Many people my age may eventually be confronted with the prospect of taking responsibility for their parents’ finances as they grow older. It’s best to begin discussing this possibility before there is a crisis situation. The following basic tips can help you develop a strategy.
- Plan in advance by getting your parents organized now. The worst that can happen in a crisis is that instead of helping your parents make a decision, you expend time as ‘financial detective’ trying to piece together needed information. Where do your parents keep their bank statements? What about their investment files or life insurance policies? Where is the will? While they are still healthy, encourage them to at least share with you the basic information of their financial documents and assemble a financial file. Work with them to find out if any of the companies will send you duplicate statements or allow online viewing of accounts.
- Get educated about Social Security benefits and Medicare. Learn as much as you can so that you can talk with your parents about their choices in layman’s terms. Research and learn the differences between Medicare A, B, C and even D. Figure out their health insurance gaps, which can include co-insurance, co-pays and deductibles. Look into their eligibility for Medicaid, which is a combination of federal and state programs to cover medical expenses. Contact former employers to learn if they are eligible for any supplemental benefits or if they have a long-term care policy.
- Set up a power of attorney and/or health care proxy before it is needed. Before a parent becomes incapable of making decisions or executing documents, have the authority in place to step in if needed. A power of attorney will allow you to make financial decisions on their behalf. Without it, you will need to go before a judge before you can step in. A health care proxy gives you authority to decide on life-and-death medical decisions. An elder law attorney can provide guidance with this process.
- Consult a financial planning team (financial consultant, tax consultant and/or attorney). Not only should you consult legal help for executing a power of attorney, but hire as much help as you can to avoid making financial mistakes that could prove to be more costly later. No matter how good you are with your personal money, experts can assist in determining the right budget for your parents’ situation and can help you determine if their investments are sufficient to sustain them financially. Your siblings may also feel better knowing that you are receiving expert advice rather than managing their finances on your own. This can also help avoid having siblings second-guess your choices.
- Document everything you do on your parents’ behalf. If you are paying their bills, keep copies of check images and bank statements. If you are using your parents’ cash, keep the receipts. Keep detailed notes of the advice that you receive from your financial planning team. Regularly inform your siblings in writing, summarizing the highlights of your parents’ finances and the decisions you have made.
- Review their will. Be sure that your parents’ final wishes or requests are updated and in place. The best place to keep the will and other legal documents is in a fire-proof box in their home. If these are kept in a safe-deposit box and you are not listed on the safe-deposit account, you will need a court order to access the box, which could waste valuable time.
Even with proper planning, the need to take over your parents’ finances can be stressful. Advance preparation will enable you to make decisions one step at a time and will help you manage what needs to get done.
Have you had to manage your parents’ finances? What advice do you have?