At some point, the time may come when your parents are no longer able to manage their money. Depending on the situation, it may be sudden or gradual, but we know this is a significant transition for a family.
For some, the prospect of managing someone else’s money can be stressful, and coupled with the realization that your parents may not want to give up control—it can be an overly intimidating task. However, with the right knowledge and preparation, it doesn’t have to be.
By becoming familiar with the various aspects of financial management, and how some may be specific to older adults, you can feel comfortable taking on your parent’s finances.
Franklin Park® Senior Living, with retirement communities in San Antonio, Texas, and the surrounding areas, is offering some insights and strategies for when it becomes necessary for you to step in and manage your parent’s finances.
Knowing When You Need To Take Over
The first step in managing your aging parents’ finances is to recognize that they may need your help. Your parents’ ability to manage their finances may decline, and knowing when to step in can be vital in protecting their money, their future, and even their identity or health. There are several instances when it could be beneficial for you to start managing your parents’ finances:
Dementia or Cognitive Decline: If your parents are experiencing any type of cognitive decline, this could be an indicator that you need to step in and help. Dementia and other memory impairments can make it difficult for your parents to pay bills on time, monitor a budget, or remember where they put extra cash.
Elderly Scams: Unfortunately, the older population is the most at-risk for financial scams. Considered by some to be “naive,” older adults are frequent targets of scams because they may be “lonely, willing to listen and more trusting than younger individuals (Association of Certified Fraud Examiners).” Some warning signs that your parents are the subjects of a scam include expensive, out-of-character credit card purchases, an increase of unknown phone numbers, or visits from new “friends” that you may not know.
Moving into Assisted Living: Your parents moving out of their home and into an assisted living community could be a great opportunity to consider transferring the ownership of finances. Moving into a community is already a transition period for your parents, and taking over their finances can be a great way to make their lives even easier as they move.
Talk With Them and Respect Their Decisions
Finances are a sensitive matter, and sometimes older adults can be reluctant to give up their control. When it does become time for you or another family member to help manage your parents’ finances, try to approach the topic with patience and respect. Bring it up in a way that preserves your parents’ dignity, and focuses on the fact that you only want to help them, not take control.
If your parents are still hesitant to relinquish control of their money, consider bringing in another family member or a third party to help lead the discussion. Making sure that everyone is on the same page and in agreement can help facilitate the entire process.
Ensure You Have the Authority
After your parents have agreed to let you become involved and before management begins, it is imperative that you are assigned the durable power of attorney. This is secured through the courts and gives you the authority to make account changes, pay bills, and deposit money on behalf of your parent. Without this, many banks and financial institutions will deny you access to your parents’ account.
Gather Up Important Documents
If your parents have been savvy at managing their finances, they may already have all their relevant documents stored and organized properly. However, some people aren’t as organized as others and may keep their important documents (like social security cards, property records, financial information, etc.) in a variety of places. Make sure to ask your parents where these documents might be, and try to have everything you may need before diving in.
Tips While Managing Your Parents’ Finances
Know What Institutions They Use & How To Access Them
Ask your parents to write down the names of their banks, financial advisor(s), or any other pertinent information. Have them include account numbers, passcodes, usernames, and passwords. If you do not have this information and suddenly need to access accounts, it can be challenging—even with the proper authority. It is also best to update this information every six months in case information changes.
Determine Their Total Monthly Income
Even if your parents are retired, there’s a good chance that they are receiving money every month from a variety of places. From social security to pensions, dividends, and Medicare or Medicaid— numerous standard programs benefit older adults financially. Knowing how much is coming from each deposit can help you more accurately determine your parents’ cash flow and how much they can comfortably afford.
Understand Their Monthly Expenses
After you double-check their monthly income, figure out everything that your parents purchase on a monthly basis. Understanding their expenses will ensure that they are not spending above their means. Make a list of any recurring monthly expenses—such as mortgage or rent, car payment, utility bills, etc., and help your parents create a budget for the remainder so that they can increase their savings of disposable income.
By examining what comes out of your parents’ account each month, you can also look for any instances of fraud or scams—such as paying too much for any service they may use.
Today, many companies allow you to not only pay online but to set up an automatic monthly withdrawal from your account. Set this up for your parents for any bills that have this option so that they don’t have to worry about remembering to pay their bills every month!
Take Inventory of Their Safety Deposit Box and Other Non-Liquid Assets
If your parents have a safety deposit box, make sure that you’re listed as an agent who has access (power of attorney does not always grant permission to open). Once you are able to get into the box, bring a witness, and take inventory of everything inside. Ensure there is nothing in the box that shouldn’t be (the only copy of their will, advanced directives, etc.) and take note of the value of other things inside.
It can also be a good idea to take inventory of other valuable assets that your parent might have, including jewelry, china, or art. Depending on your parents’ situation, you may even consider getting these items insured or appraised.
Preparing for the Future
Consider Rethinking Your Parents’ Investments
Once you have worked with your parents to get their current finances organized and managed, you can start thinking about the future. Over time, your parents’ financial goals and needs have probably changed, and a long-term, high-risk investment may not be the best option for them anymore. Work with your parents’ financial advisor to determine a portfolio that will best fit their needs.
While you are going through finances and essential documents, ensure that your parents have an estate plan in place. This should include a living will, power of attorney, advanced directives, and more. While this can be a sensitive topic, remind your parents that organizing their estate is the best thing they can do for their family.
Moving to a Community
Eventually, your parents may want to move into an independent or assisted living community. Evaluating their finances provides a great opportunity to discuss this potential transition. By understanding their current income and expenses, you can discuss community options that would be a good fit for their budget and their lifestyle.
Franklin Park® Senior Living knows that it can be challenging to approach the subject of managing your parents’ finances. We hope that when the time does come for you to take over, the above strategies will make the transition smooth. Being prepared, educated, and organized are the most important elements to making sure your parents’ money is well-managed and safe if they become unable to care for it themselves.
For more information on caregiver tips, senior health, or our Franklin Park® retirement communities in the San Antonio area, visit our website!
Updated on August 15, 2020