The 65-and-older population has seen rapid growth since 2010, as baby boomers born in the two decades after the second world war begin to gray. Based on the US Census Bureau reports, the country had more than 54 million residents aged 65 years and older as of July 1st, 2019.
The day may not be far when your aging parents are unable to take care of their own financial duties. Your parents might go through a deterioration of their cognitive abilities as well as a risk of falling prey to scammers looking to swindle them out of their hard-earned savings.
The financial responsibilities of your elderly parents need careful planning on your part.
Here we discuss some of the steps you can take to manage your parents’ finances.
Start the Conversation with Your Parents
Your parents may not need your help right now, but that should not stop you from starting a dialogue. As per the National Institute on Aging guidelines, you will need your parents’ written consent in advance to discuss their personal financial and medical matters with financial representatives, doctors, and Medicare executives.
Starting a conversation now will give a better idea of the degree of involvement expected from you, over time. Moreover, privacy laws may inhibit such conversations later.
Make Gradual Changes
They might need your help, but maybe hesitant to ask for it. The onus will be on you to be sensitive and work with them in a manner that takes care of their needs without making them uncomfortable.
Be wary of rushing in to take charge of your parents’ finances. Instead, extend your support only when needed at first, and then increase it gradually, so that it gives them time to be comfortable with the new arrangements.
Compile all the Important Documents
Take inventory of your parent’s account numbers, contacts, and legal documents. Prepare a list of insurance policies, certificates, deeds, and wills; and make sure that everything is up to date, and valid. While compiling this data, ensure the safety of all sensitive information and the security of the storage location.
Execute a Power of Attorney
A capable adult can sign a power of attorney to assign powers to another person to exercise choices and act on their behalf. A power of attorney can have a limited or broad scope, utility, or duration, and cover general, medical, or financial decisions.
A power of attorney on behalf of your parents provides you the legal authority to make the necessary decisions when your parents are not able to do so. An attorney conversant with elder law can help you to draft a power of attorney document according to your needs. These are the three documents you might need, to begin with:
A Durable Power of Attorney
This document appoints someone your parents can trust to look after their financial responsibilities should they be no longer capable to do so themselves.
A Health Care Proxy
Your parents can assign powers to a trusted individual to make medical decisions when they are incapable to do so.
This legal document includes your parents’ wishes related to the division of their assets once they pass.
Executing these documents can be emotionally taxing, but you will need legal documentation if there is a sudden deterioration of your parent’s health, making them incapacitated to carry out these tasks.
Separate Your Finances
Avoid mixing your parents’ finances with your own, even if it seems convenient at the time. It is important to keep your funds and assets separate and not put your own financial and retirement goals in jeopardy while helping your parents.
Keep Your Loved Ones Informed
It’s vital to communicate with the other members of the family, especially siblings, yours as well as your parents’. This can reduce any chances of misunderstanding apart from the fact that relatives can extend their support in managing some of the responsibilities.
Additional Practical Suggestions
- Try to curtail your parents’ vulnerability to fraudsters by placing their phone number on the Do Not Call registry
- Ensure the safety and security of all legal and financial documents
- Keep copies of all financial transactions handled by you on your parents’ behalf
- Make a budget and open a savings account
- Consult an investment advisor for the assessment of your parents’ investments
- Seek advice on when your parents should start withdrawals from their social security payments