Assisting aging parents can present many hurdles. Healthcare, housing, finances, and simply the fact that the power dynamic between parent, and child is changing can lead to a myriad of struggles.
When it comes to helping parents with their finances, adult children often find themselves walking a tight rope between protecting their parents, and their parents’ money, and causing feelings of loss of autonomy, and power.
As it becomes evident that an aging parent needs assistance, the child or relative who will be helping them should aim to take inventory of their parents’ financial situation. It is important to locate all accounts, documents, and most recent tax return. If all else fails, the most recent tax return will likely have clues as to where assets are held in terms of interest and income. It is helpful if parents are willing to create a financial “cheat sheet”, letting their children know where all of their assets are located. If the parent(s) are unable to address their situation on their own, it may also be necessary to explore establishing power of attorney for one or more children. This will allow them greater latitude to act on their parents’ behalf, though it does also come with some basic fiduciary rules: to act in the person’s best interest, manage money and property carefully, keep money and property separate from their own, and maintain good records.
The next step in helping parents manage their finances is assessing their household cash flow. Collect bills, and information on any debts, and assess whether or not your parents have the means to pay them. It frequently happens, that elders get behind on payments simply from memory loss, or misplacing paper bills. Go through their checking account statements and credit card bills and see if there are routine payments that can be eliminated. Often older people have trouble identifying scams, and can be easily persuaded into signing up for things they do not need or cannot afford.
Next, develop a plan for how you will handle their finances going forward. Do they have the assets to see them through? If not how will you fund housing, care, end of life expense, etc.? Do you anticipate having to contribute to their living expenses? This part of the process often begins to feel like something for which the caregiver must have their own financial plan.
As you move through this process it can be helpful to engage a financial planning team. This might include you parent’s financial advisor, tax preparer, and attorney if they have been working with these professionals. If not, it still may be helpful to seek professional expertise. They can help assess whether your parents will out-live their means, offer guidance on budgeting and update investments if needed. Bringing in outside advice can also help diffuse family tension, as often, siblings feel better knowing that another set of eyes is on their parents’ finances as well.