When You Should Take Financial Responsibility for Your Parents
When it comes to helping your parents as they age, it’s best to be proactive. Lyle Solomon, the lead attorney at Oak View Law Group, says in an email to The Balance: “In fact, you should talk to your parents about who will take over their financial affairs before any issues arise. If you have this conversation early on, you will know when to step in and what to do when the time comes.”
But even if you haven’t had this discussion, it’s important to know when to intervene. Solomon says there are some signs to watch for, including:
- Unusual purchases: If one parent is buying things that don’t fit their lifestyle or needs, or is entering many sweepstakes or contests, it may mean you should consider taking on financial responsibility for your parents soon. Solomon says, “These issues can escalate quickly, and the elderly often fall victim to many scams.”
- Mail pile-up: A pile-up of mail can indicate that one parent is spending unusually or having financial difficulties.
- Frequent money complaints: If your parents frequently complain about financial matters, such as not having enough income or having overdue bills, consider intervening.
- Memory problems: Pay attention to signs that your parents can’t remember things like they used to, especially if it’s affecting their finances. For example, it may be a red flag if they don’t remember why they wrote a large check or whether they paid the mortgage.
- Deteriorating health: If you notice that one parent is struggling in daily life due to health issues like poor vision or arthritis, they may need costly assistance.
How to Manage Your Parents’ Finances
If you’ve decided it’s time to help and take care of your parents’ finances, there are some steps you should take:
Track the Documents
The first step in taking over your parents’ financial management is to locate bank statements, bills, and other documents that will help you understand the current situation.
Make a list of all the bank accounts and loans they have, along with the regular bills they incur. This will give you a sense of their financial obligations and the resources available to cover them. You may find that you need to contribute some money to ensure everything continues to run smoothly.
Tip: If possible, find out the login information for your parents’ online accounts (or set up accounts if they don’t exist) so you can easily manage their finances from anywhere.
Get a Power of Attorney
Find out if your parents have a living trust or a power of attorney. These documents designate individuals (other than your parents) who are legally permitted to handle their affairs, and you’ll want to know if they chose you.
You’ll need to present these legal documents to each financial institution they deal with. Solomon recommends adding your name to your parents’ checking account if you will be managing their finances on a permanent basis. This can be arranged if you have a durable power of attorney and the bank branch manager has reviewed it.
Note: To create a new power of attorney, your parents must be legally competent and give their consent.
If your parents have not signed a power of attorney, do not have a living trust, and become incapacitated (due to illness, for example), you may need to go to court to become their guardian to handle their financial affairs. The court will also need to determine if you are qualified to manage your parents’ affairs. Solomon notes that it’s not a particularly pleasant process, and it’s helpful to work with an elder law attorney.
Documenting
Everything
You should keep track of everything you do for your parents. Solomon says, “You should maintain a record of everything you do for your parents.”
This will ensure there is a paper trail for sensitive legal and financial matters. Additionally, it will keep siblings and others informed about what’s happening and show that you are taking care of your parents’ affairs responsibly.
Consider Hiring Help
Managing your own financial matters can already be stressful, so taking on your parents’ financial responsibilities can be overwhelming and complicated. Solomon advises that you should consider hiring an attorney or financial planner and/or a tax accountant. “They can help you with budgeting, and they will also reassure your siblings.”
Challenges of Managing Your Parents’ Finances
One of the biggest potential challenges in managing your parents’ finances is convincing them to share information with you, according to Patrick Simasko, an elder law attorney and financial advisor at Simasko Law in Mount Clemens, Michigan. He says, “Many parents tend to be secretive or think they can handle everything and don’t want to involve their children.”
Have a conversation with them to help them understand that you are doing this for their protection and safety. Ensure they know that you are trying to help in case something unfortunate happens to them.
Things can also get complicated if their financial matters were not managed correctly. You may have to make some corrections, which could require you to contribute financially. If you are facing any challenges with your own financial situation, it can be stressful. Talking to a financial advisor can help; many offer free consultations and charge by the hour or even have virtual meetings, so you don’t have to worry about committing to expensive or extensive help.
How Siblings Can Prepare to Handle the Process
Solomon says that you should inform all siblings or other heirs who will be affected by your decisions if you are managing your parents’ money. Transparency with siblings is key to avoiding conflict.
He says, “You should hold family meetings to inform the concerned siblings or others about your elderly parents’ financial situation, their care needs, the cost of that care, and the management options you are considering.”
However, you don’t have to manage everything alone. If all siblings are on the same page, Simasko says that each of you can take on separate roles when it comes to managing your parents’ finances. He states, “One sibling should be in charge, and the others should help alleviate the workload.” Again, hiring an attorney can help resolve issues and allow all siblings to understand their roles and address any questions they may have.
If you are the only child, you may need to rely more on professional guidance. However, it doesn’t have to be costly. A geriatric care professional can help oversee different aspects of your parents’ care and assist you in finding free or low-cost resources in the community.
Conclusion
Taking on financial responsibility for your parents – or even knowing when the right time to do so is – isn’t easy. However, reaching an agreement with your parents and siblings will make the process go more smoothly. Have discussions with your family about the best way to help as soon as possible.
Frequently Asked Questions
How can I talk to my elderly parents about money?
It’s important to start these conversations early, before there’s any cognitive decline. Try to be sensitive to your parents’ feelings about aging and their ability to care for themselves. Often, it can be good to start by discussing your finances and planning first.
How can I better protect my elderly parents’ money?
May
Taking effective interest in your parents’ finances is the best way to ensure their protection. Make sure you have written consent, such as a power of attorney, to speak with their financial institutions and service providers. Keep an open line of communication with your parents about the decisions you’ve made.
Would you like to read more content like this? Subscribe to The Balance newsletter for daily tips, insights, and financial advice delivered straight to your inbox every morning!
Source: https://www.thebalancemoney.com/taking-over-elderly-parents-finances-legally-6361456
Leave a Reply