Getting old is a fact of life.
Unfortunately, people may start to lose their cognitive ability to make smart decisions as they reach an advanced age.
This is a valid concern as you watch your parents reach the later stages of their lives.
One area where aging individuals often run into problems is their money.
Here are a few things you should consider if you have aging parents that may need help with their finances.
These ideas should help your parents’ finances and help make sure their wishes are honored.
Managing Bank Accounts and Other Financial Accounts
Managing financial accounts and bills can be a difficult task for anyone.
Aging parents can become vulnerable to financial scams and missed payments. This gets worse as their decision-making abilities deteriorate.
Many seniors become more forgetful as they get older, too.
Your parents may begin missing payments that could have very negative effects. This can happen even if they have a perfect track record for paying their bills on time up to this point.
One worst case scenario involves a lender foreclosing on the family home.
Another negative outcome could involve the family car getting repossessed.
These are the last things your parents need to deal with if they’re starting to lose their independence.
A parent doesn’t have to fall victim to a scam or be forgetful to need help with their finances. In some households, one person is completely in charge of the finances. If the family CFO passes away, the surviving partner could be hopelessly lost.
The partner may not have the knowledge to make even the most basic financial decisions.
One way to help prevent financial issues is monitoring your parents’ finances.
Of course, your parents need to be on board for this to work.
If your parents are comfortable with the idea, they could share their online banking login information. Then, you can keep an eye on their checking account.
With that said:
Sharing login information can be dangerous.
After all, a person with the login information could wipe out a bank account balance in an instant.
For that reason, it may make more sense to have your parents set up read-only bank account access. Some banks or credit unions may offer this service. That said, there is an easier option that helps you take a look at your parents’ full financial picture.
Many financial aggregators could be used for this purpose.
Companies like Personal Capital and Mint allow you to track your own finances all in one place. If your parents set up an account, you could track their finances in one place, too.
Have a parent set up an account with one of these services. Then, link their bank accounts and other financial accounts. If this is difficult for your parents to understand, help guide them through the process.
Make sure to use a unique password for the financial aggregator. This way your parents' accounts should be safe if the password to the financial aggregator is compromised.
Not all parents will be comfortable giving read-only access through their bank or an aggregator.
Instead, you can review their financial account statements with them each month. It's likely easiest to do this in person to make sure everything is in order since you can ask questions.
You should be able to see if your parents pay their usual bills on time by monitoring their accounts.
Even so, you’ll need to stay aware.
You'll need to make sure bills for new accounts are added to the list of things to watch for.
Keep an eye out for other non-regular bills, such as medical bills, to make sure they get paid, too.
The downside to reviewing statements monthly is you won’t be able to keep an eye on their accounts on a day to day basis.
This makes it tougher to catch fraudulent transactions before severe damage is done.
Access to Safe Deposit Boxes
Your parents may have one or many safe deposit boxes.
Unfortunately, access to safe deposit boxes is often strictly monitored.
If your name isn’t on the list of people that can access the box, you typically can’t gain access. You may be denied access even if you have the key unless certain conditions are met.
The easiest way to make sure you can access a safe deposit box is to make sure your name is on the list of people that can access the box.
If you aren’t on the list, the laws governing who can open the boxes and under what circumstances vary by state.
Research your state’s laws to see what options you have.
Get Professional Advice
As with most complicated financial situations, it’s often best to get professional advice.
Professionals deal with these issues every day. They can make sure everything is set up properly.
Writing a will, setting up a trust or granting power of attorney can be complicated and have unintended consequences. This is especially true if your parents have a unique situation.
An estate attorney can help your parents navigate their state’s laws and make sure they’ve considered everything they need to consider before enacting these documents.
Make Sure a Will Is in Place and Updated
A will is one type of document that allows a person to state their final wishes should they die. It’s important to have a will in place so your family can honor your parents’ wishes when they pass.
To write an enforceable will, the person must be of sound mind and have two witnesses sign the document, as well.
People think of wills in the sense that they tell a person, the executor, how to distribute the person’s belongings and financial assets after they die.
However, wills can also name guardians for children and pets. Often, these decisions are more important than how to distribute financial assets.
While your parents may have a will in place, make sure they keep it up to date. Circumstances change over time. Your parents may want to change how they distribute their assets.
If they don’t update their will, assets may be distributed according to the last version of the will.
Your parents may want to consider a trust instead of a will.
This is often the case if your parents have a considerable amount of assets to their name or they have specific instructions they want followed.
A living trust allows a person to control assets in their trust until they die or become incapacitated. They can also name a successor trustee to take over if they become disabled or incapacitated.
If set up correctly, a living trust can help avoid probate. It can also control what happens with the property in the trust, even after your parents are gone.
Your parents must place assets they want to be controlled by the trust into the trust. That means they’ll have to re-title major assets out of their name and into the trust’s name. If they don't, the trust can't control the assets.
Power of Attorney
Another way to help an aging parent with their finances involves what’s called a power of attorney.
Each state has their own laws regarding power of attorney.
In general, a power of attorney allows a person to name someone to act in their place.
Typically, power of attorney is set up for financial or medical reasons. Your parents can set a power of attorney to start working immediately, at a future date or when an event happens in the future.
Power of attorney can be permanent, for a specific event, such as closing on a home, or for a temporary period.
Your parents will need a durable power of attorney if they want the power of attorney to remain in effect after they become incapacitated.
It’s important to consider granting power of attorney carefully. The person the power is granted to can make decisions as if they were the person that gave the power of attorney.
A power of attorney may even give access to a safe deposit box, although policies will vary by bank and laws may vary by state.
Get Started Today to Make Life Easier Later
The best time to talk to your parents about how to manage their finances is before the need arises.
While talking about finances usually won’t be a fun exercise, discussing how to help before action needs to be taken allows everyone to come to an agreeable arrangement.
Help your parents get their financial lives in order so that you can easily assist should the need arise. It will make helping less stressful for everyone.
When discussing finances, make sure that all necessary documentation is taken care of and readily available. This includes safe deposit box access, trusts, power of attorney forms and wills.
When the time comes to help your aging parents, all you have to do is enact the plan already put into place.
If you’re forced to step in to help your parents with their finances without advance notice, remember that this is a big change for them.
Check in with them on a regular basis, explain what you’re doing and do your best to stick to their wishes.