Years ago, we moved my grandmother from her home to a senior living facility. When my dad handed her the keys to her new apartment, she asked, “What do these do?” This was an eye-opening moment after a slow decline in abilities. In the months leading up to this moment, my dad had taken over my grandmother’s day-to-day bill paying and eventually her investments and sale of her house.
Like my dad, many adult children take on caregiving responsibilities for aging parents. This often includes helping them manage finances.
Having a loving presence to act as a second set of ears and eyes in financial matters can be a blessing, especially for people who are having a hard time remembering details or staying organized. This doesn’t mean they will welcome a complete takeover with open arms. It’s hard to give up control or admit you need help. So, move into this space gently, talking to your parents about their needs and how you can best support them.
We find that help from adult children usually progresses over time, starting with emergency help or consultation and possibly eventually progressing to full control. Here are some tips for each stage as you manage more and more of your parents’ financial matters.
Setting the stage for emergency help
Many adult children get involved while their parents are still fully independent and making financial and investment decisions.
A benefit of this is that your parents can explain their financial situation and bookkeeping methods, so you don’t need to figure it out in a crisis. The key in this stage is gathering information and setting up structures so you can be helpful if an emergency arises. Ask your parents if they would give you an overview of what they have in place so you can help if needed.
Make sure you are named Power of Attorney or Trustee for financial decisions and Healthcare Agent for health care decisions. These documents allow you to act on their behalf if/when the need arises. Your parents should also add you as a contact on long-term care and life insurance policies, which will allow the insurance company to call you if the premiums haven’t been paid and they can’t reach your parents
Ask for lists of accounts; names of financial, insurance, and legal advisors; where they keep passwords to financial websites; the location of important legal documents; and keys to safe deposit boxes or home safes. Set a reminder on your calendar to ask for yearly updates of net worth statements or other inventories of assets, loans, and insurance.
If you notice something your parents can improve upon or if you have concerns, ask them if you may share an observation or suggestion. Be careful not to overstep at this early stage. Ask your parents how they’re feeling about their finances and if there is anything you can do to be helpful.
Increasing hands-on involvement
If aging parents start to get overwhelmed or children start seeing concerns like unpaid bills, it might be time to increase hands-on involvement.
At this stage, we often see parents bring one or more of their children to meetings with their tax preparers, financial planners, insurance specialists, and estate attorneys. Having the child there to listen, take notes, and facilitate follow-up items is often quite helpful and appreciated by parents.
As parents become more open to help, offer to receive duplicate statements or get online access to investment, insurance, and bank accounts, and become an authorized signer on bank accounts.
Review your parents’ estate plan with them, making sure it is up to date. This is also a good time to confirm that assets are properly named (i.e. joint ownership, trusts) and beneficiaries are up to date.
Review property, casualty, life, and long-term care insurance policies with your parents and their insurance agents to evaluate if the coverage is appropriate. Make sure they have enough money set aside for final expenses and funeral expenses in an account that you will have access to.
As you progress toward being more involved, you will want to review their tax returns or even help them prepare them and make sure they are paying their estimated taxes.
Even if they are still paying the bills, you can make an inventory of which expenses are on autopay and which are paid by check. Try to switch as much to autopay as possible, and set reminders on your own calendar to check bank accounts online to make sure bills are being paid on time.
Becoming the lead manager
If you eventually need to take the lead on your parents’ finances, you’ll need to increase your access to financial accounts. Provide a copy of your Power of Attorney to banks and investment companies to demonstrate that you now are the decision-maker, or co-decision-maker, depending on your parents’ cognitive status. If your parents have a trust, work with them and their attorney to add you as a co-trustee or sole trustee. Then share that paperwork with the bank and investment providers.
This might be a good time consolidate and simplify. For example, multiple stocks and stock certificates could be brought into one brokerage account. CDs held at multiple banks could be cashed in and brought to one bank. To streamline further, consider moving your parents’ accounts to the same financial advisor or financial institutions that you use.
Consider whether your parents might be vulnerable to fraud or identity theft. If you think they are, you may need to lower the credit limit on their credit cards or remove access to bank accounts.
A good way to let aging adults maintain control of their daily spending while you manage the bigger picture is to provide them with “spending money.” You pay all the bills to make sure nothing gets missed there, but they have a checking account that they can use for incidentals however they see fit.
Financial caregiving sometimes overlaps with other caregiving responsibilities. For example, as household management gets difficult, you might want to discuss hiring in-home services, downsizing, or moving to an assisted living facility. As the financial caregiver, you can run a forecast and budget to see what these kinds of changes would mean for them financially.
Things to avoid
Regardless of the stage you are in, avoid doing any of the following:
- Cosigning on a loan with your parents.
- Adding your name to their bank accounts or property. Instead, be added as an authorized signer and use their financial Power of Attorney or Trustee arrangement.
- Doing it alone, unless you’re an only child. Split responsibilities with other family members as much as possible, even those who live far away. Holding family meetings, even with those not directly managing finances, is also a good way to avoid conflicts and be transparent about what is happening with your parents’ money.
Spirit of support
We have worked with several clients who were no longer able to manage their own finances. One client, upon learning she was developing Alzheimer’s like her mother did, worried about her future. We talked with her about setting up a support system and created a plan while she was able to state her wishes.
Her daughters began joining our review meetings and gradually took over bill paying and the other financial matters. She often said how thankful she was to have her kids to look after her.
We always recommend approaching any offer to assist your parents out of a place of love, support, and helpfulness.
Anne is a Senior Wealth Manager and Shareholder. She is passionate about simplifying complex issues and is a huge advocate for clients as they work through personal money questions and work toward financial life goals.