If you are the adult child of aging parents, you may find yourself in the position of having to assist them with handling their finances. Whether that time is in the near future or sometime further down the road, there are some steps you can take now to make the process a bit easier.
Mom and Dad, can we talk?
Your first step should be to get a handle on your parents' finances so you fully understand their current financial situation. The best time to do so is when your parents are relatively healthy and active. Otherwise, you may find yourself making critical decisions on their behalf in the midst of a crisis.
You can start by asking some basic questions:
What financial institutions hold their assets (e.g., bank, brokerage, and retirement accounts)?
Do they work with any financial, legal, or tax advisors? If so, how often do they meet with them?
Do they need help paying monthly bills or assistance reviewing items like credit-card
statements, medical receipts, or property tax bills?
Make sure your parents have the necessary legal documents
To help your parents manage their finances, you'll need the legal authority to do so. This requires a durable power of attorney, which is a legal document that allows a named individual (such as an adult child) to manage all aspects of a person's financial life if he or she becomes disabled or incompetent. A durable power of attorney will allow you to handle day-to-day finances for your parents, such as signing checks, paying bills, and making financial decisions for them.
In addition to a durable power of attorney, you'll want to make sure that your parents have an advance health-care directive, also known as a health-care power of attorney or health-care proxy. An advance health-care directive will allow you to make medical decisions according to their wishes (e.g., life-support measures and who will communicate with health-care professionals on their behalf).
You'll also want to find out if your parents have a will. If so, find out where it's located and who is named as personal representative or executor. If the will was drafted a long time ago, your parents may want to review it to make sure their current wishes are represented. You should also ask if they made any dispositions or gifts of specific personal property (e.g., a family heirloom to be given to a specific individual).
Prepare a personal data record
Once you've opened the lines of communication, your next step is to prepare a personal data record that lists information you might need in the event your parents become incapacitated or die. Here's some information that should be included:
Financial information: Bank, brokerage, and retirement accounts (including account numbers
and online user names and passwords, if applicable); real estate holdings
Legal information: Wills, durable powers of attorney, advance health-care directives
Medical information: Health-care providers, medication, medical history
Insurance information: Policy numbers, company names
Advisor information: Names and phone numbers of any professional service providers
Location of other important records: Social Security cards, home and vehicle records,
outstanding loan documents, past tax returns
Funeral and burial plans: Prepayment information, final wishes
If your parents keep some or all of these items in a safe-deposit box or home safe, make sure you can gain access. It's also a good idea to make copies of all the documents you've gathered and keep them in a safe place. This is especially important if you live far away, because you'll want the information readily available in the event of an emergency.
Don't be afraid to get support and ask for advice
If you're feeling overwhelmed with the task of handling your parents' finances, don't be afraid to seek out support and advice. If your parents' needs are significant enough, you may want to consider hiring a geriatric care manager who can help you oversee your parents' care and direct you to the right community resources. Finally, consider discussing the specifics of your situation with a professional, such as an estate planning attorney, accountant, and/or financial advisor. We welcome the opportunity to help you with these matters.
The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.