As you guide a parent through the aging process, more than likely you’ll encounter income and expenses you never knew existed. Credit card debt, mortgages, investments — the list goes on. Whether your loved one is in good health or not, it’s wise to plan for the unexpected. But, it’s not to say that conversation isn’t easy.
Here are 10 tips for managing an aging parent’s finances and communicating their wants and needs to siblings. We hope this serves a good starting point for developing financial planning around your parent’s wishes.
1. Have the conversation early.
Money is never an easy topic. You don’t want to come across as naggy or dominant, but you also know it’s a conversation that needs to happen (no matter how uncomfortable it can be). Bring it up early and present it to them in a way that is neutral and helpful.
It can take a while getting documents and financial affairs in order. Taking a few hours each week and getting a handle on their finances helps you protect them against any missteps as well as securing their financial needs.
2. Keep it transparent.
If you have siblings, it’s crucial to involve them as well. The last thing you want is having someone feeling threatened or alienated. Discuss your parent’s income streams, their insurance policies and how to pay for assisted living or long-term care. Keeping everything transparent not only boosts family morale but ensures everyone’s on the same page.
3. Organize financial documents.
During those initial conversations, start noting where essential documents are located. Birth and marriage certificates, social security cards, insurance policies, mortgage information may be stored in a safety deposit box — which can be particularly difficult to access if something were to happen to your parent.
4. Bring in a third party.
Sometimes, you need to bring in a professional — and that’s completely fine. A financial planner or elder law attorney can be extremely helpful in this situation. They can help you sort through documents, policies and statements, making it easier to streamline a plan of action.
5. Know where to access their will and trust.
We mentioned locating documents earlier, but it’s also imperative your parent has a will and trust. If your parent doesn’t have one, it needs to be taken care of sooner than later. If they do have them, share access and ask if anything in them needs to be updated. Most common, wills outline who administers the estate and who inherits specific assets. A trust will lay out how other funds (like 401Ks and IRAs) will be distributed.
6. Choose a power of attorney.
When managing an aging parent’s finances, a power of attorney can be designated to you or more than one person. This position gives reign over your parents’ finances and legal matters. We recommend selecting someone who has the most time (or resources) to sort through accounts. Additionally, it’s important this person has a close relationship with the parent since they’ll be carrying out their wishes. If there are multiple siblings in the family, just enforce transparency and this will help prevent common squabbles.
7. Consolidate unnecessary costs.
In the day and age of subscription-based purchases, which ones does your parent actually use? Look for ways to consolidate unnecessary reoccurring expenses. If they have a membership they haven’t used in months, cancel it. If their life insurance is far larger than what they’ll need, lower it. Work with your parent and a financial planner, finding ways to cut costs and stretch their dollars.
8. Collect and pay off bills.
What do your parent’s financial actives look like on a monthly, quarterly or annual scale? Make a list of your parent’s income and expenses, balancing what has been paid and what’s coming up in the pipeline. It’s also a good idea to record any account numbers, PINS or banking information. That way if something were to happen, it’ll be easier and faster to pay off end-of-life expenses and distribute assets.
9. Uncover stocks, bonds and investments.
In theory, 30 percent or less of your parent’s portfolio should be in stocks. If they have more, it’s a high risk when you’re in the stages of retirement or bad health. We suggest switching these stocks out for corporate or government bonds which can be much more reliable. They’ll also have an opportunity to pass that money down to their grandchildren through education savings accounts, 529 plans or trusts.
10. Transfer assets early.
If your parent is sitting on a huge nest age, introduce the idea of distributing gifts before their health is at risk. Under the internal service law, they can give gifts up to $26k tax-free each year. When managing an aging parent’s finances, this is a great alternative if they’re not looking to contribute to an education-based account.
It’s hard watching a parent age. You’re forced to make those conversations that remind you what limited time you have together. Bringing up these topics earlier alleviates the elephant in the room while giving you the free air to make most of your time together. To learn more about assisted living, hospice or other tips for financial planning, give our McCortney Family Hospice team a call at (405) 360-2400.