5 Tips to Help You Manage Your Parents’ Money
Although it is a duty that most of us would rather not do — because it’s nice to think that our parents will be alive and mentally present forever — many of us will eventually have to manage or assist our parents with their money. There is no way to know the future, and so you should prepare now in case you ever have to help your parents with their money because they cannot manage it themselves anymore. It can be a difficult talk to have, but take the time now to discuss finances with your parents so that you are prepared in the future, or at least ask them who they would want to handle their finances if they were unable to do so. Whether you are planning for the future, or already handling your parents’ money, you can make careful decisions to keep their best interests in mind.
1. Understand your role
Your duties will change depending on whether you have power of attorney, are a trustee, a court-appointed guardian, or have a government fiduciary. Knowing and understanding your role will help you manage the money effectively and within your rights, avoid scams and possible exploitation of your parents’ money, as well as where you can get help. The Consumer Financial Protection Bureau has explanation of each type on their website. You will probably need a lawyer to talk through the different roles with you and your parents, hopefully before you have to take over their finances. The point is for you to handle their money in the way that best benefits them, and the right role will help you and them benefit the most.
2. Have your parents document everything for you
If you are not yet at the place where you need to take over your parents’ finances, it will help if your parents document as much as possible for you. They should have records of all the different accounts they own, as well as stock, bonds, and whatever else that you might need to be responsible for. Also be sure they tell you where they keep their tax forms from previous years.
If, on the other hand, you had to take over your parents’ finances suddenly, hopefully you will be able to find as much information as possible. If they have a financial advisor, that is a good place to start. If you have little to go on, you might be able to find old financial documents around the house. You can also start contacting local utility companies to pay outstanding bills. You will need proof of your right to manage your parents’ money in order to deal with any person who has access to their personal financial information, whether a utility company, financial advisor, or other person who handles sensitive financial information.
3. Document everything you do
In addition to hopefully speaking with your parents ahead of time and having them document everything for you, you should also document any action you take on behalf of your parents. That means every time you pay a bill, withdraw money, or make other financial decisions, you should keep track of it. This will help protect you if any financial disagreements come up, and show that you have been using their money wisely.
Sometimes siblings disagree about who should manage their parents’ money, so if you are facing a situation where your parent or parents suddenly can no longer take care of their own finances, you might have an argument on your hands. Even if your parents chose you ahead of time, this can happen. Documenting everything will protect you in this case as well.
4. Prepare in case the money runs out
Again, if you are looking at this issue as something far in the future, now is the time to think about long-term care. You should determine, hopefully with the help of your parents, whether or not they want to live in a retirement community, an assisted living center, or with you. Depending on your personal circumstances as well as theirs, not all of these might be an option. Retirement communities have good and bad qualities, as do most living arrangements. You may not have the ability to take care of your parents for the long haul in your home, or they may need more medical assistance than you can offer. If your parents suddenly seem financially reckless or are not saving enough, it may be time for a serious talk with them about their priorities. You also might need to look for other signs of loss of decision making ability.
You also might want to consider insurance for your parents. They may not have the money necessary to afford long-term care, and if you don’t either, you need to prepare. In the case that you are already handling your parents’ finances, take the time now to project just how long that money will last.
5. Determine the details
There is a chance that your parents could pass away before you get a chance to talk to them about their finances, so the earlier you can do it, the better. You should know where all their important documents are, whether they have a will, and so on. Before your parents become unable to manage their own money (regardless of the cause), sit down and talk to them. Ask them where they want to live once they can no longer take care of themselves; how proactive they want you to be if cancer or other life-threatening issue arises; what type of funeral they want when the time comes; whether or not they are organ donors and if they want to be, and so on.
Try to talk to your parents before you first see any signs of mental or other deterioration, or signs that they might need extra help. These signs include health-related symptoms like pain or difficulty completing normal tasks, as well as other signs like frequently forgetting things, letting food spoil, leaving mail unopened, or displaying general confusion.
Hopefully you are able to talk to your parents about their financial future long before you actually need to take control of anything. Although they may resist at first, if you explain that you want to make sure that everything is documented and that you want to manage their money the way that they would want you to, you might have better luck. Make sure that you determine your legal role so that you actually have the right to manage their money when the time comes.