Adult kids, parents need to talk money

PERSONAL FINANCE

February 06, 2000|By Eileen Ambrose

CHERYL Gordon's father always handled the family finances. So, when he died unexpectedly six years ago at age 54, Gordon, her sister and mother were left to put the financial pieces together.

Fortunately, his brokers and lawyer had many of the papers. But tracking assets wasn't always easy.

"We didn't know how much. What was where? Who had what?" the 32-year-old Baltimore County woman said. The family struggled sometimes to figure out the capital gains on stocks purchased decades earlier.

The Gordons' situation is not unusual.

Many parents don't discuss their finances with adult children.

Some parents consider the topic taboo, prefer to keep finances private or put off the discussion until it's too late and they die or become incapacitated. Adult children often don't broach the subject because they don't want to appear prying or inheritance-hungry.

Neither likes to think about when parents may no longer be healthy or around.

Yet financial discussions between generations are becoming a greater necessity.

As life spans increase, so does the likelihood that children will have to step in and make health or financial decisions for elderly parents. Women who reach the age of 50 free of cancer and heart disease, for example, are expected to live to 94, according to the Maryland Cooperative Extension.

Parents need to make sure their health and financial wishes are known to children.

"It's important for the children to have a general idea of whether they might have to provide support for the parents," said Susan Freed, a financial adviser in Washington.

Parents don't need to divulge every detail and dollar to children, said Joanne Hamilton, extension educator for Maryland Cooperative Extension in Anne Arundel County. Parents, though, should let offspring know where they keep financial papers and the names and phone numbers of lawyers, accountants or other financial advisers, she said.

Organized records can be crucial when disaster hits.

When Hamilton's father was deathly ill, for instance, family members rifled through his papers to find his living will that requested he be taken off life support. After some time, they located the document under "P," for "pull the plug," she said. He survived.

To help with record keeping, the Baltimore County Department of Aging offers a free filing system called "The File" at its senior centers or by calling 410-887-2594.

Once a financial dialogue is opened, experts said, families should consider setting up several legal documents:

A will, which spells out how and to whom your assets will be distributed when you die. A representative who will divvy assets according to the will must be appointed. If you die without a will, state law determines how assets are divvied.

A durable power of attorney for financial affairs. With this document, you can name someone to handle your money matters if needed.

A medical advance directive, or medical power of attorney. With this document, you designate someone to make medical decisions on your behalf if you're unable to do so.

A living will, which allows you to state your wishes about life-sustaining procedures if you are terminally ill, in a persistent vegetative state, or permanently incompetent and physically dependent with no chance of recovery.

The living will is limited in scope and not as useful as the medical power of attorney, experts said.

Sometimes hospitals and doctors are reluctant to remove life support, even when it has been requested, Freed said. "It's very difficult even with these documents to have your wishes honored, but without them you have no choice," she said.

Beyond documents, parents and children need to consider other financial matters.

"Long-term care has to be addressed at some point. What will we do if we get sick?" said Lutherville elder law attorney Jason Frank.

Nursing home care can cost at least $60,000 a year. "Unless you have $60,000 in income per person, you have to deal with long-term care issues -- and how you will pay for it," Frank said.

Families with few assets will qualify for long-term care through Medicaid. Those with greater assets need to consider other alternatives, such as long-term care insurance or continuing care retirement communities, Frank said.

Parents should also review their holdings and estate planning to make sure they are doing what they can to reduce taxes, said Charles Visconage, an estate planning specialist with Merrill Lynch & Co. in Baltimore.

For instance, the long-running bull market can easily have pushed a family's net worth beyond the $1.35 million a couple can shield from federal estate taxes.

An individual can give up to $10,000 a year per person without any tax consequences. Those with a net worth of $2 million can give away 1 percent to 2 percent of that each year without hurting their standard of living in retirement, Visconage said.

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