Is it time to start managings your parents’ finances? Here is how you can approach the conversation with care and sensitivity, to ensure that your parents are as comfortable as possible.
When is the right time to have a conversation with our elderly parents about the state of their finances? For most families, the topic of money and personal finances was verboten when we were growing up. And for most of us, we delay discussing because it can be uncomfortable, and it may feel like an invasion of privacy.
Not having a dialogue, and not preparing for a senior loved ones’ financial well-being when they are no longer able to live independently can end up being a costly endeavor for family members. A study by MetLife found that nearly 10 million adults over the age of 50 are providing care for their aging parents. The study estimates the potential costs to family caregivers (in terms of lost wages, social security benefits, and pensions) to be around 3 trillion dollars or an average of $300,000 per caregiver.
Managing Elderly Parents’ Finances: Starting The Conversation
The best time to discuss handling your loved one’s financial affairs is before they need help. Being proactive, while mom and dad are cognitively sound and able to discuss their wishes will help minimize a great deal of anxiety and uncertainty down the road.
Still, money matters are a delicate issue, and the topic should be broached respectfully and in a sensitive manner. Having a family meeting or an “intervention” over the holidays will likely alienate you and put an end to any future conversations. Family dynamics are unique, and it may be easier for one or two adult children to initiate the first conversation.
Below are a few tips that may make your parents feel more comfortable when the time is right:
- Start by putting your own financial house in order: A non-threatening approach would be to let your loved one know you’ve recently compiled all of your own financial information, and wonder if they have done the same.
- Treat mom and dad as equals: Some aging parents may resent the role reversal of the child taking care of the parent. Talk to them as if they were an adult friend, and you are there to look out for them, not look after them.
- Offer to help: Ask parents if they need help paying their bills. If they accept, this will allow you the opportunity to identify problems early on. If they use an accountant or financial planner, ask permission to speak with him/her for better insight into the big picture.
Many seniors are understandably reluctant to allow anyone, including their own children, access to accounts and other “private” vehicles. Mom and dad need to know your objective is not to find out how much money they have, or what you stand to inherit. Rather, the real goal is to help them organize their financial life. You want to ensure they have sufficient savings to meet their needs to cover future medical and long-term care costs.
Setting Up the Right Legal Documents
Find out if mom and dad have set up a living will. This is a written legal document that defines their wishes for end-of-life care, or a trust. Also, ensure that they are current. Have they designated individuals (power of attorney) to make financial and medical decisions on their behalf if they become ill or mentally incapacitated.
Taking charge will be much easier if the proper legal forms are in place before they are needed. These documents will allow the executor the authority to carry out specific actions. This may include paying bills, accessing bank accounts, and signing legal documents on behalf of your loved one.
Legal documents can be created using templates or through online services. However, there are complexities when it comes to setting up specific types of Power of Attorney (POA), and all POA’s are not created equal. There are levels of authority associated with types, and it may be worth hiring an attorney or financial advisor to assist with the proper use of these legal documents.
Compiling Financial Documentation
It is wise for everyone, regardless of age, to assemble a portfolio of all necessary financial information. Create a paper or online document that lists the names of banks, account numbers, investment accounts, insurance information (with policy numbers and providers), mortgage and lender, household bills and expenses, and a list of any outstanding debt. A document with consolidated information should be kept in a secure location that trusted family members know how to access.
Financial Document Checklist
- Bank accounts
- Credit card statements
- Social security statements
- Pension, 401k and annuity documents
- Investment Documents (stock certificates, savings bonds, brokerage accounts)
- Insurance policies (life, health, long-term care, home, and auto)
- Tax returns (past five years)
- Property deeds
- Vehicle titles
- List of loans/other debt
Questions to Ask
- Where do they keep their money and financial records? Gather names of financial institutions and account numbers. Determine if they use a safety-deposit box at a bank, or if they have a lockbox and file cabinets at home. (Don’t forget keys to lockboxes)
- What is their annual income and its source? Do they receive: a monthly pension, dividends from investments, alimony, or disability?
- What are the monthly expenses? Mortgage, loans, car payments, credit card debt, utilities, and other monthly expenses.
- How are bills paid currently? Do they write paper checks and mail them, or do they have online bill pay? Which checking accounts are they drawn from? (Remember online codes and passwords)
- Do they receive Social Security, Medicare, or Medicaid checks?
- Do they have other health insurance in addition to Medicare?
- Did they purchase a long-term care policy? Traditional health insurance plans do not cover the cost of senior living facilities or home health care.
- Do they have a financial advisor, accountant, or a lawyer? Get names and contact information.
There may be signs that your aging parent(s) may need you to step in and help manage their financial affairs. For instnace, if you notice late fees on bills, unpaid taxes, calls from creditors, uncharacteristic purchases, or questionable charity donations, you need to intervene.
You may also suspect mom or dad may be the targets of scam artists. Elder financial fraud is no joke, and adult children need to pay attention to possible exploitation. According to a report by the Consumer Financial Protection Bureau, in 2017 alone, reports of suspicious financial activity involving older folks totaled $1.7 billion.
Tips for Long-Distance Caregiving
As our parents age, many of us will take on increasing responsibilities for our loved ones’ physical, mental, and financial welfare. Taking an active role in open communication while they are in good health will help in guiding your parents through this stage of their lives.