My parents own more than twenty mutual funds. Is that actually diversified?

For the long term plan, start with the household balance sheet and cash flow so the decision is based on the money actually available after near term obligations. Diversification is about underlying exposures, not the number of funds. A sound answer depends on the family's objectives, time horizon, taxes, cash requirements, and ability to tolerate risk, so review the numbers together rather than one decision at a time.