When it's time to have that talk with mom & dad.(Executive Memo)

There's an old saying that s always stuck with me: Once a man, twice a child." It succinctly states that we are dependent on parents or guardians for our care and feeding as young children, and as we eventually reach our twilight years, we are once again reliant on others--often, our own children.

In recent years, I have increasingly noted the veracity of this maxim. I have watched friends spend huge sums of time and money caring for elderly and, in many cases, infirm parents. What has made my friends' situation all the more difficult is that they live in the sandwich generation, in which they provide for Morn and Dad's needs while maintaining their current financial status, paying for junior's college education, and socking away a few dollars for their own golden years.

If you're facing this situation, you're not alone. A 2006 PNC Financial Services study reported that 40% of respondents considered providing support to elderly family members to be an important financial goal, and 20% were concerned about the cost of caring for parents. Roughly 20% of those surveyed said they spent an average of $6,700 a year on parents or in-laws. And caregivers are getting younger: According to a 2007 survey by Fidelity Investments, one in five households headed by 25- to 42-year-olds has either started providing financial assistance to Morn and Dad or plans to do so soon. These GenXers typically spent $3,500 a year on food, utilities, healthcare, and other expenses. Of those who haven't yet offered financial assistance, 14% expect to do so eventually. To make matters worse, the average household retirement savings was a paltry $11,250--a sum that would be depleted in less than three months of paying for a semiprivate room in a nursing home at an estimated monthly cost of $5,566.

Obviously I'm not suggesting that you abandon loved ones during their golden years. But putting your head in the sand doesn't help. Believe me when I tell you that avoiding the conversation is an invitation to financial ruin and emotional volatility. So ladies and gentlemen, it may be time to have that heart-to-heart with Morn and Dad.

First, let me say that discussing financial, business, and mortality issues with parents is neither easy nor pleasant. But it's necessary. Even if you have an unbreakable bond with your parents, it's often difficult for them to discuss their finances: some may believe it detracts from their authority or status in the family, reducing them from parent to peer. Many first-generation entrepreneurs, including my own father, honestly believe death is an optional exercise. Fortunately, my father understood the need to continue the business into the next generation. Therefore, my family engaged in comprehensive business succession and estate planning.

As you engage in this dialogue, examine four key areas. Find out if your parents have sufficient cash flow to maintain day-to-day expenses. Make sure you can access documents such as a will determining distribution of assets; a power of attorney allowing you to manage their finances if they are unable to do so; and a healthcare proxy enabling you to make life-and-death decisions. Review their investments and, if your parents are still employed, find out about contributions to retirement accounts such as 40 l(k) plans or IRAs. Lastly, because of the crippling cost of healthcare, make sure they're enrolled in Medicare prescription drug plans and have Medigap insurance to help cover co-payments and deductibles.

Failing to plan for your parents' golden years may put your own retirement at risk. You may create a cycle in which you'll need your children to take care of you--that is, if they're willing.

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