Understanding Your Aging Parents’ Finances: 12 Questions for Their Advisor

By Christopher Sassone, CFP®, CLTC®, Financial Consultant Investment Advisor

As your parents enter their golden years, understanding their financial situation becomes critical. Whether it’s providing support during a health crisis or eventually managing their estate, having visibility into their financial landscape is essential for the entire family. Although starting these talks may feel a tad awkward, meeting with their financial advisor can bring invaluable clarity and peace of mind for everyone involved.

To kickstart the conversation with your parents, it’s crucial to articulate your intentions. If your aim isn’t to assume control, make that unmistakably clear. Let them know you’re eager to understand their financial situation, to help when needed, and to ensure their future wishes are respected. This lays the groundwork for constructive dialogue.

Drawing from decades of experience serving multi-generational families, we’ve pinpointed key questions to then bring to your parents and their financial advisor.

Can I review their financial plan?
It’s crucial to ensure their plan is in line with their goals, includes all expenses and income (such as retirement withdrawals and social security) and adequately prepares for their needs spanning decades.

Do my parents have long-term care insurance?
Given the escalating costs of assisted living and skilled nursing care, it’s prudent to plan for the possibility of these potentially high expenses in the future.

What are their financial assets and liabilities?
Understanding their financial situation enables you to identify any risks or vulnerabilities and take proactive steps to safeguard their financial well-being.

Who is appointed as the estate executor?
Having clarity on this ensures smooth handling of their estate affairs and avoids any surprises or confusion later.

Do my parents have a named financial power of attorney?
This ensures that someone can make financial decisions on their behalf if they are unable to do so themselves.

Which life insurance plans are in place?
It’s important to review the policies, particularly to assess if they are term policies that may expire in their 80s or 90s. Confirming adequate coverage and updated beneficiaries is also essential.

Can I review their estate plan?
Reviewing their estate plan ensures it aligns with their wishes and meets legal requirements. It’s also an opportunity to discuss upcoming estate and gift tax changes with their financial advisor, potentially impacting heirs with a 40% federal tax rate.

Is there anything else worth noting?
Encourage open communication to address any other concerns or details relevant to their financial security and well-being.

Keep in mind that your relationship with your parents’ financial advisor could extend far beyond their lifetime. If you find yourself overseeing their estate, you may collaborate closely with this advisor to navigate the complexities of estate administration and wealth transfer, while honoring your parents’ wishes.

However, it’s essential to recognize that their advisor may not necessarily be the best fit for you in the long run. Here are some questions to help you assess their advisor:

Are you an Independent Advisor Representative?
Understanding their independence helps gauge their objectivity and ability to offer unbiased advice that isn’t influenced by specific programs or vendors.

Do you work with CPAs or other tax experts?
Given the years your parents spent building their savings, it’s crucial to minimize unnecessary tax burdens. Every facet of their financial plan should be viewed through a tax-focused lens.

When do you expect to retire?
A big portion of the industry is nearing retirement age, as highlighted by the Certified Financial Planner (CFP) Board, which found that about 45% of CFP professionals are 50 years old or older.¹ If their advisor is nearing retirement age, it’s important to understand the succession plan and decide if it’s time to find another advisor.

What is your fee structure?
Understanding how the advisor is compensated and whether their fee structure aligns with your expectations ensures that you’re aware of any potential conflicts of interest and can make informed decisions.

Bottom line: Initiating discussions with your aging parents and their financial advisor can bring peace of mind to both generations. By asking targeted questions about their financial situation and the advisor’s qualifications, you empower yourself to effectively support your parents through their golden years with less anxiety.

If you or your parents need help building or reviewing financial plans, contact us for personalized tax-intelligent guidance and support tailored to your family’s needs.

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¹ www.cfp.net, 2024