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How Confident and Comfortable Are You When Asking Your Parents About Their Financial Situation?
If you are unprepared for this conversation, it is easy for your concern and curiosity to be mistaken for insensitivity or even self-interest.
Unfortunately, not knowing their financial circumstances could someday place your aging parents in financial trouble:
Bills may be unpaid…
Assets may be misplaced or ignored…
Legal guardianship may be required to gain access to their accounts and decide things on their behalf…
Managing our elderly parents’ finances and assets is a task that’s unavoidable and inevitable, but preparing for it makes the task less stressful, and can be done without adversely affecting your personal finances.
In this article, we have some tips on managing elderly parents’ finances and assets to help you get started on a task that may be a tough row to hoe.
Jump straight to…
What You Need to Know Before Managing Aging Parents Finances
It can be difficult to know when it’s appropriate—or necessary—for you to step in and take charge of your parents’ finances.
These signs could give you a hint:
1. Unusual Purchases
Pay attention if your parents start making purchases that are inconsistent with their necessities or way of life, or if they start participating in numerous giveaways or contests. Older adults are frequently prey to scams, and this behaviour can easily spiral out of hand.
2. Stack of Unopened Mail
Piles of unopened mail can be an indication that your parents are making unexpected purchases, are behind on their bill payments, or are simply neglecting to take care of their finances.
3. Constantly Complaining About Money
When your parents only talk about money when you’re with them, it can be an indication that something is wrong. They may grumble constantly about not having enough money or refrain from engaging in things that they believe will set them back.
4. Physical Limitations
Arthritis can make the most basic of financial tasks painful. Fading vision can make it difficult to drive to the bank. If you notice that tasks are getting harder, that can be a sign that they require assistance.
5. Memory Issues
Cognitive lapses, such as not knowing how to access their bank accounts, can be a big sign that you might need to step in and help.
Being aware of these signs will help you make reasonable steps to ease into the task of helping your parents manage their assets and finances.
Are You Financially Responsible for Your Parents?
Managing your parents’ finances is voluntary work. No law obligates you to be financially responsible for your parents.
However, as they age, there are things our parents may struggle with, such as managing their finances. And more often than not, the people they will trust are their children.
This is where a power of attorney can best serve your parents and you. A power of attorney is a legal document of written consent that a competent adult signs to give another person the authority to act on their behalf.
Rest assured, you are not responsible for repaying your parent’s debts even if you have a financial power of attorney. Only if you cosigned for them or are designated as a joint debtor can these debts be transferred to you.
Knowing that debts and loans cannot be transferred to children or heirs eases the concerns of family members who help manage their parents finances.
How Do You Financially Take Care of Your Parents?
Although it might be some time before your parents require assistance, it’s best to start communicating now. You can start by discussing who will take care of their personal affairs in the event of a crisis.
Parents who give written consent in advance to a named family member remove barriers for that person to speak with important experts, such as doctors, specialists, and even financial advisors regarding their parent’s personal needs.
Without this kind of financial planning, privacy laws can forbid crucial discussions and decisions.
Establishing a constant line of communication with your parents now will help you better understand their financial situation and determine how involved you should be moving forward.
This also allows you to make gradual changes instead of swooping in and taking over.
For example, if you’ve been authorised to write checks on their behalf to pay their bills, do it with them. This way they can adjust to the new arrangements more easily if you take a steady, compassionate approach.
Are your elderly parents financially prepared for their twilight years?
Help your parents manage their assets and finances with the guidance of an experienced financial planner by booking a complimentary call with our team.
Transition of Financial Responsibility: Steps to Managing Your Parents Finances
Managing your parents’ assets and finances can be difficult if you don’t have the legal authority to act on their behalf, which is why it’s important to get a power of attorney if you and your parents are intent on giving you the task of managing their finances.
There are 2 Types of Powers of Attorney:
Enduring Power of Attorney and General Power of Attorney.
Enduring Power of Attorney
A legal document that enables your parents to designate a person or people to handle financial and legal choices on their behalf and endures even if they lose the capacity to make decisions for themselves.
General Power of Attorney
A legal document that enables your parents to name a person or people to handle their finances and legal decisions while they have the capacity to make decisions for themselves.
By signing a power of attorney with your parent, you ensure that you will have the legal capacity to handle crucial choices in the event that your parent is unable to.
The scope of a general power of attorney and an enduring power of attorney may vary depending on the state or territory where your parents live. For assistance in creating a power of attorney that meets your requirements, speak with a lawyer who focuses on elder law.
Find Important Financial Records and Relevant Legal Documents
Complete financial information is important when managing aging parents’ assets.
Make a list of your parents’ names, phone numbers, bank account numbers and information, and the locations where they keep important papers such as birth certificates, insurance policies, deeds, and wills.
Verify that all information is accurate and up to date, and that all accounts are in good standing.
Make sure all sensitive information is kept in a secure location when gathering this information or when noting where your parents have kept it.
To safeguard these documents, group them together as:
- Keep forever
- Keep for 3-7 years
- Keep for 1 year
- Keep for a month
Keep forever copies of tax returns as part of your parents’ financial history. You should permanently store a hard copy or electronic copy of the tax returns and any payments made to the government. Keeping track of important financial events like court filings or inheritances is also a good idea.
Bank information, birth and death certificates, marriage licences, divorce decrees, life insurance policies, wills, and certificates of investments are other records that should be preserved indefinitely.
Keep for 3-7 years supporting tax documents in case of ATO audit.
Keep for a year regular statements and receipts.
Keep for a month utility bills, and deposit and withdrawal records.
Manage Money Now – Monthly Expenses, Debts and Financial Accounts
Grouping documents will put everything in order and make it easier for you to keep track of them and will help you to manage bills, expenses, and debts efficiently.
Take Inventory of All Financial Accounts & Make Changes If Needed
Examine any income your parents may have more closely, such as retirement or savings, and if possible, move those income streams to direct deposit.
This will guarantee that even if a problem arises and your parents are unable to or forget to make a deposit, their money still gets into their bank accounts.
Update Utilities If Needed & Arrange to Pay Bills
You can think about setting up online bill pay and online banking so that payments are made automatically each month if paying bills is difficult for them.
When you pay bills, make sure it comes out of their account, and avoid mixing your funds with theirs.
Mixing your funds with your parents’ is not a good idea, even if it appears like a quick cure. Where possible, you should avoid using your personal assets or income to support your parents since doing so may endanger your own retirement plans or savings objectives.
Make a Plan to Reduce Any Outstanding Debts
Paying off debt can take a long time and be difficult particularly when one has little income and little assets.
Here are ways to reduce and ease the burden of paying your aging parents debt:
1. Inquire with the creditor about adjusting the payments to better match your parent’s retirement income.
2. A reverse mortgage is an alternative way for your parents to augment their income if they own a property and have little to no mortgage debt.
Just remember that after your parent passes away or otherwise leaves the residence, the loan becomes due.
3. Seize their credit cards and inform creditors of their disability
Make sure that your enduring power of attorney is in place so that you can take charge and manage your parents’ finances if their cognitive functions decline.
In order to protect your parent’s physical and financial wellbeing, you might think about guardianship if they did not select an enduring power of attorney.
Make Future Financial Decisions Now
The best time to make plans with your parents is NOW.
Don’t wait for their health to deteriorate or for their resources to get depleted before taking action. Circumstances are always right when taking care of our loved ones.
Knowing that it can be difficult to manage finances, and even more difficult when you’re trying to do it on someone else’s behalf—it wouldn’t hurt to speak with a lawyer, accountant, or qualified financial advisor.
Find the Right Financial Professional For You With the Help of the My Money Sorted Team.
When you book a call with My Money Sorted, you’ll:
✓ get a better understanding of your financial options
✓ have an idea of the experts you can call on to help manage your elderly parents’ finances and assets
✓ be matched with the right financial professional who can help simplify the process
My Money Sorted is your stress-free pathway to getting ahead with your money.
Here’s what your journey will look like:
Step 1: Start off with a quick financial assessment session with an MMS team member
Step 2: Get matched with a licensed Finance Advisor that’s right for your money situation
Step 3: Take the first step towards your money goals with a clear and sound roadmap prepared by an experienced Financial Advisor.
It’s that easy!
Speak with Our MMS Team and Get Your Money Sorted Today
