Helping an elderly parent or family member manage their finances can be a tough topic to broach. These tips can help make the process a bit easier.
It often starts with a minor, even mundane, incident. Perhaps you notice a parent or other family member receiving an unusual number of mail-order purchases, or you come across overdue bills.
These may be early signs that taking over elderly parents finances can be a smart decision. According to a study by Pew Research Center, the number of Americans age 65 and older is expected to nearly double by 2050. Among adults with at least one parent 65 or older, almost 6 in 10 assist their parents with personal care or day-to-day tasks.
However, providing this assistance can be challenging. In some cases, the intended recipient might refuse support or worry that accepting help signals a loss of independence. At the same time, adult children may be uncomfortable taking on a supervisor role with a parent or older family member. Further, both sides may prefer to avoid topics such as aging, finances, and mortality.
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.
Here are seven tips to help you begin the process of protecting your elderly parents finances and addressing their needs with sensitivity and tact.
1. Start Slowly
Rushing to assume control of a family member’s accounts can prompt 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 around finances.
2. Talk with Others in Your Family Member’s Life
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.
3. Get the Big Picture
Ideally, you’ll begin these financial conversations early, while your loved one is still in a position to walk you through their accounts and grant you access to assist.
Keep a record of where the accounts are held, their account numbers and balances, insurance policies, ongoing bills and property titles, and contact information for the financial, health, and legal professionals that your loved one works with. Ensure all accounts are in good standing and store your documentation in a secure place, such as a fireproof lockbox.
4. Communicate and Automate
If you’re worried that a 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.
Make sure to keep clear, updated records of all transactions made on behalf of your family member to avoid any misunderstandings. Hold on to receipts and document the expenses you pay. Maintain a record of all income received, including pension, Social Security benefits, interest and dividend payments, and withdrawals from retirement accounts.
5. 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 an idea about what the others are doing. Sharing this information can help prevent unwarranted concerns 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. Plus, if one family member needs to take over another’s duties, he or she will be better equipped.
6. Consider Power of Attorney
In general, power of attorney provides you with the authority to make legal decisions regarding taking over elderly parents finances, medical decisions, 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 occurs — if you become incapacitated, for instance. Typically, you’ll want to receive power of attorney while your loved one is still capable. 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 financial professional to manage your loved one’s finances can help you avoid costly mistakes, especially when it comes to 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.
Some of these steps could be included in estate planning, learn the basics of that process.
