Managing an Aging Parent's Finances
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 your parent’s ability to manage their finances, and there may come a time where you need to step in and help.
Signs It’s Time for You to Take Control of the Finances
How do you know when your parent needs some help with their finances? Some of the warning signs that your loved one may be losing track of their finances include:
- Expensive new purchases you know your parent can’t really afford
- Unopened mail is piling up around the house
- Regular calls from creditors
- Having difficulty doing simple, everyday math
- Taking longer to deal with routine financial tasks
- Showing a decrease in the understanding of basic financial concepts
- An increase in gambling
- Becoming forgetful about cash
- Complaining about never 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 an assisted living nearby, or new investments.
Tips for Stepping In
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.
Work Together with Siblings – Keeping your siblings in the loop is critical, notes USA Today. If you’re the one who lives closest, then 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 Someone Else’s Money.
How to Take Care of 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. This should include:
- Social Security cards
- Marriage certificates
- Birth certificates
- House title
- Mortgage information
- Car titles
- Investment statements
- Health insurance policies
- Property insurance policies
- Retirement account statements
- Medical and doctor records
- Safety deposit box information
Check into Their Cash Flow – Next, Forbes suggests checking your parent’s cash flow. Look at their 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. 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 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, attorneys, and financial planners 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 trying to handle everything on your own.
Remember, the best time to talk with your parents about their finances is while they’re still self-sufficient and competent. Planning ahead and then working with a team of professionals on your parent’s behalf can help you make sure your parents can enjoy their golden years in a secure, stress-free way.
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