As our Parents age, once simple tasks become harder for them to accomplish. One of those tasks is financial management. Without help, a parent can become confused and derail his or her retirement plan. Bills go unpaid. Dividend checks get lost. Duplicate checks to the same charity or vendor begin to appear. The situation begs for adult children to step in and organize the parent’s finances. If your parent is losing the ability to manage their finances, you need to take the following five steps,
Inventory Assets and Income
The first step to take when helping an aging parent with their finances is to get a clear picture of the parent’s assets and income. Start by collecting the latest statements from banks, investment accounts, stock brokers, deeds, and the U.S. Treasury. Create an Excel spread sheet of the date and totals of each account. Create a separate listing of the name of each financial institution, the contact information of the key person at each financial institution, the account numbers and any online usernames and passwords.
Get a Durable Power of Attorney and Use It
If you are going manage you parents finances instead of just help them, you will need to get a Durable Power of Attorney. A Durable Power of attorney enables another person to represent you in specific business, financial and legal transactions. It is called “durable” because it continues even after the person in question becomes incapacitated. You need to get a Durable Power of Attorney while your parent is fully functional because If your parent is unable to sign the Durable Power of Attorney or acknowledge that it was their free act and deed to sign it, you may lose the power to help them with their finances without court intervention.
Be aware that it can take several weeks to get a Durable Power of Attorney signed and it is best to get it signed in the office of your parent’s attorney. Have 4 originals signed because most financial institutions will want to see an original. Once it is signed, go to the financial institution with the parent and present the Durable Power of Attorney to the financial institution. This way the banker or broker will feel confident that the parent wants your help in managing their finances. If it is not possible to visit the financial institution with your parent, have your parent call the banker or broker to assure him or her that they want your help in managing the account .
List Their Expenses
Everyone has regular, periodic expenses that need to be paid. You need to create a listing of each household expense and when it comes due. Include the name and contact information of each service provider, the usual amount or payment range, the monthly due date, and any account numbers.
Put Monthly Income and Bills on Automatic Payment
You can eliminate lost or bounced checks by arranging direct deposit of income from annuities, dividends, and bond interest. You can avoid late charges, utility shutoffs and lost services by paying mortgages, utilities, condo fees, heating oil and other expenses with automatic bill pay through your parent’s checking account. If you do put income and bills on automatic payment, be sure to review monthly statements to make sure their aren’t any unusual charges.
Report Regularly to the Whole Family
If you are going to manage a parent’s finances, transparency is crucial to maintaining positive relationships with other family members. Siblings and other concerned parties will likely want to know how you are managing Mom or Dad’s finances. Financial management rarely occurs in a vacuum. Your parent and siblings may have suggestions on better ways to meet your parent’s needs. Keep good records and consult them. Initially, report to your parent and siblings in writing at least every 3 months. Outline what you have done for them financially. Send it to siblings by e-mail; go over the report with your parent in person. Once most of the above steps are completed, you can report less regularly.
If your parent’s financial situation is simple, you can probably help them manage their finances by yourself. However, if they have a complex financial situation, hiring an estate planning attorney can save money and relationships. It is not easy to help a parent manage his or her finances as they age. Patience and understanding are required. But if done thoughtfully and reported regularly, you can make a meaningful difference in the future of a parent and maintain good relations in the family.
