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Learn how to find, understand and manage your parents’ finances.
Are your elderly parents having trouble staying organized? Do they forget common things like important dates, or ask for the same information over and over? Are there reminder notes or memory aides scattered around their home? If so, your parents could be struggling with memory loss. Among the many difficulties you and your parents will have to face in such a situation is managing their finances.
Establish a power of attorney or a living trust
If your parents are willing and able to consent to help, the first step is to obtain proper legal documents. Talk with an estate or elder law attorney to help your parents develop a will and health directives. You’ll also want to discuss naming a power of attorney or living trustee with your parents and siblings.
A power of attorney will enable you to act on your parents’ behalf with regards to financial and legal matters. Being named a living trustee means you or your siblings control your parents’ living trust assets and act in the interests of the trust. This provides you with more direct control of your parents’ assets, but also requires your parents to set up a living trust.
If your parents are not able to sign legal documents, you’ll have to go to court and prove they are mentally or physically incompetent. A judge will ultimately name you or someone else as guardian of your parents’ financial and legal affairs.
Investigate savings and insurance policies
If your parents are able to, ask them to list all accounts, safe deposit boxes and institutions in which they have money or important papers regarding investments and insurance policies. Also ask for names and contact information of any financial professionals they use, such as accountants, attorneys, financial planners or brokers.
In the event your parents are unable to provide this information, you’ll need to track it down. Start with your parents’ most recent tax return. Schedule B will show dividends, interest income and names of financial institutions. Look at old bills and statements that your parents may have on hand, or wait for new ones to arrive in the mail. These may arrive monthly or quarterly.
Once you have gathered all policies, statements and contact information, start requesting information on your parents’ accounts. Remember that power of attorney or living trust you established? You’ll need it here; no company will talk with you about your parents’ finances without it. Ask that the institution copy you on any statements or information that are mailed to your parents, or have them sent directly to you if your parents are no longer able to manage them.
Review income and expenses
This includes any pensions, 401(k) distributions, IRA income, annuities, Medicaid and Social Security. When gathering monthly expenses, check mortgage accounts, Medicare, insurance payments, health and prescription costs, and other typical monthly expenses.
A look back at a recent checkbook ledger and monthly statements and bills received in the mail could provide some insight. Again, before you can contact any institution on your parents’ behalf, you’ll need to have established power of attorney or be acting as a living trustee.
Get the whole family involved
Before you make any changes or begin assisting your parents, be sure to talk to all your siblings about what’s best for mom and dad. If you will be in the one in charge of managing their finances, take documented notes and keep all siblings informed of your actions. If you’re opening a safe deposit box, bring a witness and record everything. It may seem silly at the time and it could be unnecessary in the long-run, but better to take extra precautions than to have to deal with a fall-out later on.
Act on your parents’ behalf
Now that you have a complete understanding of your parents’ finances—and the power to help—it’s time to start managing them. Automate whatever you can; direct deposits of income and automatic withdrawals of common monthly expenses can help you and your parents stay on top of things. If you don’t have time to perform these tasks, consider hiring a daily money management professional. Check that anyone you hire is bonded and insured.
If you’re unsure whether your parents’ money is invested properly for their age and situation, consider hiring a financial planner or tax attorney.
As you’re helping your parents through this process, remember that it’s important to take care of yourself as well. The Alzheimer’s Association notes symptoms of caregiver stress and offers tips to help you stay healthy.
This article contains general information. Individual financial situations are unique; please, consult your financial advisor or tax attorney before utilizing any of the information contained in this article.
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