The idea of taking over your elderly parent’s finances can be stressful for many reasons.
First, you hear so many stories about elder financial abuse, and of course, you never want to appear as if that’s what you’re doing. Your parents may not be open to the idea, and siblings may have an issue with it as well, but often as our parents get older, it’s the best and most responsible choice to have someone else handle their finances.
There are emotional and financial considerations to keep in mind in doing so.
When Should You Consider It?
Timing is an important part of taking over a parent’s finances and it’s something you may struggle with. Telling your elderly parent they need to change their lives, such as not driving or perhaps moving out of their home, is often met with resistance and anger. It’s tough on everyone.
There are some obvious signs you may need to take over. For example, if one or both of your parents is the victim of an elderly abuse scam, or you see serious signs of forgetfulness.
If your parent forgets to make important payments, that’s also a red flag that means a conversation might be warranted.
A physical illness or major surgery may mean that logistically someone else has to step in.
Many financial experts feel it’s best to always be on the lookout for red flags and then step in sooner rather than later.
If you wait too long to have the conversations, then issues may become so big that you can’t walk them back, or you could have to be more aggressive in how you deal with the situation and that could cause friction in your family relationships.
While your parents are still in good shape, it’s better to gradually get involved, rather than having to do something requiring you to get power of attorney.
If you wait until things are at a crisis point it can add to already high emotions.
If you do take a proactive approach, start by simply getting the contact information for your parents’ banking institutions, their investment advisor, and a general list of the accounts they hold. That’s a good foundation for future discussions.
Be careful with your tone as you broach the conversation. Don’t belittle your parents or be judgmental. Remain positive and just make it clear to your parents that you’re here to help.
If your parent seems very reluctant, start with one thing at a time.
Once you’ve spoken with your parent about working with them on their finances, the following are steps to get started:
- Know where all important documents are located and how to access them. This can include marriage certificates, military records, insurance policies, mortgages, debts, tax returns, and advanced directives.
- Gather a list of contact information for anyone who advises your parents including not only financial advisors but lawyers as well.
- Get together any health insurance information, including Medicare information and any supplemental insurance.
- Go over your parents’ expenses and start creating plans for tackling them.
You should create a list of your parents’ assets and expenses before you pay any bills. If your parents don’t have enough money to cover all of their expenses, you’ll have to prioritize.
If your parents have a safe-deposit box and you open it, do so with a witness.
You will either need to do this with your parent, or you’ll need to show the bank a living trust or a power of attorney form. These shouldn’t be kept in a safe-deposit box for this very reason.
You should film yourself taking inventory of the box, even with the witness.
You may think it seems silly, but a lot of problems stem from siblings and other family members making a claim that items have been taken out of a safe deposit box.
You May Need Guardianship
If you’re just starting to help your parents with their finances to keep them organized, you might not yet need power of attorney to become their guardian.
However, if your parent is very unwell or has something like dementia, you may need to go to court to take over their finances.
Depending on the situation, you’ll need a judge to approve you as the person who will deal with your parents’ finances, and you may need a guardian ad litem at the discretion of the judge.
A guardian ad litem will work to make sure you don’t take advantage of your parents, and this is something you would need under a guardianship.
The best option is to have your parents either have already created a power of attorney or to have established a living trust.
Otherwise, guardianships can get very complex.
Consider Working With a Financial Planner
If your parents don’t already have a financial planner, you might hire someone to help. Having a financial planner can be especially important if it’s likely your parent will require long-term care. In addition to a financial planner, other people who might be on the team include attorneys and tax preparers.
While you have to pay for their services, you can probably end up avoiding much more expensive mistakes if they’re guiding you.
A financial planner can also help you decide whether or not your parents’ investment strategy needs to change. It’s very possible that your parents haven’t even considered their investment strategy in a while.
Financial planners are also helpful if your parents have a large estate because they can consider the best interests of beneficiaries as well. For example, if there are children and grandchildren in the family and your parents have a decent-sized estate, a financial planner may be able to come up with an investment strategy to benefit them in the future.
Talking with your aging parents about their finances may not be comfortable, but it’s often necessary. Start sooner rather than later so that you don’t find yourself in an emergency situation, scrambling to figure everything out.