Table of Contents
Table of Contents
- Start the conversation early: Initiate discussions about your parents' finances and plans for the future before any health or cognitive issues arise.
- Spot potential warning signs: Keep an eye out for red flags that may indicate financial difficulties or vulnerability, such as memory loss, unpaid bills, unusual behavior with money, or involvement with suspicious individuals.
- Gather the necessary documents: Collect important documents and information related to your parents' finances, including legal documents, insurance policies, financial accounts, tax returns, and medical records.
- Request access to their accounts: Explore options to gain authorized access to your parents' financial accounts, such as becoming a joint holder, authorized signer, or designated power of attorney.
- Get a clear view of their finances: Once you have access, assess their financial situation, address overdue bills or debts, and consider simplifying their financial obligations through automated payments.
As your parents get older, their health is likely to become a larger focus — both for them and you. During visits, you may find yourself paying closer attention to how they move or the health of their memory. The same should hold for their finances. As people age, it's easy for financial matters to start to slip, and it may be harder for your parents to recover as time goes by.
The best time to start thinking about protecting elderly parents' assets is before they run into health issues. Helping elderly parents make decisions about their finances can require difficult conversations. But it's necessary.
As your parents approach old age, it's wise to speak to them about their needs and wishes. This can help you ensure they're taken care of when they can't manage their money on their own. Here are six strategies that can help you protect your parents' assets and financial well-being.
1. Start the Conversation Early
Talking with your parents about their finances may be challenging. It could lead to pushback and hurt feelings. Coming from a place of empathy, care and concern can help.
Many people struggle with the emotions that come with growing older. Ideally, it's best to start these conversations before there are any health or cognitive issues, possibly even before your parents retire. That way, you'll be on the same page about what to do if your parents get sick and need help in the coming years.
Depending on your parents' health, managing their finances doesn't have to be an all-or-nothing scenario. You may want to take a little bit off their plate at a time. Remind them that with your help, they won't have to worry as much about keeping track of their finances. Instead, they can enjoy their retirement knowing you have their best interests at heart.
Start by asking questions, and listen to your parents' wants and needs. Here are several questions you may want to ask about their plans and finances:
- Have you been saving for retirement?
- What does your ideal retirement look like?
- What kinds of savings or debt do you have?
- Do you have a will and other legal documents such as a power of attorney?
- Have you thought about long-term care and what you want to happen if you get sick or can't take care of yourself? Also, do you have long-term care insurance to help pay for it?
- Can I meet your doctors and have a list of any medications you take?
- Can we meet with your lawyer, accountant and financial professionals to get a sense of your retirement and estate plans?
- Do you have specific end-of-life wishes such as funeral plans?
Some of these questions may be hard to ask. But getting this information can help ensure your parents have their needs and wishes met. Trying to get it when your parents are sick or incapacitated can make a scary and stressful time more difficult. Keep that in mind as you start the conversation.
2. Spot Potential Warning Signs
Not everyone has a chance to talk with their parents about money situations before problems arise. Millions of older Americans are sick or have cognitive issues such as memory loss, dementia and Alzheimer's.1 Even if everything seems fine on the surface, health conditions may affect their ability to stay on top of their finances.
It's a good idea to keep an eye out for potential red flags, especially if your parents live independently. Here are a few warning signs:
- They are having memory or mobility issues.
- There are calls from creditors on their voice mail.
- The mail is piling up and there are unpaid or unopened bills lying around.
- They are making large purchases or behaving differently with their money than usual.
- They talk about someone new helping them with their money or telling them about great investment opportunities.
It can also help to remind your parents about these and other financial pitfalls. If you know about common elder scams going around, let them know. Reassure them that if anything makes them feel uncomfortable, they can talk to you. And if you don't live near enough to your parents to check on them, consider asking someone trustworthy to visit them often and give you updates.
3. Gather the Documents You Need
Once your parents are on board with you helping them protect their assets, the next step is getting an idea of their financial health. That will provide a clear picture of what needs to be done.
Begin collecting documents and information. It may be time-consuming and frustrating if your parents don't have the information handy, so try to be patient. Gathering as much as you can now may make a big difference later on, especially if there's an emergency.
These are the kinds of documents you'll want to collect:
- Personal information, including birth certificates and marriage records
- Social Security numbers and benefit information
- Wills, living wills and powers of attorney
- Property deeds, vehicle titles and other ownership papers for physical assets
- Mortgage or other loan documents
- Rental agreements
- Life insurance policies
- Health care insurance information, including Medicare
- Any other insurance, such as long-term care policies or pet insurance
- Military service records, including discharge papers, health information or pensions
- Bank accounts
- Credit card accounts
- Investment accounts, including stocks, bonds and certificates
- Retirement accounts, including 401(k)s, pensions, annuities and individual retirement accounts (IRAs)
- Additional income records
- Tax returns from the last three to five years
- Medical records, including doctor's contact information and copies of prescriptions
- Contact information for financial professionals, including attorneys and accountants
- List of monthly bills, memberships and subscriptions
- Location and key for safety deposit or P.O. boxes
- Logins and passwords to any online accounts
- List of beneficiaries
- Funeral or burial documents
It's a lot of information. One way to keep track of it all is by compiling copies of documents in a binder and keeping it in a safe place. If you opt to save the information to your computer, you might consider creating a backup as well. You may also want to give copies of key documents to your or your parents' lawyer for safekeeping.
4. Request Access to Their Accounts
In some cases, accessing your parent's account information is as easy as logging into a website. But other times, you may need to show proof that you're authorized to have this information. Here are some ways to make access easier:
- Consider having your parents add you as a joint holder for their bank accounts, giving you full access to them.
- Ask your parents to add you as an authorized signer on an account, meaning you can deposit and withdraw funds and sign checks.
- Get added as a representative payee for Social Security benefits, which means their check will go to you to use on their behalf.2
- Request that your parents designate you as their financial power of attorney, giving you legal authority to act for them for financial matters.
- Speak with their doctors to see if you need your parents to sign a Health Insurance Portability and Accountability Act release form for access to their medical records.3
5. Get a Clear View of Their Finances
After gaining access to your parents' important financial information, address the most pressing needs. Look for overdue bills or debts, and make a plan to take care of them. Consider checking their credit reports for identity theft or creditors you don't recognize.
If you're working with your parents to coordinate their money, you can try to simplify things for them. For example, you might set up automated payments from their checking account to cover bills. That may give them fewer obligations to track, especially if they've been doing it manually.
You can also talk with any financial professionals your parents do business with to learn more about their plans. If you can't help them with estate or financial planning beyond paying bills, chatting with a few experts on your own can help make sure you've got everything covered:
- A financial professional can look over their finances and help create a plan for their retirement income that can help ensure their funds will last their lifetimes.
- An accountant can help you find some of the best ways to maximize tax opportunities.
- An elder care attorney can answer specific questions about long-term care and patient rights around health care needs. They can also help with estate planning and legal documents. You can find a list of certified elder care lawyers through the National Elder Law Foundation.4
Helping elderly parents make decisions is what these professionals are trained to do. They're likely to have a lot of advice to offer. As many of them have also helped families in situations like yours, they could have valuable insights you might not have considered.
6. Take Care of Legal Documents
Another way of protecting elderly parents' assets is to make sure their legal documents are in order.
If they haven't already considered naming you their financial power of attorney (POA), this is a good time to discuss the possibility. A POA grants you the authority to decide on their behalf how their finances should be managed and lays out exactly what you can and can't do. To make sure you still have this authority if your parents become incapacitated, they would need to name you as their durable power of attorney as well. Without specifying durability, your POA would end once they are incapacitated.
You can do the same thing for your parents' health care. Creating a durable health care POA can grant you the authority to communicate their wishes for treatment and end-of-life care. In addition to a health care POA, your parents may also want to consider creating a living will. It lays out detailed instructions for what medical care they'd prefer if they become incapacitated.
Additionally, you may want to revisit your parents' will. If they don't yet have one, it's a good idea to work with an elder care lawyer and help them make one. Having a will in place will help save the long process of going through probate — which can take months if not years — following their death.
Talking with a lawyer can help you understand all these documents and ensure your parent's wishes are taken into account. If things change, such as your parents want to update their beneficiaries or you want to give POA access to a sibling, let your attorney know so they can revisit the documents and make the necessary edits.
Keep the Conversation Going
Helping your parents with their finances may be a bumpy ride at the start. But getting organized and having open and honest communication can go a long way.
It's wise to set aside time every month or so to go over your parents' finances and see how things are going. Listen to feedback if your parents voice frustrations or concerns. Consult financial professionals when you need to. Together, you can all make sure you're on the same page and be assured your parents' finances are protected.
- Memory, forgetfulness, and aging: What's normal and what's not? https://www.nia.nih.gov/health/memory-forgetfulness-and-aging-whats-normal-and-whats-not.
- When people need help managing their money. https://www.ssa.gov/payee/.
- HIPAA release form. https://www.hipaajournal.com/hipaa-release-form/.
- National Elder Law Foundation. https://nelf.org/.