Managing and talking about money can be difficult for people of any age, but as parents get older, many adult children start to take a more active role in their parents’ finances. This can be a stressful process, but also can help ensure that both child and parent feel more financially secure. Here are five tips for helping with financial management for an aging parent.
Talk to Your Parents
Communication is one of the most important parts of this process, and getting things started on the right foot can work wonders for maintaining positive conversations. It’s normal for an aging parent to feel worried about losing control. Last year we wrote a series of three posts on having difficult conversations with an aging parent. In the series, we wrote about how to prepare for a conversation, methods for having that first discussion, and how to resolve conflict that might arise during the discussion.
Since finances can be one of the most stressful topics for a parent and child to discuss, preparing for your conversations can be an important step in the process.
Make Changes Gradually
There is a good chance that your aging parent has been approaching their finances in the same way for years, possibly decades. It’s also possible that they have been neglecting their finances; in some cases, you may feel the need to step in completely in order to get things in order.
If at all possible, try to make changes gradually. If you wait until things are dire, the process will be more stressful for both you and your parent. If you can make small changes (for example, maybe you start by setting up online access to utility bills on your phone, so that you can make sure they are paid on time), it can help you to get used to having more responsibilities, and help your parent become accustomed to your involvement in their finances.
Make Sure You Know Where Important Paperwork is Stored
If your parent experiences memory loss, dementia, or a sudden decline in health, you don’t want to be stuck with no idea where to find the important information that you need. You might be lucky enough to have a parent with all paperwork stored in one locked filing cabinet, or you might have to hunt around, but as soon as possible, make sure you have access to all paperwork.
Better yet, use a scanner app on your phone and store all paperwork electronically. You can password-protect PDFs for added security, and that ensures that if items get moved or destroyed that you still have the information that you need.
Consider a Power of Attorney
A power of attorney is a relatively simple legal document that allows you to make financial decisions on your parent’s behalf. It does not deny them that ability—a power of attorney doesn’t take away any of your parent’s rights, but simply allows you to act on their behalf. This can be especially helpful with a parent who may need a lot of medical care, because you can ensure that financial needs are taken care of on their behalf when they are recovering.
Talk to a FInancial Advisor
If your parent has assets such as real estate, investments, or pensions, there may be tax implications to decisions you make about what to do with them; in some cases, transferring assets directly to you might be a better financial decision. If your parent has no or very few assets, you may be able to claim them as a dependent, helping to relieve the tax burden on you.
In either situation, it is recommended that you discuss your shared financial situation with a financial advisor so that you can make the best decision for the long term.