During her two years as a bank teller, Kathryn-Lynn Raskina met a lot of people who were drowning in debt and struggling to pay their bills. It wasn’t because they weren’t making enough money. It was because they didn’t know the first thing about debt or about managing their money. She doesn’t want you to be one of those people. She wants you to graduate money smart.
It’s a tough conversation to have with your parents but an important one: How do you want your finances handled after you die?
I sat down with my dad at the dinner table with a glass of wine, a notepad and pen and had this conversation last summer for the first time. I had it again with my Dad last month after he made changes to his will.
I decided that this conversation was one I needed to have and one that I couldn’t put off after I had a few friends from high school, around the same age as me, who suddenly lost a parent. I realized I had absolutely no idea what to do in that situation, let alone where I would begin when it came to handling my own parents’ finances.
Although it’s morbid to think about, the truth of the matter is you will most likely outlive your parents. When you are mourning their loss, I don’t want you to also have the added stress of not knowing how to handle their finances. I want you to be prepared and know where to look, who to speak to, and what questions to ask.
Mary Warwick, an investment and retirement planner at RBC, says the biggest hurdle is having that first conversation.
“There is a huge emotional component here,” Warwick says. “There can be suspicion or awkwardness and the question of ‘Why do you want to know this?’”
To avoid giving off the impression to your parents that you are after their money — which I know none of you are because you are going to follow my saving and investing tips and become financially independent — try opening the conversation by telling your parents you are genuinely concerned. Ask them to walk you through the steps you should take if they pass away.
Warwick suggests starting the conversation by telling your parents that you want their advice on how to manage your finances now that you are close to embarking on your own career. She says that way it will be more of your parents instructing you instead of the other way around. Another bonus: asking your parents this will open up the conversation about finances in general. Maybe you both can learn something new.
Now there are several pieces of information that you want to walk away from this conversation with.
First off, Warwick says, you want to find out who the executor of your parents’ estate is. The executor is the person who is in charge of gathering together the assets of the estate, paying any debts that the deceased has outstanding and then dividing what’s left among the beneficiaries. Your parents name the executor of their estate in their will. That person could be you.
Next, you want to know the intent of the will, Warwick says. These are your parents’ wishes for how their finances and money are to be handled. Ask your parents for the phone number of the lawyer who drafted their will. The lawyer will have a copy of it. It is also good to know where your parents have their copy. For instance, maybe they keep it in a safe in your house or in a safety deposit box at their bank. Either way, make sure you know where to find it.
Now, while lawyers will be aware of the intent of the will, Warwick says they will have very little detail about the investments and debt that your parents hold. For this reason, it’s also important for you to ask your parents who their accountant or financial advisor is. Whoever they are, you will need their number, Warwick says.
It’s also possible that your parents don’t have an accountant or a lawyer. They could have created their will online, and they could do their taxes on their own as well. If this is the case, then you will want to know where they keep that information.
Insurance is also important to discuss, Warwick says. You will want to know who their insurer is. Do they have benefits at work? If so, what are they? Or maybe they have insurance with a broker. If so, you will want to get his or her name and contact information.
And what about their account numbers and passwords for their bank accounts? Well Warwick says, while you should know which institution they bank with, passwords should be kept confidential. “You shouldn’t need this [information] if you are an executor,” Warwick says.
It is also possible that your parents may not have a will. According to a 2012 survey by Lawyers’ Professional Indemnity Company, more than half of Canadians fall into this category. If this is the case, you should urge your parents to contact a lawyer and get one.
Without a will, your parents won’t have any control over who will inherit their assets or manage their estate. Provincial law will determine who gets what, and it may be very different from what they would have wanted. Having a will also brings down the taxes that need to be paid with their passing.
As you can see, there is quite a bit of information that you need to get from this conversation. Feel overwhelmed? That’s okay. I felt the same way when I sat down with my dad for this first time to talk about my parents’ will, but I also felt relieved and prepared after doing so. You will too.
Illustration by Evelyn Thompson