As we age, both the body and the brain changes and with aging comes the decline of cognitive skills. According to USA Today, financial decision-making peaks when you’re in your early 50s, but by the time you reach age 60 the brain’s ability to process new information is slowing down. Of course, this shift happens at a different speed for every senior, and medical problems like dementia and Alzheimer’s can accelerate the process. The impact of this cognitive decline can affect elderly parent’s ability to manage their finances, and there may come a time when adult children will need to step in and help.
Signs it’s time to start managing a senior’s finances
How do you know when your parent needs some help with their finances? Some of the warning signs that your aging parents may be losing track of their finances include:
- Expensive new purchases you know your parent can’t really afford – Did dad recently buy a new boat or vehicle that you’re worried he can’t safely steer, let alone afford? Has mom’s lifelong thriftiness suddenly turned into a lot of purchases from TV shopping channels? Out of character purchases, extreme lottery ticket habits, or worse, signs they’re being scammed, means it’s time to take an active role in their accounts.
- Unopened mail is piling up around the house – If this is the case take a look at the envelopes to see if any are marked “Final notice” or other types of warnings. You should not open your parents’ mail without their permission but glancing through unopened stacks will give you an idea of the scope of the problem.
- Regular calls from creditors – If you notice your parents seem to be receiving phone calls from collectors, nonprofits looking for donations, or even acquaintances asking for money, this could be a sign that their finances are less secure than you’d like. If new “friends” have entered the picture (or unwelcome old ones), try to find out if it’s because your parents are being freer with their money than they should be, or if they've fallen victim to scams.
- Having difficulty doing simple, everyday math – If calculating a tip or dividing stitches on their knitting needles is suddenly a problem, start asking gentle questions about how difficult basic math may have become for them.
- Taking longer to deal with routine financial tasks – Pay attention to see if navigating their online bill pay seems like a struggle, or they’ve been bouncing checks. Have they filed their tax returns in a timely and organized manner?
- An increase in gambling: Like lottery tickets, if mom or dad are spending a lot of time at the casino or on gambling games, consider checking in with them.
- Becoming forgetful about cash – Many families have stories about finding cash squirreled away in dresser drawers, pockets, under mattresses, and even in the walls of their loved one’s home. If your aging parents can’t keep track of the cash they have on hand it can become a bigger problem beyond you having to hunt it down while you’re packing up the house.
- Complaining about never having enough money – Ask to take a look at their checkbook or bank account(or to go into the bank with them) if they grumble about not having enough money.
Of course, even if you’re not worried about your parent’s mental or physical health, it’s essential to become familiar with their finances as they grow older. The sooner you begin integrating yourself into this area of their lives, the more comfortable they’ll be with including you in the big decisions like selling their home, choosing assisted living, or making new investments.
Tips for stepping into your parents’ finances
It can be difficult for parents to even talk about their finances with their children, much less hand over control. If they need help or you need to step in and take complete control, keep these tips in mind.
- Preserve your parent’s dignity – When it’s time for you to begin stepping in, make sure you do it in a way that preserves the dignity of your parents. It may feel frustrating to you if they’re balking a bit, but remember how difficult it is for them to relinquish control. Be subtle and kind, and remind them that what you want most is to help them and make sure their finances are safe. Below are some ways of starting the conversation:
- “How did you save up for...?” Starting by asking about their successes (buying their home, moving around the world, saving for retirement or your college fund, etc.) might make your parents feel less defensive.
- “What are your goals for your money?” While for some seniors the answer may simply be living a comfortable and secure lifestyle, others might want to provide funds for grandchildren or donate savings to favored charities. Focus on their goals and how to protect them.
- “I’ve made arrangements so that [Name] can take over my affairs if something happens to me.” Start the conversation by setting a good example: show your parents the paperwork you’ve filed to ensure that a trusted family member or friend can help take care of your finances in the event of an emergency.
- Work together with siblings – Keeping your siblings in the loop is critical. If you’re the one who lives closest, then caregiving and the in-person financial tasks may fall to you. But take time to set up monthly telephone meetings so all your siblings are aware of what’s going on and keep them involved in the financial decisions being made.
- Get legal power – You’ll need power of attorney to handle financial transactions for your parents. Be sure to get a durable power of attorney, which will take effect immediately. According to Kiplinger, if you do have siblings, you can all be given power of attorney and the document can specify that you all need to act together, something that may make everyone more comfortable. It’s a good idea to work with a lawyer who specializes in elder law to draft the power of attorney. Keep in mind, many brokerages and financial institutions will have their own forms your parent must sign before you can be given access, and you’ll need to present a copy of the power of attorney as well. If you need help, the Consumer Financial Protection Bureau offers helpful guides to managing seniors’ finances.
How to manage their finances
Jumping in and managing your parent’s finances can take some time, persistence, and patience, but following these steps can make it a bit easier.
- Find and organize important financial documents – The first step is to find and organize important personal papers and financial documents. These should include:
- Social Security cards
- Marriage certificates
- Birth certificates
- House title(s)
- Mortgage information
- Car titles
- Investment statements
- Health insurance policies
- Property insurance policies
- Retirement account statements
- Medical and doctor records
- Safety deposit box information
- Bank account numbers
- Check into their cash flow – Look at your parents’ financial accounts, bank statements and their checkbook register. Make a list of their income, such as pension, government assistance, or disability. List their expenses as well, such as utility bills, mortgage and car payments, credit card payments, and any other monthly expenditures.
- Get estate planning documents organized – If you’re not already aware, find out if your parents have a living well, living trust, last will, or other estate planning documents. This is a good time to make sure that you know your parents' healthcare wishes and to formalize them with the proper paperwork. Make sure you know where originals and copies are located. If your parents do not have these documents in place, work with them and a good lawyer to create them.
- Document everything you do – Whether you’re paying bills by check or you’re purchasing personal items for your parent with cash, make sure that you document everything that you do on your parent’s behalf. Keep copies of checks, ensure you have detailed receipts, and take thorough notes if you meet with attorneys or other professionals to discuss your elderly parent’s finances. These details are essential to showing your siblings that you’re taking care of your parent’s affairs responsibly.
- Consider working with a financial planning team – Working with a financial planning team that includes tax preparers, estate planning or elder law attorneys, and financial planners or advisors can help you avoid costly financial mistakes as you deal with your parent’s affairs. They’ll help you decide the best way to budget your parent’s money, and it will make your siblings feel comfortable knowing that you’re not managing your parents’ finances all on your own.
- Seek out low-income help – Not every senior will have much in the way of assets or savings. If your parents are facing financial difficulty, consider consulting government resources. These organizations can help you navigate complex benefit systems and point you toward local aid.
Remember, the best time to talk with your parents about their finances is while they’re still self-sufficient and competent. That way they can control the plans on how you will help them manage their finances and long-term care if and when they need that help. Planning ahead and then working with a team of professionals on your parents’ behalf can help you make sure your parents can enjoy their golden years in a secure, stress-free way.