Strategies for Managing Elderly Parents' Finances
Date: September 19, 2016
The fact that you manage your own money well doesn't make it any easier to handle your elderly parents' assets when the time comes. Your parents may still be very independent, but just need a helping hand. Maybe they are incapacitated and require someone to do everything for them. Whatever the circumstance, you'll need legal authority to get started, and then follow these steps to move forward on the right foot.
Legal Authority to Act
You won't have access to your parents' accounts unless they've given you power of attorney (POA), according to Los Angeles attorney Sam Cook. "A POA is a legal document adults can execute giving another adult the right to act on their behalf in their financial affairs," Cook explains. Be sure you get a durable power of attorney, not a springing power of attorney. A durable POA goes into effect immediately, whereas a springing POA doesn't become effective until a doctor testifies that your parents are incompetent.
If your parents are already incompetent, they do not have the capacity to sign a POA, Cook says. You'll have to go to court and prove to the judge's satisfaction that they are incapable of handling their own affairs. You must ask to be appointed as their conservator or guardian. This can be difficult and could get downright ugly if other family members oppose you.
Become a Financial Detective
You'll have to play detective if your parents don't have a financial map leading you to the locations of their assets and accounts. If you have the name of their tax preparer, CPA or attorney, call that person first. If not, look at Schedule D of their recent tax returns. These schedules should list all interest and dividend income, including the names of the banks and firms they work with. You'll also want to locate safe deposit boxes and any real estate they may own.
Find the Bills
Look for outstanding bills that need attention. If your parents are set financially, pay those bills so all accounts are current and you avoid future late fees. Make note of the accounts as well so you can monitor them. If you worry that your parents owe more than they can pay, hold off on writing checks until you have a good idea of their assets and expenses. You may have to consult with a financial planner to determine which bills take priority if there aren't enough funds to pay all of the outstanding financial obligations.
Communicate and Document
Unless your parents are incapacitated, talk to them regularly about what actions you've taken with their finances, even if it's just paying outstanding bills. The level of detail you share will depend on their level of interest and how capable they are of understanding. It's also important to keep clear records of what you do. Retain copies of checks you write, bank statements showing activity, and receipts for items you purchased for your parents with their cash. This type of documentation helps show family members that you're acting responsibly and in your parents' best interests.