Tips & advice on getting your finances back on track.
The realization that your once vibrant parents have significantly slowed down can come as a surprise. It begins to happen so slowly that you fail to notice until it becomes all too obvious. The combination of both physical and mental decline can have a detrimental effect on their finances. So, when should you step in to help, if at all?
The whole topic of money can be a touchy one between parents and adult children. For the parents, there is a sense of loss of privacy, loss of control and perhaps even the feeling of relief, knowing that they are starting to be overwhelmed with keeping up with their bills and other money matters. It’s a difficult conversation to have with your parents, but one that may go more smoothly if it’s begun well before any intervention is needed. Make the focus of the conversation about wanting to fulfill their wishes, not on their money.
Start the Conversation Early
Begin the conversation long before any intervention is needed. This allows the parent to decide how they would like to be helped should the need arise. This can be an ongoing conversation where decisions can be made over time, in an unhurried way. It’s preferable to making decisions on the fly when there is either a health crisis or you discover your parents’ finances are a mess. Choose the timing of these conversations carefully. You should all be unrushed and, in a stress-free environment, preferably with your siblings if possible.
Topics to discuss should include where important documents are kept, which financial institutions are involved and if there is any debt. It’s also good to get the contact details of any professional your parents deal with such as their accountant or investment broker. If possible, establish a meeting with these professionals and your parents so that everyone is on the same page should you ever need to step in to help.
Make notes and stay informed
Create a list of your parents’ accounts, including the account number, login information, contact details and account types. Also take note of who has access to these accounts apart from your parents.
Likewise, make copies off all important documents such as property/car titles, insurance policies, wills, deeds, and tax returns. Make sure you know where the originals are kept.
Take note if they have a Long-Term Care insurance policy. As the population ages, the demand for long-term care is increasing and can be incredibly expensive. You may plan to care for your parents in your own home, however, this is not always practical given the need to work outside the home, and the medical needs of your parents.
Examine, or start a budget
Even couples who easily maintained a positive budget may struggle later in life on a limited income. It can be easy to slip into debt, which may be a sensitive topic for your parents to discuss with you. Tread slowly and determine if their level of debt is manageable or detrimental to their financial well-being.
If their finances are simply disorganized and they are falling behind or overspending due to lack of planning, step in an offer to organize their finances, and then check in occasionally. You may find that they are grateful for the help, bringing relief from the financial stress.
What to do about Debt
However, if you find a greater level of debt than they can realistically handle on their own, reach out to a certified credit counseling organization to get professional help. They may be eligible for a Debt Management Plan which could significantly reduce their interest rates and make the monthly payment much more manageable.
Establish a Last Will and Testament
If your parents already have a will, great! Get a copy and ensure you know where the original is. If they don’t have a will, help them to create one.
When someone dies, their estate must go through probate. Probate is the process that determines if someone’s wishes are legally binding and distributes their assets according to those wishes. If there is no will, the state determines how the assets are distributed based on law. Having a will makes the probate process much easier and faster, and at a time when you are dealing with the loss of a loved one.
Are there any safety deposit boxes that your parents own, and do they know where the key is? You don’t necessarily need to know what’s in the box but knowing where the key is, will be helpful later.
Power of Attorney
The National Institute on Aging recommends that parents give advance written consent to a designated family member so that person can discuss a parent’s personal affairs with key professionals. Having Power of Attorney for financial matters can provide you access to your parents’ finances without the concerns of a breach of privacy.
A power of attorney is a document that grants the power to make decisions on their behalf. There are several kinds of power of attorney, covering financial, medical or general decisions, and they can be designed to be temporary, limited. Executing a power of attorney with your parent ensures you have the legal authority to make important decisions when your parent is unable to.
Taking over control
Taking over the management of your parents’ finances can be best handled as a slow process. Offering to help with paperwork or with online payments maybe be very well received. As the need for intervention increases over time, you will already be in a position to provide more support. Establishing online alerts to notify you of low balances and large withdrawals can provide an extra level of peace of mind.
Make notes and document everything that you do. Be transparent not just with your parents about how you are handling their finances, but also with your siblings. Being clear with your actions will reduce the chance of ill-feelings within the family.
Whatever path you take with aiding your aging parents with their finances, take it slowly, clearly defining your intentions to other family members. Find ways to preserve your parent’s dignity and sense of control through communication and allowing them to continue with the financial tasks that they are still able to effectively complete.
Lori Stratford is the Digital Media Manager at Navicore Solutions. She promotes the reach of Navicore’s financial education to the public through social media and blog content.