Prepare to Manage Your Parents’ Finances
It can be tough when you face the moment where you become responsible for your parents—but it may happen. It’s smart to plan for that before illness renders your parents incapable of handling their own finances.
Aging parents may find it hard to believe they are no longer fully capable of running their own lives, especially having done it for decades already. Many will have a hard time relinquishing control to their own children. Planning can be difficult but you should talk to them before they send money to a nice young prince of a foreign country and become a victim of a scam.
The question becomes: How should you handle this delicate subject?
Start Open Communication
It can be difficult to tell parents that you are concerned about them. Some experts suggest approaching the topic by gathering the entire family together to discuss where you might find their important documents “should something happen to them.” This could include:
- insurance documents
- will and trusts
- living will
- banking information
- healthcare directives
- final arrangements
A conversation about locating documents may be less likely to put parents on the defensive and it opens up a good time to discuss additional topics. Parents may share their wishes for end of life care and funeral arrangements. You can also ask if they have designated an executor.
An important question to ask is who holds the powers of attorney should they be unable to make medical or financial decisions in the future. If no one has been designated, this may be the best time to ask them to do so.
By having all of the siblings there, you’ll maintain transparency and keep everyone posted.
Keep Documents Updated
Once you’ve got the ball rolling, it’s a good idea to make sure everything is updated. If their last will was written in 1995, it’s likely they’ve accumulated or sold assets along the way. You’ll want to look at their insurance policies and ensure that they’re still adequate.
After you’ve confirmed that their wills, trusts and insurance documents are current, make sure there are multiple copies available. Each adult child should either have their own copy or know where to access it. If the will was formally drafted by an attorney, the attorney will have a copy as well.
Know when to Hire Professionals
Some parents are unable to accept help from their adult children and may find it easier to hire professional money managers and estate planners. Receiving help from a neutral third party takes away some of the power imbalance and gives parents a sense of control.
Professionals can also assist parents and their adult children in burdensome or complicated paperwork, such as filing for Medicaid/MassHealth, strategically moving assets to minimize tax ramifications and setting up trusts to protect assets.
For investment accounts, a professional can discuss various investment strategies and make recommendations. They’re likely to offer solutions that you hadn’t considered.
Watch for Health Changes
You can help parents by watching for changes in their mental ability.
Half of people who live past age 85 will suffer from dementia. If you start noticing signs that your parents are no longer operating at full mental capacity, the window for them to sign legal documents including powers of attorney may be closed or closing. It’s a sad possibility.
Having documents and financial affairs in order well before the onset of dementia can reduce complexity in an already stressful situation.
If you need assistance with estate planning or elderly care for you or your parents, our team at Baker Law Group P.C. can help.