Imagine your mom gets dementia or your dad has a stroke and they can no longer pay their bills. If you had to suddenly take over their finances, would you be ready? Managing their health care would be stressful enough; here are some tips to help you manage their money, too.
Start as Early as Possible
Find out if your parents have met with an estate planning attorney and have a general durable power of attorney (as well as documents for health care, such as a designation of patient advocate, living will or advance directive). Make sure these documents are up-to-date both in terms of the current law and who is designated to act in place of your parents. Make sure you know where the documents are kept or, if your parents will agree, take the originals or a set of copies to your house for safekeeping. (Our firm keeps scanned copies of all of our clients' documents and are happy to provide them to approved family members via email or on a CD).
Have the Talk
If possible, discuss with your parents the "triggers" you should look for to determine if it is time for them to turn over control of their finances. Have they recently been the victim of a telephone or mail scam? Do you see overdue notices or a pile of mail that is not being handled? Are they complaining about collection calls for bills they think they already paid?
Ask your parents to make a list of where they keep important documents and who has their financial information (such as their accountant or their financial planner). Make sure you know the amounts in their accounts, and where their income comes from (pensions, Social Security, their own IRAs, etc.). Ask them to list all of their bank accounts and investments in a safe place. Our firm offers a helpful Financial Information Planner that can be useful for this purpose. Please contact us for a free copy.
When the Time Comes
Step in slowly and take over only as much as necessary. Don't take all of their responsibility away at one time if you don't need to. Maintain meticulous records and notes so you can show your parents what you're doing. If you have siblings, keep them informed of all action as well. As a fiduciary, you are held to the highest standard of care to do what is in your parents’ best interest.
Assemble a Team
Remember that you don't have to do this alone. Ask for help from your (or your parents') financial planner, tax preparer or attorney. They can all help you to avoid common (and expensive) mistakes. This might also make your siblings and your parents feel more comfortable that you are doing the best job possible for them.