A Financially Fit Life Offers Real Abundance
Desmond Henry, CERTIFIED FINANCIAL PLANNER™
Taking Care of Aging Parents' Finances
Money is uncomfortable for many people. In fact, many individuals struggle to have an honest money conversation with themselves or their partner – much less extended family members or friends. Yet, at some point, we might have to face the fact that our aging parents need help with their finances. Caring for your parents as they age includes helping them take care of their financial situation. There is no right way to go through this transition, and it may be awkward for both you and your parents.
START WITH A FAMILY MONEY TALK
The most important thing to keep in mind is that everyone is feeling uncomfortable right now. Nobody likes sharing this kind of personal information with one another. Having open and honest communication from the get-go is key. That’s why I suggest starting with a family money talk. Bring your parents and siblings together to make sure everyone is on the same page. Don’t bring it up casually – have this talk be scheduled apart from another family event to solidify that it is important and a priority.
You and your siblings will need to give your parents some reassurance. Put yourself in their shoes. They’ve been doing this themselves their entire lives – having you suddenly involved may feel like an unwelcome intrusion. Reassure your parents that you’re not trying to take away their independence or their financial freedom. You’re simply trying to ensure that they have everything they need – and that you understand what they want so that you can help them achieve those goals.
As you’re navigating this conversation, work to avoid judgement. Your parents have worked hard for their money and they have a right to want certain things in their retirement. Whether they can afford those things may be a separate conversation –try to understand where they are coming from. They’ve worked towards retirement for a long time – they’re allowed to have some pie-in-the-sky dreams.
Finally, consider bringing in an impartial third party to help guide this conversation. A trusted financial planner can help to remove some tension or offer new solutions that help your parents achieve their goals in a financially sound way.
GETTING DOWN TO THE DOLLARS AND CENTS
It’s important for you to help your parents create a financial map, or an inventory of sorts. This not only helps them stay organized, it helps you become fully aware of their financial situation and what may need to be done to keep them on the right track. Here are some things to consider:
- Assets. Where are they? What are the amounts?
- Any liabilities or debts. Where are they? What are the amounts? How are they being paid?
- Income. Where is it coming from? To whom and how is it paid?
- Expenses. What are they? How are they being paid for?
- Insurance(s). What is their health insurance coverage? Do they have long term care policies in place? Life insurance? Funeral policies? Do they need to consider any of these things if they don’t have them?
- Important documents. This often gets missed when discussing a financial picture – but it’s an important piece of the puzzle. Where are their birth certificates, marriage certificates, death certificates (if a spouse is deceased), divorce papers, military records, etc.? Do you need copies? Consider creating a binder so that they’re accessible in one spot.
- Safe Deposit Box. Where is it located? Who has the keys? What does it contain?
- Other helpful documents. Credit reports, tax returns, and bank statements all come in handy.
- Contact information. Gather the contact information for every key financial player in your parents’ lives – financial planner, CPA, and insurance agent.
TAKING ON RESPONSIBILITY
You’re getting ready to take on responsibility of your parents’ financial lives. To do that, you’ll need a few key documents other than what’s listed above. First, you’ll need a Durable Power of Attorney. This gives you the authority to manage someone else’s finances. I recommend getting this drafted by an attorney in your state as laws vary depending on where you live. A common mistake I see is people applying to be a joint owner on a bank account instead of a Power of Attorney. This is a mistake! Make sure you are taking the correct steps.
Next, you’ll need to apply to different administrations to help have full access to your parents’ finances. The federal government won’t recognize your Power of Attorney. You’ll need to do the following:
- Apply to become a Representative Payee with the Social Security Administration and the Railroad Retirement Administration.
- Apply to become a VA Fiduciary with the Department of Veteran Affairs.
- You’ll need to complete a Form 2848 to be named the Power of Attorney with the IRS.
Healthcare is also something you’ll likely be taking responsibility for. For this you’ll need a Healthcare Proxy (also known as a medical power of attorney). This is different than the Durable Power of Attorney mentioned above and will need to be drawn up separately.
- Ensure that you have a HIPAA clause so that you have access to the medical information you’ll need to determine incompetence in case you do need to take over medical decisions for one or both parents.
- Complete the HIPAA forms at your parents’ doctor’s office so that they have them on file, as well.
ADDITIONAL WORDS OF WISDOM
This is not an easy process, but it’s worth it for both you, your siblings, and your parents to have peace of mind. While you’re having this money conversation, don’t be afraid to suggest additional measures to make sure your parents are well taken care of. For example, make sure that their property and income taxes are still being paid. I have many clients who assume that once they hit a certain age, they’re no longer liable. This is not the case.
You can also add your parents to the National Do Not Call Registry to avoid them falling victim to one of the many scam artists out there. Additionally, you can take this time to make sure the nitty gritty of their financial situation is streamlined and simplified. Make sure beneficiaries are up-to-date, consolidate and simplify their accounts, streamline bill pay with auto payments, coordinate who will take care of their small life expenses (like grocery shopping) with them, assist with home repairs if it’s necessary, and sit in on meetings with their various advisors and agents to make sure you’re up to date. Finally, make sure they’re regularly checking (and opening) their mail. Nobody wants to get blind-sided by a bill or expense that they weren’t aware of until it was overdue.
It’s okay if you’re feeling overwhelmed – that’s normal. If you can, divvy up the responsibilities with your siblings. This can help take some of the pressure off and help to keep everyone in the loop. As you go through this process, make sure that you are documenting everything. Your goal is to make sure that your parents’ lives are organized, easy, and financially taken care of – not to drive a wedge between you and other family members because of financial stress.