Taking Over Aging Parents' Finances
As our parents age, there is an almost inevitable probability that they will require assistance with financial or health issues.
One or both parents may become ill or incapacitated and unable to keep up with their financial affairs as their mental and physical abilities decline. This can mean that bills don't get paid or they get paid twice and checks bounce. Even worse, parents can become susceptible to scams and fraud. Children usually will have to step in and take over the management of their parents' finances, often during a crisis, and often with little knowledge of their parents' financial affairs. This can cause stress, not only to the parents who feel that their independence is suddenly being taken away, but also for the children who are now in the position of having to navigate through years of financial documents to ascertain exactly what the parents' assets, liabilities, income, and expenses are. Taking over parents' finances can be tricky business, both emotionally and financially for all involved.
The best way to avoid problems later on is to plan ahead. Planning ahead helps to ensure that parents' wishes are carried out, and it can eliminate potential conflicts among siblings about how mom and dad's finances will be managed and by whom. Children should have a frank discussion with parents about their assets, liabilities, income, and expenses around the time parents retire, if not earlier. The problem is that many people are private about their finances, so parents may be reluctant to discuss their finances with their children. While bringing up the subject of finances with parents can be awkward, it is an important and necessary conversation to have so children can better assist their parents later on. At the very least, parents should let their children know where the parents keep their important financial documents in case these documents are needed in an emergency. Ideally, parents should have an estate plan in place that includes powers of attorney or revocable living trusts that dictate who will manage their finances and under what circumstances. Additionally, parents should maintain updated lists of income and assets.
An article on Forbes.com offers a few practical suggestions for actions that children can assist their parents in taking now that will ease the burden and transition for children later, if and when the children need to step in and take over the management of their parents' finances:
-- Put regular transactions on autopilot. Have Social Security and other monthly checks deposited directly into bank accounts and have bills automatically debited.
-- Simplify where possible. Consolidate bank and brokerage accounts and request that financial service companies send duplicate paper statements to parents and children.
-- Have one child in charge. When children do take over, have only one child handle everyday finances and regularly inform the other siblings in writing of what is going on. Such communication can prevent tension and potential problems down the road.
-- Locate insurance policies. Insurance policies can easily be overlooked. Ensure that copies of all policies are easily accessible.
In taking over the management of a parent's finances, it is important that children respect their parents' rights and wishes. Children should allow parents to maintain as much control as possible. Parents should be kept involved as much as possible and informed of all actions that their children are taking on their behalf. Children should always keep their parents' money separate from their own. Starting the conversation about finances with a parent now will go a long way to help ease the transition of finances to a child later.
The attorneys at The Estate Planning & Elder Law Firm can assist clients with their estate, financial, insurance, long-term care, veterans' benefits, and special needs planning issues.
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The Estate Planning & Elder Law Firm, P.C. is an elder law firm. We represent older persons, disabled persons, their families, and their advocates. The practice of elder law includes estate planning, estate and trust administration, powers of attorney, advance medical directives, titling of assets and designations of beneficiaries, guardianships, conservatorships, and public entitlements such as Medicaid, Medicare, Social Security, and SSI, disability planning, income tax planning and preparation, care management, and fiduciary services. For more information about The Estate Planning & Elder Law Firm, P.C., please visit our website at http://www.lifecareplanning.com.
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