gets together, maybe while you're in the kitchen preparing things for the meal you suggest to your parents, "Hey, I'd love to find a time sometime later when we can sit down and have a conversation." Or maybe you wait till the next day. If not everyone in the family is out shopping the Black Friday sales, then maybe you use that as an opportunity to start this conversation.
As you mentioned, Jon, this is not just one conversation. You don't want to sit your parents down and grill them for hours about their finances. This is a series of conversations that you're going to have over time, and maybe it doesn't even start with talking to them about their finances. You just ask them a very kind of open-ended question.
"How is retirement going for you?" Or if they haven't retired yet, "What do you think retirement is going to be like for you?" Get them comfortable with the idea of sharing some information with you. And then as they get comfortable telling you some general information about their finances, then you can start asking for more information.
"Do you have those estate planning documents? Do you have a plan to pay for long-term care?” It's incredibly expensive and more than half of adults are going to need long-term care at some point. “Where do you bank? How do you pay your bills? Are you paying them a check or have they been set up to pay automatically? If something were to happen to you and I had to make sure your bills got paid, I need to know how to do this."
Jon Luskin: This one is from username ‘epoche’ who writes: “How do you handle differences of opinion on spending priorities that emerge during this conversation? What do you do if your parents reveal they have large debts or are spending at a high, likely unsustainable, rate?”
Cameron Huddleston: If your parents are still mentally competent, if there's not any sort of dementia, cognitive decline, or any mental health issues, then they're adults and they can make their own decisions about their spending. Now, I realize that as their child, you might be worried they're going to spend all their money, they can't afford care that they might need, and then you're going to have to step in.
You can't necessarily tell them how to spend their money, but I do think it's okay to let them know that you are concerned. You can say something along the lines of, "I am a little bit concerned about whether you are going to have enough resources to have a comfortable retirement. That you're going to have the resources to pay for any care you might need. And I am worried that you might have to ask for some support from me, and I want you to know that I might not be able to provide that support."
If you can provide that support and you're willing to provide that support, you can tell them that. And if you can't step away from your job to be a caregiver for your parent, it's okay to tell your parent that. It's okay to say, “Look, I don't think I would be able to help care for you because I have kids who are relying on my income and I have to take care of them. I can't step away from a job to help care for you. And so, I'd like to talk to you a little bit more about how you are spending."
You could refer them to credit counseling if you are concerned about the debt they might have. The National Foundation for Credit Counseling has free and low-cost credit counseling available, and you could refer your parents to that.
If you feel like the conversation is going to be difficult, share some articles about the high cost of long-term care. I've written a lot of articles about the high cost of long-term care. You can find articles about people having to come out of retirement to go back to work, so just say, "Hey, I found this article. I thought it was interesting. Thought you might want to read it." Just kind of put it
Now if your parents are experiencing any sort of cognitive decline, if there has been a diagnosis of dementia and they are spending, that can be a result of their cognitive decline because your financial management skills and your financial decision-making ability is impacted by dementia. And you need to be getting involved to protect their financial wellbeing. You're going to have to step in. If you have been named power of attorney already, then you are going to have to start exercising that power of attorney to get involved with their finances.
If you've not been named power of attorney and you are concerned about their wellbeing, you might have to go through the court process to be named their conservator. But you can't just sit by and let them spend all their money if there is cognitive decline or a mental health issue that is having an impact on their ability to manage their finances.
Jon Luskin: Spending can be a result of cognitive decline. Absolutely. There is one family member of mine that had cognitive decline and they were doing exactly that. They were spending somewhat unknowingly. For example, they were making political donations, maybe a hundred dollars. Forgetting they made the donation and then making the donation again. And that came up to the tune of, believe it or not, five figures in political donations.
So certainly that could be a part of the unsustainable spending, that cognitive decline. You may already be there with your parents.
I'll link to Cameron's articles in the show notes for our podcast listeners.
This one is from username ‘jocdoc’ who writes: "Please address the opposite, how to talk with kids if they do not want to discuss or deal with your assets after I pass or become incapacitated. They don't want to think about death or incapacity of their loved ones. The only solution I have is to provide a letter of instruction and list of accounts for them."
Cameron Huddleston: I think a letter of instruction is certainly a great idea. Just like we're telling people to try and try again when having these conversations with parents. Try and try again having these conversations with your children. I do know that a lot of adult children are reluctant to have these conversations themselves because they don't want to have to think about a time when their parents are no longer going to be there.
It's really hard for them. But I want to encourage parents to continue to try to have these conversations and let your children know why you want to have these conversations telling them, "Look, I want you to have this information because once I am no longer here, you're not going to have to play detective to figure out what sort of assets and property I have. It's going to be a difficult time for you, but if you have this information, it's going to make that part a little bit easier. That loss you're experiencing is not going to be compounded by having to sort out a lot of different financial matters. You're going to have this information you need."
"If you have to help care for me, you're going to know exactly what sort of resources I have to pay for care. You're going to know what sort of legal documents are in place. Again, it's going to make it easier for you. I know it feels like an awkward conversation to have, but it's going to be a lot more awkward if you don't have the information that you need, if I need care or when I pass away."
Again, if they are sticking their fingers in their ears and refusing to listen, like you said Jon, having that letter of instruction can certainly be helpful.
Here's the thing too. If you've got kids who perhaps are not financially savvy, who you’re concerned will not be good stewards of your finances, and you're not sure that they would be the best people to step into the role of power of attorney, there are other types of ways that you can plan if you become incapacitated and cannot manage your finances on your own.
You could set up a trust and you could use an independent trust management company to oversee your finances in that trust if you become incapacitated. And so, there are options available to you if you have children who are not willing or able to help manage your finances as you get older. And you could also use that third party trust management company to manage your assets after you pass away if you've put those assets into a trust, so the kids don't end up fighting over duties as executor and having
Jon Luskin: I can't help but think about in Episode #1 of the Bogleheads® Live podcast, Rick Ferri talked about talking to friends, family members about low-cost indexing, and his approach was, “Hey, you're not necessarily going to tell them once and that's going to be it. You might have to tell them maybe even a hundred times to get this message to stick.”
So, we're looking at the same thing here. That first conversation might not necessarily be a slam dunk. You just want to keep trying.
A user from the Bogleheads® Forums writes: "We are retired, financially stable, have some good insights into planning and investing. Our daughter is working but not financially secure and has a poor grasp for planning and investments. Our main concerns are around actual in-person help as we age rather than financial."
Any thoughts for this user from the Bogleheads® Forums, Cameron?
Cameron Huddleston: If their main concern is about in-person help and care as they age, I certainly hope that they do have a plan to pay for long-term care. That they have a long-term care insurance policy or they have additional savings set aside to pay for care.
Because if their daughter is not particularly financially secure, she might not be able to step out of her job to care for them. She might not be able to take that income hit, or maybe you have a plan to pay your daughter to care for you.
But certainly if you are counting on your daughter to help provide hands-on care, she needs to know this in advance. Because that's going to have to factor into her own financial planning. You know?
And as I mentioned earlier, if they can't trust their daughter to manage their finances for them, again they could make sure that they've set up a trust and they have an independent trustee company that can manage the assets in that trust if the daughter's not going to be able to do that.
There certainly needs to be a way to pay for long-term care. Even if the daughter is willing to provide that hands-on care, you never know how long you might need care. My mother, it was 12 years from the time she was diagnosed with Alzheimer's until she passed away. And for four years I was a hands-on caregiver. I did have some help, and then she was in memory care for eight years. It is incredibly expensive, and I don't know how many people could step away from their own lives for 12 years to provide that sort of hands-on care.
So, the daughter might be willing to provide some care, but she might not be able to do it for that long of a period of time. There needs to be the resources there to pay for care if they need it.
Jon Luskin: This one is from ‘retired@50’ who writes: "If you prescribe adding a stock index funds to the parental portfolio, how does one avoid or deflect blame the next time there's a bear market?"
And perhaps, I would imagine in this scenario, maybe you're a power of attorney. Maybe you're managing your parents' portfolio because they're no longer able to. And if you're a Boglehead®, you're probably going to use low-cost index funds.
Cameron, what's your take on this question?
Cameron Huddleston: You don’t want mom and dad to be like, "Oh my gosh, you talked me into investing in stocks and now look, the market's tanking and there goes all of our savings."
If you have parents who are much older, you wouldn't all of their savings to be in stocks, even index funds. But of course, people are living a very long time and it's a good idea to have certainly some money invested into stock index funds so that there is going to be growth. You want that portfolio to continue growing if you're going to be in retirement for 20 or 30 years.
And so, reminding your parents, "Yeah, the market is down right now, but it's going to bounce back because you can look throughout history. It does. There are periods of ups and downs."
And I saw this with my mom's stocks that she had. There were plenty of times when I logged on to the account and I was like, “Oh my gosh. I hate looking at seeing how much the value has dropped.” But, over those 12 years when I was managing her finances - because really the market continued to grow over time - there was more money in that account by the time she passed away than when I started taking over her finances. And I was withdrawing money, selling those stocks to pay for her care. But because the market, for the most part, continued to go up - even though there were some drops - her portfolio still came out ahead.
So just telling your parents, "Look, it's down right now, but it's going to bounce back. It does. It always does. Give it time."
Jon Luskin: I think there's two considerations for explaining index fund investing. Certainly, if you're dealing with someone who has severe cognitive impairments, that might not even be possible. But there might be other family members in play there - those who don't have cognitive impairment - who may be wondering what's going on with the person’s portfolio that you're managing, that family member who's trusted to you to manage your assets. At that point, that's where you'll do some Investing 101 with them. We're going to stay the course. These short-term losses are expected. We're going to be patient investors.
Cameron, anything you'd like to share before I let you go?
Cameron Huddleston: These conversations cannot wait. You need to have them sooner rather than later. My mom was 65 years old when she was diagnosed with Alzheimer's disease. I was 35, and I wish I had talked to her sooner. And really my story is not all that unique. I was just at a caregiving conference. A lot of people there who had to get involved with their parents' finances at a relatively young age. So, don't wait to have these conversations.
Jon Luskin: Absolutely. You sum it up well in your book, you write: "It's so much harder to be reactive than proactive, especially because emotions and the stress of a crisis situation can get in the way of a rational response."
That's all the time we have for today. Thank you to Cameron Huddleston for joining us today, and thank you for everyone who joined us for today's Bogleheads® Live.
For our next Bogleheads® Live, Bill Bengen, author of the 4% rule of thumb, will be our guest. He'll be answering your questions live. Until then, you can access a wealth of information for do-it-yourself investors at the John C. Bogle Center for Financial Literacy.
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