Discussing finances is never easy, and if you are an adult child, finding a way to ascertain your elderly parent’s financial health can be difficult. However, there are questions you can ask to help ensure your parents’ financial security without overstepping your bounds as their child.
There could be many reasons why older adults may not plan for their financial future—fear of losing control, of igniting family conflicts, or of having to confront their own mortality. But simply sitting down and opening up a dialogue with them can help reassure them that they can have control over their finances and estate matters, while still receiving assistance.
Before you get started, here are some areas to consider discussing:
- Be Respectful. First and foremost, it’s important to be sensitive to and respectful of the delicate nature of your parents’ financial—as well as emotional—needs. Not having the ability to maintain their financial independence as they get older can be frustrating and disappointing for them. Being cognizant of the place from which your parents might be coming, can help avert any resistance you might face as you uncover the layers of financial history in their lives.
- Organize Essential Financial Documents. Noting where essential personal papers are located is a first step to helping your parents with their finances. These include birth and marriage certificates, Social Security cards, life, health and property insurance policies, and mortgage information. If your parents own a safe or rent a safety deposit box, make sure you know where the combination and keys are located—and if, in the case of the safety deposit box, usually at a bank—you, or someone else, needs to be a signer to have access.
- Make Lists of Financial Activities. Make a list of your parents’ income and expenses, including whether they receive a monthly pension, disability or government assistance, and any other monthly expenses such as car and mortgage payments, credit card payments, utility bills, and other personal expenses. Also, list their bank and investment companies’ information, including PIN numbers, savings and checking account numbers, investment accounts, certificates of deposit, and stock and bond information as well as the financial institutions’ contact information.
- Organize Estate Planning Documents. If you don’t already know, find out if your parents have a last will, living trust, living will (also called a health care directive) or power of attorney and where the originals and copies are located. If they don’t have these documents, work with them to create them. A last will an is essential estate planning tool—and if your parents have valuable personal property or real estate, they might also want to have a living trust to protect the value of those assets from probate. A living will is also an essential estate planning tool.
Create Durable and Health Care Powers of Attorney. Granting someone a durable power of attorney for finances and health care can allow aging parents to appoint a trustworthy individual to manage their finances and health care decisions should they become disabled or incapacitated.
A durable power of attorney lets your parents choose someone to execute financial transactions on their behalf should they become incapacitated. It can be set-up to only take effect if a specified event occurs, such as dementia, an incapacitating illness, or the death of the spouse. This type of power of attorney can help ensure your parents maintain control of their finances until the time comes when assistance is needed.
A power of attorney for health care appoints a trusted individual to make health care decisions for your parents if they become unable to. Typically created in conjunction with a living will, which establishes your parents’ particular health care decisions in the event of incapacity, a health care power of attorney gives a trusted individual the ability to make medical decisions on your parents’ behalf.
- Involve a Financial Expert. If your parents’ financial situation is more complex than you or they can handle, you might want to look into hiring a financial planner, accountant or tax attorney. In some cases, a money manager might be needed to help establish a budget, manage Social Security, pay bills, or balance their check book. Whatever you decide, you can ensure their financial health is in good hands, while maintaining your parents’ financial independence.
- Look Out for Red Flags. As you go through and organize your parents’ financial records, keep an eye out for any suspicious activity on bank statements or check book registers. Some red flags include incorrect or duplicate payments, unusually large purchases or charitable donations, high credit card debt, collection notices, or even sweepstakes or contest expenditures. These red flags are indications that your parents may need assistance in managing their financial obligations.
The Best Time to Discuss Finances
The best time to discuss finances with your parents is when they are competent, self-sufficient adults. Planning ahead and seeking out the appropriate professional financial assistance on their behalf can help ensure your parents enter their golden years in the most comfortable, stress-free and secure way possible.