39: How To Talk To Your Parents About Their Retirement & Estate Plans

Welcome to the Sugar Daddy podcast. I'm Jessica and I'm Brandon and we're the Norwoods, a married millennial couple, here to help you build wealth so you can live the life you've always dreamed of. Brandon is an award-winning licensed financial planner with over 10 years of experience and millions of dollars managed for his clients all over the US. Don't worry, we leave all the intimidating finance mumbo jumbo at the door Stick with us as we demystify the realm of dollars. So it all makes sense. While giving you a glimpse into our relationship with money and each other, we are so glad you're here. Let's get started. Hey babe, what are we talking about today?

Well, today we're talking about a topic that may be a little bit uncomfortable to talk about, but it's talking to your parents about their finances and making sure that they're okay, because if their finances are in order, the first place they're going to come to for money is you, and that's going to affect how your planning goes with yourself and your family.

I mean, I think the reality is that most people don't know anything about their parents finances and by that I mean the details right like, let's say, your family, your parents in particular, seem to have it all together. They've got the nice house, the big house, the nice cars, and you're like, yeah, my family is fine, my parents are fine. What does that mean?

Yeah, I think it's really hard for people to have this conversation because most of the time, your parents don't want to tell you the information. They kind of still view you through that same lens, as if you are still a little child, and they don't view you through the lens of you being an adult and trying to help, because ultimately, at the end of the day, when that day comes, when your parents pass away, you are going to have to handle their estate and make sure that everything's taken care of, so you're going to need to know the information one way or another. But the bigger thing that we're focusing on today is making sure that their finances are in order. Do they have enough money to retire? Because if they don't, they are going to come asking you for money and what does that do? That takes away from your pot and what you're able to do from a plan of standpoint for your family, and that's the big point that we want to get across. You need to have this conversation. It is so uncomfortable, but you need to have it because I can tell you what happens when you don't have it.

Well and you need to have it while your parents are of sound mind, when they're healthy, when they're able to receive this information and these questions that you should be asking them, not when they're laid up in a hospital bed because something happened or they're declining or they're, you know, starting to experience memory loss. I mean, there's so many things that can happen from one day to another. And having this conversation early and in a vulnerable state where everybody's honest, everybody's coming to the table with love and compassion and empathy and a willingness to have this difficult conversation while everybody's of sound mind, is really, really important.

It's also important to have the conversation as soon as possible so that if there's anything that needs to be done to improve the situation, you have more time to do it. Too often I'll ask somebody because what part of my process with my clients is that I asked them about their parents finances? Do you know the details? And most of the time the answer is I think they're fine, I think they have this, I think they have that, and that is not a way to operate, because we're operating in an area where you can have finite detail you can know, and we are not going to operate and make plans off of I think, because I could tell you nine times out of ten I think means no you don't know means what means no? so it means most of time your parents finances aren't in order. They don't have their finances in order, so they don't even know what's going on if they're financially sound. But then also on top of that it leads into what you might be able to do with your family because, like I said before, if your parents don't have enough money let's say they get into retirement and they start to run out of money who's the first person they're gonna ask to help them? where they're gonna live yeah, and one thing that a lot of people you know for their parents are completely overlooking is long-term care. Now, when I say long-term care, I'm not talking about putting your parents in a completely a retirement assistant living facility where they can't take care of themselves at all. That's not what we're talking about now. Do people end up there 100%? But that is a small minority. The majority of people, when I talk about long-term care, are getting assistance for a couple hours a day in certain aspects of their life at home, and that's the ideal scenario is that if your parents need any assistant care, then as they get older they have it done in their home and there are ways to set it up so that can be funded properly. And if it's not funded properly, you have to make sure your parents have enough money and if they don't, you're gonna end up probably paying for that care and like, once again, that's gonna take away from what you were able to do in your life with your money, and there's planning that can be done to help prevent that. You know, for example, I have a long-term care policy on my mom. We wouldn't got her a long-term care policy. Reason being is that unfortunately, alzheimer's runs in my family. My great-grandmother had it, my grandmother had it and I'm praying that my mom doesn't have it. But we have to face the reality, prepare for if she potentially does so. We have a policy in place that if she needs to type of care, it will pay for the care so that she can have the care that she would need in home.

At what age should people start looking into a long-term care policy for their parents?

I always say the sooner the better, but I would say, from a financial standpoint and with everything that we have going on, honestly, 50 to 55. So you know, majority people, if you're around my age, your parents have already passed that age and so if they don't have a policy, they should look into getting one as soon as possible, because you do have to be able to qualify for it from a health standpoint. So it's not just something you can go out and get. You have to be eligible for it first.

So if they've already had medical procedures a stroke, a heart attack, any major ailment or illness it's very likely that they will not qualify. Is that correct?

Correct, that is correct.

So again, the sooner the better. Just like we've talked about in past episodes, getting a life insurance policy when you're young, when you're healthy, will help mitigate potential issues of waiting too long and not getting one when you should have.

Yeah, and there's also. There's several different options on how to take care of this need, but it's more or less assessing the situation and finding out what option best fits the situation and, as before, the sooner you do it the better.

Yeah, I just am thinking of not having something in place and then finding out that, hey, you thought your parents were in a really good spot and then they're not. And then, yeah, where did they end up living? Now they're moving into your home. Now they're taking money from what you were planning on using that money for whether that's for your family now or for some sort of retirement planning of your own and then, heaven forbid, let's say, your parents really need additional care that a nurse or professional caregiver should be providing. I'm just going to say it. I don't want to wipe the butts of any of our parents.

And I'm being blunt also my mom said that when I said, hey, mom, let's go ahead and do this, she said let's go ahead. My mom didn't give me any pushback. She's like let's go ahead and do this. She said the last thing I ever want you and my brother Marcus to have to do is to wipe my ass Playing the simple.

Thanks. Okay, let's backtrack a little. Get out your pen and paper, get out your notes app on your phone if you're listening and you're not currently driving Because I think there are some key questions that you should make sure you're asking your parents, and if they are resistant to this conversation, that's a red flag.

Yeah. So first and foremost is bringing the subject up to them to have the conversation, say, hey, we need to sit down and make sure that your finances are in order so that you can properly retire, but then also so that I know where everything is at in the event of you passing. So it does serve two purposes, because you're going to have to settle their estate one day and it's much easier to have all the information beforehand. So that makes it an easy process as compared to having to search through documents and their computer and just paper everywhere to find some remnants of what you know their financial life was like like, so that you can reconcile all their accounts.

Well, the reality, too is these are boomers. They did not grow up in the era of technology, so you know that there are papers, file cabinets full of things that we probably don't need anymore, right, but they're holding on to and it's going to be a mess of paperwork to get through, to even find what you're looking for, if it's not properly organized. So, again, having this conversation now, if you haven't already, is going to be really critical, because organization of all of this is important. I mean, for starters, do you know what kind of accounts your parents have and where they're located, what institutions and how many?

I can tell you from firsthand experience. So my grandfather, my mom's father, passed away prior to me getting into finance and it was hell getting or getting all his information. After he passed, my grandfather was born. My grandfather was born before the depression, so he was around. He was like around five years old when the depression happened and he carried those that thought process into his adulthood and how he did his finances. He had like eight or 10 different bank accounts because, honestly, it is a little bit easier to pull money from each one if you have multiple ones rather than pulling all that money from one. So I understand his logic. But we had to find all these different bank accounts, we had to find where his investment accounts were, we had to find his annuities and it was a process and a lot of the bulk of that fell on my mom and it was a lot to do and that can be completely avoided by having this conversation beforehand and helping them to get everything organized so that you know where everything is at.

So step one know what accounts they have, what bank accounts, what retirement accounts, what investment accounts. Where are they located?

Life insurance policies, any annuities they have set up, anything that is involved in money, having that set up. And I would even add, like, for example, with your parents, if the bills for things in the house like you know as far as for they have a mortgage still, or utility bills, if that's through one person and one person handles that. Make sure you know that information so in the event of that parent passing you have the information for your other parent so they can so that things can continue and you don't miss any.

You know payments or anything like that, yeah, that's important, even just simple things, like some girlfriends and I were chatting when we had our beach trip a little while back. You know who does our pest control. Do you know who does our pest control?

I don't technically know the name, but they were literally out here two days ago.

It's that kind of stuff that one person probably handles and if it's not written down somewhere.

I do have it written down.

Right, we have it written down, but he doesn't know it off the top of his head. So now multiply that times 100, for our parents, who grew up in a totally different era, weren't in the era of technology, probably don't have everything written down on a Google sheet with shared accounts and passwords, etc.

I make a Google doc. So I recommend people making a Google doc, sharing it with the people who need to know the information. So, for example, you know, obviously sharing it with your parents. You know both of your parents and then if you have siblings, you guys are all on there so that you can partake equally, partake in the responsibility. Now we all know that more than likely it's going to fall on the older one. I'm the older sibling, she's the older sibling. We know that it's going to follow in us, but still have the information out there if they, if the help is needed, and then you can continuously update the Google doc as needed.

Yeah, I think, aside from understanding how many accounts, where are the accounts? Anything to do with finances? Get that written down, get that outlined, take it a step further and understand, if they are electronic accounts, what the passwords are, getting those written down as well and saved in a secure spot. Also, understanding, are they currently working with a financial advisor? If, at this stage, they have a financial advisor that has never spoken to you, or when you ask your parents, hey, has your financial advisor ever asked to meet with me? And you've just said no, that's a red flag at this stage in our parents lives. Whoever they're working with financial advisor, wise, cpa, accountant, bookkeeper you should be in the know, you should have a relationship with them, you should know their name, you should know what firm they're with and you should understand that you should be part of your parents' financial plan at this stage.

So for me, like obviously as a financial planner I currently don't have any clients that have kids old enough to bring to the mix, because I'm working with people our age. However, I 100% say that if the kid is old enough, the financial advisor 100% should start to establish relationship with the kid. So, in the event of the parent passing, the first time you're reaching out to this person is not on one of the worst days for them. Also, even from a greedy standpoint, from a financial planning making money standpoint, the biggest wealth transfer is about to happen because the baby boomers hold the most wealth and they're going to start passing away and transferring that wealth so that wealth transfers to our generation. And just for me, like I said, a business standpoint, the financial advisor should be establishing a relationship with their kids.

Yeah.

But also, too, is if you ask your parents, do they have some of that they work with and they can't name the person they don't have some of their working with, they're going, they're calling to a call center. I guarantee you all my clients, if someone asks them what's their financial advisor, they're going to say Brandon Norwood, because I make sure that my clients know this and we have this continuous relationship.

Right, well too, yeah, there's a difference between a financial advisor who checks in, makes you know, connection throughout the year, talks about life updates oh, you went from living in an apartment to now you own a home. Okay, let's make sure that we're updating our will. Oh, you went from one child to two children, to three children. Let's make sure we're updating our will. Let's make sure that we have enough life insurance protection. Let's make sure that other things are in place to cover the fact that your wealth is growing, your responsibilities are growing. If your parents are not having those conversations with someone, right Again, if they can't name their financial advisor, then maybe they're calling into their fidelity account and, again, speaking to somebody at a call center. That is not a financial planner, that is not a financial advisor relationship. So this would be the time to potentially bring somebody in for that. I think, too, what you just mentioned about that transfer of wealth, depending on what's happening, right, you don't want your parents just to sign over their house to you, the house that they paid $120,000 for but is now worth $800,000. There are ways to do that in a proper way, where you're not going to be crushed by taxes because that house has now appreciated by $700,000. When they bought it was a hundred and now it's 800,000. You don't want to be paying that tax on the gain that that house has appreciated. So you need to be working with somebody and having these conversations so that you are actually transferring wealth and not just incurring a burden. Because if you're not doing it properly, then a hundred percent you are going to not maximize those benefits.

There's just so many things that can be a little bit more complicated and I think it's beneficial to have a professional, you know, potentially help you out with that. But the biggest thing, as I said before, is making sure that when you initiate the conversation and that they're open to having the conversation once you have it, making sure that you're going in with a game plan of a checklist of the things that you want to talk about and make sure that are okay, because after you've already had this conversation, now when you guys are getting into the details, are you starting to notice some things aren't in order? So, for example, maybe your parents don't have a proper will set up. They don't have a will set up at all. They don't have a will update it. That would need to be done, you know. Making sure, like, from a financial standpoint, do they have enough money to continue through retirement until the day they pass away?

Are all the beneficiaries on all of their accounts set up properly?

Yeah, I mean just, there's just so many different things, like I said, going through their financial information to make sure that everything is set up in the best way possible and, as I said before, if it's not and you guys didn't have the conversation it could be a recipe for disaster. Now I always also say, on the opposite spectrum, if your parents are resistant to having this conversation and you have asked them multiple times, please, we need to have this conversation. I want to make sure that you're okay. I want to make all of our lives easier and they're still resistant to it. You have to draw a hard line to say it and just simply say hey, if you do not want to have this conversation and you end up running out of money, you are not in a good financial place. Do not come to me for money.

That's really harsh.

It's harsh, but it has to be real. So, for example, as I do this for a living, I said to all our in-laws if you do not let me or want me to help you with your finances, that is perfectly fine, okay, okay, but do not ask us for money. You literally have me and I don't charge our parents just as I should. I don't I don't charge our parents and if they're not willing to work with me to make sure that you know they have the best, you know retirement that they can have. I don't need them coming to just deny it for money and then ruining the plans that we have in place when we could 100% make sure that they're okay. And you have to be real. I mean it sounds harsh because obviously if you have a good relationship with your parents and they've done so much for you that you know it's hard to fathom not helping them if they need to help. But that's not the role that a parent plays. In all honesty, you know you don't do things for your kids with the sole expectation of them to do anything for you.

I think there's a vulnerability that we have to keep in mind with our parents, because maybe they don't have things in place and now they're ashamed, or maybe they've made things work and you always you know thought you had a magical childhood and they gave you everything that they had but didn't set themselves up for a proper retirement. Well now, if they share that with you, that's embarrassing and that is something that we need to think about as we broach these conversations and just saying, hey, I want you to be okay, I want everything to be okay, I want you to have proper protections in place. This is not about me judging you or us judging you. This is simply about getting organized so that, when you are no longer here which is inevitable, right, we don't live forever. When you are no longer here, I can properly grieve you not being here, because I know that everything is in place, I know where all the documents are, I know what your will says, I know what your wishes are, I know what you want to happen in the event that you end up in the hospital and I understand what your health directive says. There are so many things that we need to talk about with our parents, because we're either going to talk about them when everybody is of sound mind and body or we're going to have to make rash emotional decisions when the time comes to figure out what to do, potentially, in an emergency. And that's not pretty. It's not what you want.

We've had friends go through it.

Absolutely.

It wasn't the ideal scenario at all.

No, then you're trying to scramble, figuring out what your parent would have wanted in the scenario. Do they want to be on a tube, do they not? Do they want to be fed like this for the next three months, do they not? I mean, we have encountered some really terrible and really heartbreaking scenarios with people that are close in our circle, and all of this can be prevented by having open and honest conversation when everybody is of sound mind and body, which is hopefully now. Not next year, not in three years from now, not when your parent turns a certain age, but now.

And also the thing is, too, is that you want to build upon, you know, each generation knowing more information. So if your parents are kind of hesitant to have this conversation, explain to them that you want to improve upon what they have already started with you. So they need to start having these open conversations and, as we said before, a big part of this podcast is to break down the barriers and get rid of the taboo of talking about money, and I think one of the biggest taboos is parents talking to their kids about money, because most of us have no idea what our parents finances are like. I'm a little different because obviously I do this for a living and I manage it to our families money, but the idea is that you want to start having these conversations because ultimately, it makes everything so much easier.

You're going to have to deal with it regardless. Everybody has an estate.

Yeah.

Everybody has an estate and you can either manage it or guess what the state is going to manage it.

Yeah, if it's not managed properly, they're going to take it as much of it as they can, and if it's not taken care of at all, then they're going to take it all.

Yeah, so prevent that. Your parents have worked hard. Whether they have managed their money well or not, they have very likely worked hard and now is a time for you all to work together to make sure that you have protections in place, that you understand what accounts they have, who the beneficiaries are, what the will says, what the health directive says, what are the passwords, who are they working with. Get it all outlined, talk about it and, if tensions are high, you know, maybe set a timeline. The same way we talk about having money meetings with your partner, have a money meeting with your parent, maybe once a month you meet for an hour and then you have a, an outline or an agenda of what you want to get through, one or two things, and then you go and have dinner and you call it a day until the next month and you can work on it and start chipping away at it piece by piece, because otherwise it probably can feel very overwhelming. There might be a rare few of you who, when you go to have this conversation, your parents just lay it all out. They give you all the accounts, they give you all the passwords. Everything's already organized. I mean, that's like the perfect scenario. It's probably not what's going to happen for most of you. So, being in a spot where you can say, hey, let's have an hour long conversation, we'll pick it up in a couple of weeks, we'll get organized in between them, or, you know, hey, let's make sure that all the beneficiaries on all of these accounts are good to go, take it step by step, because otherwise it's probably going to feel really overwhelming and you're going to face more resistance.

Yeah, like I said, it's really addressing this because I feel as though this is one of the biggest blind spots for people our age when it comes to financial planning. Because obviously you think about personal finances, you think about things that involve you, your spouse, your immediate family, like your kids and stuff like that, but most of the time people are not thinking about, hey, what's going on with my parents finances and how might that affect mine? So I think we should go ahead, let's take it back and kind of do a quick recap of some of the action steps that you could, you know, put into play right now.

So step one, ask your parents to have a conversation with you about their finances and what that looks like. Step two figure out what kind of accounts they even have their bank accounts, retirement accounts, pensions, annuities. If they have a long-term care policy, if they have trust a trust in place.

Wills have a proper will in place, Any type of annuities, basically anything that has any type of financial aspect to it, any money attached to it. You want to know about it and where it's at.

That includes the house bills.

Yeah.

Where is the electricity bill, the gas bill? What kind of Netflix and Hulu accounts do they have?

Do your parents have enough money to make it through retirement? You know, have they done the proper saving and investing over time?

Yeah, all of that. Okay, that was step two.

Step three is once you have the conversation, you have all the information to assess it and then determine hey, do I maybe need to bring a professional in to help me improve the situation or even analyze it, Because sometimes you might not be able to properly analyze your pay or situation to make sure that they have enough money and what are the next steps? So determine whether or not you need a professional to come in and help you out with that.

Shameless plug. Brandon can do that with you.

I can even have the conversation initially, because sometimes having a third party there to mediate the conversation can be very beneficial in breaking down that barrier and having a much more fruitful conversation.

Technically, everybody of a certain age should have a long-term care policy in place. So finding out if they have a long-term care policy in place is step one there. And then, if they don't figuring out, do they qualify for one? Because, again, things can happen very quickly. If you don't want your parents living with you, if you don't want to be funding their retirement and derailing your own financial plans and you don't want to be wiping your mom's butt, you need to have a long-term care policy in place or figure out alternative options Also the thing is, too, is that your parents could have done a lot of the right things and grown their money well, and a long-term care completely derails all that work.

I can tell you that my grandmother unfortunately, when she had Alzheimer's, she was in a full assisted living facility and we were paying somewhere in the vicinity between $7,000 to $8,000 a month.

Yeah, because you're likely not going to want to put your parent in some sort of a shithole.

Luckily, most of my grandfather actually had done a lot of the right things and had money in place to help out that. But that's not the normal situation and $7,000 to $8,000 a month that'll deplete a pool of money real quick.

Real quick, absolutely, so we wanted this to just be a quick episode. It might be something that you've never even thought about. Most of us don't go around thinking about our parents' finances negatively impacting the wealth that we are trying to build for ourselves and our families, but the reality is is if you're not having that conversation, you're going to be dealing with it at some point. So talking about it now and getting organized now is going to be the key to ensuring that, when your parents need care and support, that they have those established resources in place and it's not getting pulled from your bank account. Any final thoughts?

No, I think you summed it up perfectly.

Right. If you need help, you can reach out to Brandon. We'll link, as always, his information in the show notes. It's a judgment-free zone, everything is fully confidential and we just want to make sure that you and your parents have what you need in place to properly retire. Until next time, don't forget, benjamin Franklin said an investment in knowledge pays the best interest. You just got paid. Until next time. Thanks for listening to today's episode. We are so glad to have you as part of our Sugar Daddy community. If you learned something today, please remember to subscribe, rate, review and share this episode with your friends, family and extended network. Don't forget to connect with us on social media at the Sugar Daddy podcast. You can also email us your questions you want us to answer for our past, the sugar segments at thesugardaddypodcastatgmailcom, or leave us a voicemail through our Instagram.

Our content is intended to be used, and must be used, for informational purposes only. It is very important to do your own analysis before making any investment based upon your own personal circumstances. You should take independent financial advice from a licensed professional in connection with, or independently research and verify any information you find in our podcast and wish to rely upon, whether for the purpose of making an investment decision or otherwise.