If your parents’ cognitive health declines and you feel like they need help managing their finances, it may be up to you as an adult child to take over. But taking over your parents’ banking, investing and financial decisions can be a touchy subject, especially if your aging parents see it as a loss of control or power over their own lives. To help your parents, here are a few key ideas.
Not everyone will need help, but some definitely will
Almost a third of people age 85 or older will develop a disease of the brain, such as dementia or Alzheimer’s,* making it nearly impossible for them to successfully manage their finances by themselves. Others may become forgetful and need help remembering to pay bills or find their declining eyesight doesn’t allow them to read important Medicare or insurance paperwork.
If you can, talk about it before it happens
While it’s a difficult discussion to have, if possible, talk to your parents before their health declines. Discuss when it makes sense for you to help with finances, what situations you’ll both look for and how you’ll take over financial responsibilities if the need arises. Having these thoughtful conversations while your aging parents are still able to manage their finances may help you lessen the difficulties if you have to take over later. One way to do this is to talk about it as part of an overall estate planning discussion.
Know the warning signs
It may be time to step in and start helping with your parents’ finances if:
- They’re getting calls or notices from creditors or collection agencies — signaling they’re not paying their bills.
- “New friends” are calling asking for favors or loans — indicating they’re becoming more generous with their money.
- Your parents aren’t opening their mail or are ignoring unpaid bills.
- They’re bouncing checks.
- They may be making out-of-character purchases or donations.
In any of these cases, it may be helpful to get their permission to look at their checkbook, credit card statements and other bills to confirm your suspicions.
Seek an attorney to execute a power of attorney
While you can help your parents manage their finances without one, a durable power of attorney for property and finances, drafted by an attorney, can be helpful (if not necessary) in some circumstances. A power of attorney (POA) is a legal document your parents will need to sign, giving you power over their finances. It needs to be explicit as to what powers are being granted and will need to be done before your parents are incapacitated and while they are in good cognitive health.
Having a POA may allow you to write and deposit checks, pay bills, manage investments, and talk to financial and insurance companies on your parents’ behalf. Without it, you may not have full access to your parents’ information or finances.
Understand the responsibility
With a POA, you become a fiduciary for your parents, which means you are legally obligated to do what’s in your parents’ best financial interests. For example, if you believe your parents are taking too much risk in the stock market and they should reallocate their investments into more conservative funds, you can talk to their financial professional about making changes to their investment account and then have them execute those changes. But remember your POA document must specifically give you the authority to do that.
Organize their finances
Once you decide your parents need help with their finances, one of the first things you’ll need to do is figure out what they have. What bank or investment accounts do they have and how much is in them? Where do they keep their financial documents? Do they have a safe deposit box and if so, what’s in it? Do they have a long-term care insurance policy, who is the carrier and what does it cover? What medical insurance do they have and how is it paid? How do they access Medicare and Social Security benefits?
Start by organizing what you know. Make a list by location/carrier, account number, contact and dollar amount. You will likely need a notarized copy of the POA to be allowed access to the accounts.
Collect and start paying their bills
If your parents can’t tell you, you’ll need to start tracing where their money comes from and where it goes. Into which account does their Social Security and/or pension get paid? Do they have a 401(k) or IRA from which they take required minimum distributions? What other income, if any, do they have? Then, you’ll need to understand which bills get paid from which accounts and how much they have left at the end of the month or year. You may need to take responsibility for making sure their taxes are filed as well. So, keep track of necessary receipts and bills.
Work with their advisors
Your parents may already have an attorney, accountant or financial professional they’ve been working with for years. Get in touch with those advisors and lean on them when necessary. According to studies, those who work with financial professionals are more confident in the safety and security of their family and in knowing when to invest in or remove their assets from the stock market.**
Talk your parents and others through the process
If your parents understand at least some of what’s going on, it’s important to talk them through the process of managing their finances and involve them as much as possible. Most will greatly appreciate the information and will be able to continue to feel like they have some control. For example, you can collect their mail for them, go over the bills that need to be paid with them, write out the checks and have them sign them if they’re able. You’re in control of what is paid and when it’s paid, but they still feel like they are participating. And remember, it is critical that other members of the family, such as siblings, know and understand what is happening and why it is happening. Having these discussions can help reduce any misunderstandings and ease family tensions during a stressful time.
*Profile of Older Americans, U.S. Administration on Aging 2019 and Alzheimer’s Disease Facts and Figures, Alzheimer’s Association, 2019.
**Equitable Q3 Consumer Pulse Study, October 2020.
This informational and educational content does not offer or constitute financial, investment, legal, or tax advice. Your unique needs, goals and circumstances require the individualized attention of your own financial, legal, tax and other professionals. Equitable Financial Life Insurance Company and its affiliates do not provide legal or tax advice or services.
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