It often starts with a minor, even mundane, incident. Perhaps you notice a parent or other family member receiving an inordinate number of mail-order purchases, or you come across bills that are long overdue.
These may be early signs that your loved one needs assistance managing his or her finances. As life expectancy increases, more people today are providing, or expect to provide, emotional, financial and practical help to a parent or another aging family member.
However, providing this assistance can be challenging. In some cases, the intended recipient resists, worried that accepting help signals a diminishing independence. At the same time, adult children may be uncomfortable taking on a parental role with a parent or older family member. And both sides may prefer to avoid such topics as aging, mortality and finances.
Keep in mind, though, that helping your parents manage their finances can also benefit you and other family members. It can provide a clearer picture of your family’s financial situation and peace of mind knowing that affairs are in order. These tips can help you provide financial assistance to loved ones with sensitivity:
1. Begin Slowly
Rushing to wrest control of a family member’s accounts can backfire, prompting concern or even suspicion. A less confrontational approach — perhaps as simple as asking if a tax return was delivered to the accountant — may be more effective in initiating an open conversation.
2. Gain an Overall Understanding of Your Loved One’s Financial Situation
Ideally, you’ll be able to find bank and investment account numbers and balances, insurance policies, ongoing bills and property titles, as well as contact information for the financial, health and legal professionals with whom your loved one works.
If you’re worried that your family member is no longer exercising sound financial judgment, consider talking with that family member and his or her financial institutions about enabling you to automatically receive copies of account statements or to access accounts online. This will allow you to monitor transactions and better ensure that bills are not being overlooked.
If a loved one’s abilities are more severely diminished, you may need to assume greater financial responsibilities, such as directly handling bill payments. Setting up automatic payments and deposits can streamline the process.
3. Talk with Others in Your Family Member’s Life
Especially if you’re not physically near the family member you are helping, it can be worthwhile to regularly touch base with a friend or relative who is closer and in more frequent contact. He or she should be in a better position to quickly notice and follow up on any red flags.
4. When Possible, Work with Other Family Members
Even if you handle different tasks — say, one family member manages the finances while another keeps tabs on medical issues — each should have some idea what the others are doing. Sharing this information helps prevent unwarranted concerns or suspicions about the actions each person is taking. Also, the family member receiving help may be more receptive to suggestions if they’re not all coming from the same person. And if one family member needs to take over another’s duties, he or she will be better equipped.
5. Document the Actions You Take
Keeping clear, updated records of all transactions taken on behalf of your parent or other family member can help reduce any misunderstandings. Hold on to receipts and document the expenses you pay. Maintain a record of all income received, including pension, Social Security, and interest and dividend payments, as well as withdrawals from retirement accounts.
6. Consider Whether You’ll Need Power of Attorney
In general, power of attorney provides you with the ability to make legal decisions regarding your loved one’s finances or property. This could include signing a check on his or her behalf or selling a car that’s no longer in use. “Durable” power of attorney becomes effective as soon as the document awarding the power is signed; “springing” power of attorney, on the other hand, becomes effective only when a specific event — say, if a parent becomes incapacitated — occurs. You’ll typically want to receive power of attorney while your loved one is still considered competent. Waiting until he or she can no longer make prudent decisions may require involving the court system.
7. Work with Trusted Financial Professionals
Working with a knowledgeable and independent advisor, such as your Regions Wealth Advisor, to manage your loved one’s finances can help you avoid mistakes that could prove costly over time. This can be critical if you need to address healthcare, long-term care, estate planning or other concerns for the future.
Helping a family member manage his or her finances can be difficult, both emotionally and practically.
However, carrying out this responsibility with respect and discretion can help your loved one maintain a sound quality of life for as long as possible and provide you with better insight into your family’s overall financial situation.
