Watching your parents become older can be extremely difficult. Your parents likely spent years caring for you. As your parents age, there may be a point where they can no longer manage their financial obligations. With early communication and planning, you can learn how to legally take over your parents' finances.
The Challenges of Managing Your Parent's Finances
Getting your parents to share information about their finances with you may be one of your biggest challenges. Elderly parents may think they can manage their finances and don't want their adult child to be involved. Or, a parent may be uncomfortable sharing their financial situation with family members.
How to Start the Conversation With Your Parents
The ideal time to talk with your parents about managing their finances as they age is long before a problem arises. With a proactive discussion, you will have a better idea of their wishes and when you should act. Sometimes, having a handle on your own financial situation might also put your parents at ease to discuss taking care of theirs.
If you notice signs that your aging parents may be struggling to manage their finances, share your concern about their protection and safety. Be on the lookout for warning signs like stacks of unopened mail, making large purchases, unusual spending, and frequent complaints about not having enough money. When talking to your aging parents, be sure they understand you are trying to help if something unfortunate happens. If there are multiple children involved, you'll have to coordinate the discussion with them as well.
10 Financial Questions to Ask Your Loved One
Below are some key financial questions to ask when taking over your parents' finances:
- Do you have a will or estate plan?
- Have you consulted a reliable financial planner or estate planning attorney who can help anticipate your needs as you age?
- What insurance policies do you have in place?
- Will you give me or another trusted person power of attorney over your financial responsibilities if you can't handle them yourself?
- Do you have an authorized user on your bank and investment accounts?
- Do you need assistance managing some financial affairs, such as paying bills and double-checking your credit card statements?
- Can you have a joint checking account with me so I can help you pay bills if needed?
- Have you considered long-term care insurance?
- Will you allow your doctor to talk to us if we have questions about your medical treatment?
- Where do you keep your advance-care planning and other legal documents?
How to Help Your Aging Parents with Finances
Financial Document Checklist- Make a list of your parents' accounts
Take the time to locate your parents' financial records. Create an inventory of your their bank accounts, investments, and loans. Gather a list of names, account numbers, balances, and contact information.
Determine whether their legal documents require updates
Make note of where your parents store such legal documents as birth certificates, insurance policies, wills, and deeds. Check the documents to ensure they are current and the accounts are in good condition. Finally, ask your aging parents if their financial documents are stored in safety deposit boxes or other secure locations
Durable Power of Attorney for Health Care
With a durable power of attorney for health care, you can make medical decisions for an elderly parent. This legal document remains in place if your parent is incapacitated. The durable power of attorney differs from an ordinary or nondurable power of attorney, which ends if the person who makes it is not legally competent.
Hiring a Professional: When Your Help Isn't Enough
Taking over an elderly parent's finances can be time-consuming and stressful. Consider hiring a financial adviser, tax professional, or attorney when your time is stretched thin. Not only can a professional assist you in avoiding a financial disaster, but they can also provide additional comfort to the beneficiaries.
Experts' Advice on Managing Elderly Parents' Finances
Keep track of the financial and legal decisions made for your parents. Maintaining good records provides a clear paper trail of your parent's finances, keeps family members in the loop, and shows you are responsibly managing your parents' affairs.
Set up a payment schedule
To maintain your parents' finances, create a comprehensive list of their monthly expenses, such as mortgage payments and household utilities. Look at when your parents receive Medicare, Social Security, and other monthly income. To minimize missed payments, set up automatic deductions to pay monthly expenses. Create a monthly payment schedule for all other vendors who don't accept automatic payments.
Legal Tools to Help Manage Your Parents' Finances -Legal Protections
Your parents can put several legal protections in place to help manage their finances when necessary. To protect your aging parent's finances, discuss the following legal protections with an elder law attorney:
Power of attorney: A power of attorney names you as an agent so you can act on behalf of your aging parents if they become incapacitated and unable to handle their affairs. The POA can cover many events, such as managing financial transactions or selling assets. A general POA is effective when the parent signs it and remains in place unless the parent becomes disabled.
Living trust: A living trust allows a trustee to manage the assets in the trust and transfer them to beneficiaries after the grantor's death. A legal document outlines the terms of the living trust. The grantor determines which assets to place in the trust and assigns a trustee to manage the assets. Upon the grantor's death, the assets avoid going to probate and flow directly to the intended beneficiaries instead.
Will: Like a living trust, a will is a legal document communicating your parent's final wishes for their assets. The difference is that the will's instructions are carried out when the grantor dies.
If your aging parent has no living trust or hasn't signed a power of attorney and becomes incapacitated, you must become a court-appointed guardian to manage their finances.
An Action Plan for Caring for Your Parents' Money
A hands-on approach may be the best way to safeguard your parents' money. Be sure you have written consent, such as a power of attorney, to speak with your parent's financial institutions, mortgage company, and the social security administration. Maintain an open line of communication with your parents about your financial decisions.
Help Your Parents Plan for the Future
Knowing when to take over your parents' finances can be challenging. Sometimes, your parents need financial help sooner than you expect. You might be able to get a financial planner involved, but first you'll need to step in. However, you can make the process smoother when you get on the same page as your parents. Having a financial conversation early with your parents and family members can prepare you for the time when you need to step in.