A Guide to Managing Aging Parents’ Finances

There can be several differing circumstances when it may be required for you to take over one or both of your parents’ finances and budget. As parents age, their needs change, especially if they are dealing with complicated health issues. Taking steps to ensure your parents’ financial stability remains intact requires you to know everything about their money, bills, and investments. It is much easier to familiarize yourself with the necessary elements now, than having to do so as the result of sudden illness or incapacity.

The number of retirees is growing at a rapid pace, partially because “baby boomers” began retiring in 2006. According to the U.S. Census Bureau, approximately 10,000 Americans turn 65 every day. Even scarier numbers state that one in nine people over the age of 64 has some degree of Alzheimer’s disease. This number grows sharply with age; an estimated 32% of people over the age of 85 have the disease. With life expectancy numbers on the rise, it is necessary for children to become comfortable with this “role reversal” and become caregivers to their parents.

How do you know when you should take over managing your parents’ finances? There are several indicators to watch for.

• Stacks of envelopes, open or unopened, lying around. Look through them and open ones that are from mortgage companies, utilities, or property owners. This is a sign that your parents are not paying their bills, either because they forgot, or because they don’t have the money to do so.
• Your parent informs you, or you find out that one or more of their utilities have been shut off.
• They suddenly become very forgetful about cash.
• You notice “new” purchases increasing in the home.
• You may notice signs of addiction, such as gambling, drinking, smoking, shopping, or other compulsive behaviors.
• They have become victim of fraud. One in ten Americans over age of 60 has been the victim of Senior Fraud, and scams on seniors cost 3 billion dollars a year.

There is a variety of scams, including construction/repair/remodeling fraudulent activities.

Once you have made the decision to take over your parents’ financial accounts and budget, there are certain tasks involved to make the process easier and make it less stressful on both parties.

• • The first step will be for you to get a Durable Power of Attorney. Hopefully, your parents will see the benefit of designating you to be their agent when it comes to financial matters, including insurance and medical paperwork. The POA also gives you the ability to write checks on your parents’ behalf. Another advantage of a having a POA in place is that in the event your parent becomes incapacitated, you already have the paperwork in place to take over their affairs.
  • Gather all your parents’ financial accounts and bills. This may be easy if your parents are organized and have all the documents filed neatly. However, in most situations, this is not the case. You will need to locate their tax returns (if they use a tax preparer, this should be easy), stocks and investment paperwork, retirement documents, insurance policies, and other financial information.
  • Help your parents’ avoid senior fraud. Criminals target seniors, whether through a construction fraud, or telemarketing scams that ask seniors to send money. One way to thwart this type of activity is to make sure your parents’ phone number is on the National Do Not Call List. The FBI also maintains a current list of all scams aimed at defrauding seniors. You can look at it at www.FBI.gov.

• Familiarize yourself with all income avenues your parents have. At this stage in the process, it is highly recommended that you consult a financial planner or retirement income specialist to assist in setting up a plan to pay monthly expenses, and manage income. These specialists will also evaluate the investments and investment income. They may recommend diversifying your parents’ portfolio so they have more disposable income available.
• Organize bills and begin paying monthly, quarterly, and yearly bills, and begin paying them with your parents’ accounts. It is important to keep track and log every cent you spend on your parents’ behalf. This includes money spent on food and other living expenses.
• Consider using the long-term services of a financial planning firm. Should your parent become ill or incapacitated and need long term care, that care is expensive and there is no way to know how long they will need continuous care. Financial planners can recommend what direction you may go that may help increase income and pay for costs of care.
• Laws vary by state, so you must stay informed. Almost all states require that once you get the Power of Attorney to handle your parents’ financial responsibilities and income, you are not allowed to co-mingle funds. Keep all of your parents’ income, investments, insurance, bills, and all other paperwork separate from your own. Maintain records to prove that everything is separate and legal. Find out what the other governing laws are in your state and make sure you follow them.

It is important to handle “having the financial talk” with your parents with tact and not make them feel like they are incompetent. Most will welcome the help and appreciate it. Not only will it help them have less stress, it will also ensure that their retirement income is protected. If your parents already have a relationship with a financial planner, meeting with them and seeking their assistance will also help your parents feel more secure. If they don’t have a financial planner, find a reputable agency that is familiar with senior investments and income.

The transition of managing your parents’ financial means and future take the weight off their shoulders. It is crucial to stay proactive, and not wait until an emergency. Waiting too long can increase the chances of unrecoverable financial loss, and spell disaster for your loved ones. Also, remember to be patient and loving through this process. It will make the transition much easier and less stressful.

Disclosure: For informational and educational purposes only. The information contained herein may contain information that is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor.