Eventually, many of us will need to help our aging parents and loved ones with their finances. So, when the time comes, here are some tips to help you handle the subject with sensitivity, respect, and competence.
1. Schedule a meeting to see an estate planning attorney with the parent(s). If you are going to take over parts of a parent’s financial life, having a power of attorney in place will allow you to enact decisions and handle transactions. This is also a good opportunity to review beneficiary designations and make sure all accounts and assets are titled appropriately.
2. Talk to aging parents about their goals and wishes. The more you know now, the more confidence you will have when decisions need to be made in the future. Ask about final wishes and preferences on continuing care facilities.
3. Research and note the location of all assets and important documents. This can include safe deposit box, home safe combination, electronic logins, and estate planning documents. Also consider conducting a credit check and review the unclaimed property data base. Michigan’s can be found here: https://unclaimedproperty.michigan.gov/
4. Be transparent with family members. Talking about money can be taboo and some family members may push to delay the conversation. If this happens, consider corresponding via email or written communication. Keep any of your siblings in the loop to avoid potential issues in the future.
5. Organize tax documents, monthly income, and accounts. Coordinate with the current tax preparer to understand which documents may be required for subsequent tax filings. A good tax preparer should inquire about missing documents if they have been provided in the past. Having monthly income and expenses organized will allow you to understand if there will be a deficit and if additional withdrawals from a portfolio will be needed.
6. Consolidate and simplify accounts. Over time many of us will accumulate different banking or brokerage relationships. Consolidating these into one bank and/or one brokerage firm will allow for ease of tracking with less room for error on titling or beneficiary designations. Consider giving siblings online access to the accounts so they understand the finances.
7. Consider family heirlooms or a family cottage that you may want to transfer to specific individuals. Plan now for how the larger or sentimental items may transfer and communicate the plan to all stakeholders. A parent may be surprised that no one wants to maintain a family cottage and it could be worth selling sooner to help pay for care and reduce expenses.
8. Monitor finances for unusual spending. We have all heard of scams that target the elderly and it’s important to have a second set of eyes on a bank account periodically. Consider limiting the amount of readily available spending money and reduce the number of credit cards.
9. Set up the ability to pay bills on your parent’s behalf. Many bills can be set up for autopay which can make life much easier. Consider instituting autopay on many of the bills to make management more straight forward.
10. Do not try to do it all yourself. Managing your own finances can be difficult enough. Managing someone else’s finances can be even harder. Talk to a professional that has guided other families through similar generational transitions.
The decision to transfer control of finances is not easy, nor is it straight forward. Taking steps to prepare now and gradually transferring responsibility can help make the task achievable. If you would like to discuss how a financial planner can help, please feel free to contact us or schedule a meeting online.
