How to approach financial conversations with older family members
Discussing finances is not always easy, particularly with older family members. Nevertheless, these conversations are essential for alleviating stress and ensuring everyone’s long-term wellbeing. Whether it involves managing unexpected expenses, such as medical bills, or addressing insufficient savings, financial challenges can weigh heavily on ageing relatives. Families can work towards smoother transitions as circumstances evolve by engaging in open discussions and planning ahead.
Why financial discussions are crucial
Many people shy away from discussing money, even though it’s vital. Research reveals that nearly half of parents (49%) have never shared their Will’s instructions or details with their adult children, often assuming their estate is too small to justify a conversation. Equally concerning, only 34% of parents have informed their children where their Will is stored.
Avoiding such discussions creates unnecessary stress and a lack of preparation. For example, recent research notes that 55% of adults either provide financial support or expect they will need to help their parents in retirement[1]. Yet, confidence in older relatives’ financial stability remains low, especially among younger adults. Only 2% of 18 to 24-year-olds feel optimistic about their parents’ financial health. Initiating these conversations early helps families plan for key issues such as estate distribution, retirement needs and long-term care.
Professional advice can provide a helpful framework
Initiating financial discussions with older relatives might feel uncomfortable, but it is essential to break the ice. Seeking professional advice can offer a valuable framework for ensuring these conversations are successful. Below are important questions to consider, which will help prepare your family for the future.
Have living costs been assessed recently?
Understanding and managing everyday costs is key to maintaining financial independence for older relatives. You can create a budget for essentials, leisure expenses, savings and one-off costs. Reviewing outgoings such as utility bills, insurance plans and subscriptions ensures these are necessary and competitively priced.
Younger family members can help older generations identify online deals and discounts, which they may be less familiar with. Additionally, consider whether all potential tax reliefs, such as the marriage allowance, are being used to ease financial pressures further and optimise savings.
Have you tackled the increasing concerns regarding Inheritance Tax?
Rising house prices and frozen tax thresholds have significantly increased Inheritance Tax (IHT) bills. Legislation set to bring pensions into the IHT framework from April 2027 will further complicate this issue, potentially impacting even more families.
Families should consider strategies such as setting up trusts – including gift trusts or loan trusts – or gifting assets. Thoughtful planning can alleviate IHT liabilities. Exploring tailored advice on these solutions can help ensure your family is prepared for this financial challenge.
The importance of updating a Will
Having a Will ensures that a person’s assets are distributed according to their wishes, preventing disputes among family members. Regular updates are equally vital, especially following significant life events like births, marriages, divorces or deaths. For example, a marriage automatically invalidates an earlier Will, requiring a new document.
Do you need a Lasting Power of Attorney?
Another critical consideration is establishing a Lasting Power of Attorney (LPA). An LPA allows a trusted individual to make financial or medical decisions if the person becomes unable to do so themselves. Setting up an LPA alongside a Will can save time, reduce costs and eliminate potential distress in unforeseen circumstances.
Planning for long-term care costs
The rising care costs in later years can severely deplete savings if not planned for in advance. While these costs can feel daunting, there are financial tools that may help. For instance, an immediate needs annuity can provide tax-free income to cover care services directly.
Are financial and legal documents well organised?
The proper organisation of key documents is crucial. Encourage loved ones to maintain updated and easily accessible records of their Wills, trust documents, pensions and financial commitments. It is equally important to inform family members where these documents are stored.
Tracking gifts and expenditures over time also simplifies matters in the future, especially if exemptions from IHT become necessary. Clear, well-organised records make a difficult time more manageable and ensure critical information is readily available when needed.
Source data:
[1] Second 50 report – survey of 900 UK workers and 100 retired UK residents is the foundation of this second edition of our Second 50 report, complementing 12 years of research in the UK. Unless otherwise stated, the research referred to throughout this guide was conducted by Aegon in July 2024 in a study nationally representative of UK age, gender and regions.
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX ADVICE AND WILL WRITING.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.