How to talk to your parents about their financial future

Having a conversation about finances with your parents could help them enjoy a more secure financial future as they age.

There comes a time when a family’s roles begin to change. Parents who spent so many years caring for their children gradually find themselves in need of care themselves.  

“This transition can be difficult, but there are ways to make the process as smooth as possible for everyone,” Anna Hacker, National Manager Estate Planning at Australian Unity says. “It can be very reassuring to know there are plans in place for your parents’ safe and secure future.” 

Before you start planning, however, you need to know what your parents would like their future to look like, and what their financial situation is. 

“Ageing and finances are both very sensitive subjects, but having open and honest discussions now could make a big difference to their comfort later on,” Anna says. 

Here are five key financial points to cover in your conversations. 

1. Are your parents making the most of their assets?  

Along with their home, your parents may have accumulated other assets such as shares, investment properties, jewellery and artworks. 

“It’s vital these (assets) are structured in the most beneficial way,” Anna says.  

A financial adviser with specialist knowledge in this area can help your parents identify their assets and talk through their options for making the most of them. Then, when you start your own conversation about the future, they’ll have all the facts they need. 

“Even choosing residential care isn’t always as straightforward as it sounds. The lowest price may not necessarily be the most cost-effective,” Anna says. 

2. Where would they like to live?  

The majority of older people live in their own homes and generally prefer to age there. The government is making this easier by funding in-home support, but if the family home is large and difficult to maintain, it may not be the best or safest place for your parents to stay. Here are some options to consider. 

A smaller home 
You might want to discuss the benefits of downsizing — or “rightsizing” as it’s sometimes known — to a more manageable house, townhouse or apartment.  

If they want, your parents can use some of the proceeds from the sale of the family home to boost their super. Anyone over the age of 65 is allowed to make a downsizer contribution of up to $300,000 without being subject to many of the usual rules. 

 A retirement community
Some people prefer to downsize to a retirement community. As these have been purpose-built for over 55s, they bring a sense of togetherness with the security of knowing help is always close at hand. Many also have resort-style facilities to create a feeling of wellbeing and community through socialising, exercise and shared activities.  

“At first, your parents might be put off by the idea of ‘retirement living’, but I’ve seen many people change their mind after visiting one or two communities,” Anna says. “They might even be excited to realise how much their lifestyle could improve.”  


3. What about residential care?  

The switch from independent living to residential care can happen quickly‚ perhaps after an illness or serious fall.  

“The last thing you want at a time like this is to be struggling with difficult choices,” Anna says. “That’s why it’s so important to plan well ahead.” 

Again, a few visits can be reassuring. “Some people have a very poor impression of residential aged care and are relieved to see the reality for themselves,” Anna says. “Knowing where they’ll go if the need arises can bring real peace of mind, especially if it’s close to family and friends.” 

4. Is their spending in line with their assets? 

Perhaps the trickiest topic of all is whether your parents can afford to maintain their current lifestyle.  

“This is a difficult discussion at the best of times, but what if you can see they need to cut back?” Anna says. “Who wants to tell their parents they can’t afford their annual holiday?” 

Instead of tackling the subject head-on, Anna suggests steering them towards good professional advice. 

“It’s much easier for an independent adviser to ask about their assets and spending, and then they can show them how different scenarios play out,” she says.  

You should also discuss the importance of getting advice before making any big changes. 

“An adviser can make sure you have the right structures in place for whatever you’re hoping to achieve,” Anna says. “I know of one couple who sold their house because they wanted to put the money into a trust, but by then the trust was not the right structure to be effective for what they wanted to achieve. It would’ve been a very different story if they’d talked to an adviser first.” 

An adviser can also help make day-to-day finances as easy as possible if one of your parents is widowed.   

“With super, for instance, there are really clear rules around how it’s managed and the limits that can be held,” Anna says. “Any pensions might also be affected, and social security limits can change. Once again, if you have the right structures in place well in advance, neither parent will be at risk of missing out.” 

5. Have they written everything down? 

Finally, your parents need an up-to-date will to set out their wishes after they pass away. 

“We recommend keeping the original will with the solicitor who prepared it and a copy of it with your parents’ documents,” Anna says. “If their documents include details of insurance policies, bank statements and, where relevant, a list of assets, the whole family can enjoy the peace of mind of knowing everything possible has been taken care of.” 

While it can be a difficult conversation to have, talking with your parents about their finances earlier rather than later can help you plan ahead together in the event of an illness or serious injury. Knowing what they want to happen in any given scenario can provide you all with comfort and security that they’ll be looked after. 

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