7 Things You Must Do If You Take Over Your Aging Parents’ Finances
Written by
Dawn Allcot
Edited by
Travis Woods
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As millennials and Gen X prepare for the great wealth transfer as they inherit trillions from their parents or grandparents, many are already experiencing financial transitions.
For some Americans, the Great Wealth Transfer is occurring while their parents are still alive, experts previously told GOBankingRates. For others, that transition involves taking over their parents’ finances to help them manage their money in their later years. Before you take this big step, it’s wise to prepare emotionally and help ensure your parents feel respected, valued and dignified as you offer a helping hand.
1. Start the Conversation Before Your Parents Need Help
You should already be talking about money with your parents, according to the experts at Bank of America.
According to a recent study from Trust & Will, 34% of millennials don’t know what estate plans their parents have in place, or if they have a plan at all. Another 13% said they knew their parents did not have a will or trust.
“The sooner Millennials — and their parents — normalize talking about end-of-life plans, the easier it will be when the time comes,” Cody Barbo, Founder and CEO of Trust & Will in an email to GOBankingRates.
2. Know Where Finances (and Paperwork) Stand
Part of the conversation with your parents should involve taking inventory of cash, investments, life insurance, and paperwork such as a will. Find out where they store insurance policies, birth certificates, and other legal documents.
Even if they aren’t ready to share their account numbers and passwords, they should be stored in a safe, secure location so that you can access them easily when the time comes.
3. Know When It’s Time to Jump In and Help
As your parents age, keep your eyes open for signs that they might need assistance – financial or otherwise. Bank of America noted that some of the signs include:
- Unusual or unnecessary purchases;
- Piles of unopened mail;
- Sweepstakes or contest entries;
- Running out of money or voicing concerns about having enough money;
- Unexplained calls from debt collectors;
- Physical ailments that make it harder for them to perform daily tasks;
- Memory problems.
4. Make Gradual Changes
Elder Care Alliance advised easing into the process of managing your parent’s money.
“For example, if one of your new responsibilities will be to help pay bills by writing checks from their account, do this task together for a while before you do it independently,” according to the organization’s blog.
5. Streamline and Simplify
One of the first ways you can help is by automating as much of their finances as possible. First, create a budget to ensure they have enough funds to cover all their expenses.
Then, set up direct deposit for any investment distributions, dividend payments, Social Security and other income. If necessary, you can also set up automatic transfers from savings into checking.
Then, automate bill payments to avoid late charges from missed payments. Automating these elements of their finance will allow your parents to manage their money with minimal intervention from you for a while longer.
Just make sure you get written consent from your parents before making any changes, wrote ElderCareAlliance.org.
6. Decide If You Need Power of Attorney
If you feel your parent may not be capable of making their own decisions surrounding money soon, you might consider a power of attorney. This document, which must be signed while your parent is competent enough to understand what it means, can give you the power to make decisions for them. The PoA can cover finances, medical decisions, and more.
7. Maintain Separate Finances
It might be tempting as your parents age to merge finances for easier money management. Bank of America expert advised against merging finances or giving your parents too much assistance, at the risk of jeopardizing your retirement or spending goals.
Instead of paying your parents’ bills with your money, speak with a financial advisor to see how you can maximize your parents’ investments to help make ends meet.
Final Note
Taking it slow and documenting your moves can help ease the transition to managing your aging parents’ money.
Above all else, show your parents the same patience that they (ideally) showed you in your younger years, as they shared the tools you needed to manage your own finances independently.
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