According to a Merrill Lynch study, 92% of caregivers handle finances on behalf of their loved ones. For some caregivers, the signs of needing to manage a parent’s finances happen suddenly - such as after a debilitating stroke or an Alzheimer’s diagnosis. For others, changes in responsibilities happen gradually over time.
Common Signs It’s Time to Help with a Parent’s Finances
Managing a parent’s finances — especially if it happens suddenly — can add a significant amount of stress to an already stressful situation. Identifying signs it may be time to start the conversation or even help with day-to-day financial tasks can be key to avoiding conflict or hurt feelings.
Before we unpack handling challenging family dynamics, let’s first start with the two most common reasons families start this discussion.
Physical Decline or Memory Loss
Physical decline is oftentimes the most obvious sign your parent will need more support in the future. You might find it’s more difficult for them to retrieve the mail or sit for long periods of time to pay bills.
You also might find that their ability to balance the checkbook or create a monthly budget has changed. A New York Times article shared studies that show the ability to perform simple math problems, as well as handling financial matters, are typically one of the first sets of skills to decline with memory loss. Research also shows that even those without memory loss may reach a point where financial decision-making becomes more challenging.
Unusual Purchases or Expenses
As much as we hope it will never happen, scammers often prey on the elderly. The FBI estimates that seniors lose more than $3 billion each year to fraudulent scams.
In recent years, common scams have included receiving phony emails that claim to come from the IRS and tell victims that they are due a tax refund — or receiving a phone call from a scammer claiming to be an IRS employee, using fake names and a fake IRS identification badge number.
Be sure to share with your loved one that the IRS never initiates contact via phone call, email, or through social media. The IRS initiates most contact through regular mail delivered by the United States Postal Service.
Also, alert your loved one that if someone calls or emails them asking them to wire money, put money on a gift card, or load money onto a cash reload card, it is likely a scam.
You can also help your loved one by using credit monitoring services and annual credit reports. Before seeing a parent’s ability to manage their own finances decline, have regular conversations about ways to protect themself. Some simple topics can include:
- Never sign papers you don’t fully understand.
- Never ignore if someone takes money or property without asking first.
- Never share your personal information with someone who calls you over the phone.
- Never share personal or financial information through a link found in an email.
- Never share your location on your mobile device with people other than family.
- Never share your social security number.
While some of these might seem like common sense, reminders can be helpful — especially when framed in a way that highlights it's not your parent you don’t trust. It’s those who would want to take advantage of your parent.
Managing a Parent’s Finances
There are a variety of ways to help a parent manage their finances. Support can include paying bills, monitoring bank accounts, handling insurance claims, filing taxes, managing invested assets, and more.
Personal finances are (understandably so) a touchy subject. How you approach the conversation can determine whether you have a productive discussion, or become the source of a heated argument.
The best way to avoid financial missteps and potential financial abuse by outsiders is to have regular conversations within the family. The trickiest part, though, is typically the role reversal. Feeling like you are “telling a parent what to do” is almost always awkward for both of you.
If you’re not sure where to start the conversation, take a look at this helpful checklist full of topics you can explore with siblings, your parent’s spouse, or your parent depending on where you think it is best to start the conversation.
Navigating Challenging Family Dynamics
Unexpected conflict can occur with a parent, their spouse, or any of your siblings, and finances can be an uncomfortable topic for even close-knit families to talk about.
While the idea of fighting over family inheritances once your parents are gone might be the last thing on your mind during a family crisis, it does happen. Things can change quickly once a parent begins to downsize, or when they start giving away treasured keepsakes. Expenses like home care or assisted living — money that you and your siblings’ once viewed as your potential inheritance — can also lead to challenging family dynamics.
Your parent might share this concern and look to preserve their financial assets — even if it is at the expense of their own health and safety. For example, you might be worried that your mom is no longer safe living at home and want to start exploring assisted living options. Although assisted living is affordable, especially when compared to living at home or hiring in-home care, your parent objects. You suspect it is because they do not want to deplete your potential inheritance.
Family dynamics are complicated, and when stressful situations like this arise, it can be helpful to have an outside, unbiased person who can help you make very important decisions. Elder mediators provide a forum for family decision-making. A highly skilled conflict resolution expert and a neutral facilitator who does not provide advice or take sides, an elder mediator is helpful in family meetings, where they can help you stay focused on the topic at hand and help you avoid bringing up old arguments.
Collecting Important Legal and Financial Documents
You might be asking yourself, where should I start? Or, what legal and financial documents will I need to track down to help my parent manage their finances?
Here are the most common financial documents you should start with:
- Bank accounts
- Tax returns
- Retirement plans, pension documents, and annuity contracts
- Savings bonds, stock certificates, or brokerage accounts
- Business partnership and corporate operating agreements
- Property deeds
- Debt and loan documentation
- Vehicle titles
This Legal & Financial Document Locator can serve as a handy tool to help you organize important documents, property, and contacts. By keeping all the most important legal and financial details in one place, you and your loved one won’t have to scramble to find it or remember it during a crisis.
Establishing a Power of Attorney
As we’ve discussed through this article, as your parents' age, there may come a time when they aren’t able to care for their financial or medical matters anymore. It is important that they have a power of attorney (POA) in place before they reach that point. A power of attorney is a legal designation your parent can provide to another individual to act as their representative in business, financial, and health decisions, and it can be as broad or as specific as you need them to be.
To be your loved one’s financial coordinator, they need to name you as the legal guardian of their assets. Most people agree that if they are ever unable to advocate for their own wishes, they would like someone they trust to do it for them without having to go through a burdensome legal process to do so. Yet that is the situation many older adults find themselves in when they do not have a POA and a sudden medical crisis hits, or dementia takes away their ability to make important decisions.
If your loved one doesn’t have a POA, the court may step in to appoint someone to take care of your loved one’s medical and financial decisions for them — and your parent will likely have no say in who their agent will be.
Watch this video on Understanding the Roles of a Power of Attorney
If your parent or loved one hasn’t named a durable medical or financial power of attorney, talk to them about why it’s crucial they have those legal documents in place.
Managing a parent’s finances may or may not have been something you’ve already thought about. Being proactive in discussing and identifying roles and responsibilities can eliminate unwanted conflict, ensure enough time to fully understand your loved one’s wishes, and create an opportunity to have a plan in place that respects the wishes of everyone involved.