Good Ways to Help Your Elderly Parents with their Finances

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Personal finances are a delicate subject for most of us and can be particularly challenging for families helping aging parents or loved ones. Physical and cognitive declines associated with the aging process may cause difficulty working through simple or complex financial arrangements causing irreparable damages to personal finances. In 2010 $2.9 billion was lost by older Americans who fell victim to fraud schemes and financial abuse.

It is particularly difficult for elders to give up control of financial affairs because it means giving up another piece of independence.

Why Do My Parents Need Help

Research shows that as few as 10% and as many as 29% of elders need assistance with financial affairs. Declines associated with the natural aging process contribute to an elders ability to adequately handle finances, some examples include:

  • Changes in mental status
  • Changes in eyesight
  • Physical changes that impair the ability to write such as Arthritus
  • Language barriers

How do I know my parents need help with their financial affairs?

There are often signs that your parent is beginning to require help with financial affairs. The gradual declines associated with aging often are signs for investigation and action:

  • General disorganization of household affairs
  • Unopened mail
  • Large sums of cash on hand
  • Large purchases, new car, boat etc.
  • Frequent unnecessary shopping trips
  • Shut off notices due to unpaid bills
  • Overdrawn accounts

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Begin with a conversation

Losing control of finances means losing independence. Discussing finances is very difficult, usually met with resistance. Make your conversations positive and conversational to open the door for discussion, for example: We would like to know how you would like your financial affairs handled, can we talk about your wishes?

Beginning the conversation will not be easy and will likely take a few tries, but it is worth the effort. Even small steps can make a difference for the better.

Ask Parents Permission

Start by asking your parent for permission to help them with their financial affairs.Your relationship with your parents is important, it is likely that you are or will be a primary caregiver for your parents. Although you encounter resistance keep the conversation going. You may not be successful the first time, try making small steps. Loss of control and independence is a big deal for your parents, you must gain their trust by including them in making decisions, finding solutions that work for them and communicating clearly that you want them to maintain control.

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Get Help

Financial affairs are complex, especially after many years of building an estate. Your parents may have a trusted adviser or advisers that helped them along the way, encourage them to talk with their adviser. Even better see if they will allow you to join the discussion so you have a better understanding of your parents finances.

  • Estate Attorney
  • Certified Financial Planner
  • Financial Adviser
  • Insurance Broker
  • Accountant

Know Where Your Parents Stand: Net Worth

Net Worth is basically the value of one's estate calculated by subtracting all liabilities from all assets.

Assets
 
Liabilities
 
House
$100,000.00
Mortgages
25,000.00
Other Property
50,000.00
Auto Loans
2500.00
Bank Accounts
1,000.00
Credit lines
500.00
Investments
200,000.00
Credit Cards
700.00
Life Insurance
 
Total Liabilities
$28,700.00
Total Assets
$351,000.00
Net Worth
$322,300.00
Budget
 
 
 
 
 
Income
 
 
Social Security
$1500.00
 
Pension
$600.00
 
Investment Income
$500.00
 
Total Income
$2600.00
 
 
 
 
Expences
 
 
Mortgage
$300.00
 
Auto Loan
$100.00
 
Credit Line
$50.00
 
Credit Card
$59.00
 
Auto Insurance
$85.00
 
Power
$65.00
 
Gas
$35.00
 
Electric
$35.00
 
Auto Gas
$50.00
 
Food
$300.00
 
Medical Expence
$200.00
 
Perscriptions
$250.00
 
Health Insurance
$150.00
 
Total Expences
$1679.00
 
 
$921.00
 

Make A Monthly Budget

It is important to know where the money is going on a monthly basis. A monthly budget will help you understand your parents spending habits.

In the example below there is an excess of $921.00 per month, some detective work may be necessary to find out what is happening with the extra money.

Plan For The Future

Understanding your parents finances is a great start and may only be the beginning. Depending on their health and mental status it is likely more help will be needed.

Starting early and seeking the advice of experienced professionals will produce the best possible outcomes for you and your parents. Working with your parents to create a strategy for successful ageing will allow for greater independence, lower cost and the ability to remain in a home of their choosing for as long as possible.

Estate Planning

Although it may seem simple enough, helping a parent cam become very complex very quickly especially when the capacity to make decisions is impaired. Planning for diminished capacity is extremely important for protecting assets, honoring our parents choice and providing needed care. It is highly recommended that you consult a qualified Estate Planning Attorney to draft these documents:

Health Care

  • Advance Directive

An Advance Directive is a legal document giving written instructions specifying what actions should be taken in the event they are no longer able to make decisions due to illness or incapacity. The advance directive typically appoints someone to make decisions on their behalf.

  • POLST Form

Physician Orders for Life-Sustaining Treatment is typically a pink colored form usually on cardstock which defines a person's decisions about end of life treatment. This form provides doctors orders for end of life treatment for emergency personnel to follow.


Financial


  • Power of Attorney

Powers of attorney is an agreement that allows another person to make decisions on their behalf. A financial power of attorney allows the designated person to act on behalf of the incapacitated person to make necessary financial decisions and conduct financial activities.

  • Revocable Trust

A revocable trust is a document that expresses how a persons property will be managed during their lifetime and after death. In case of incapacity the assets are managed based on the instructions provided as a part of the trust document.

  • Joint Property and Accounts

Joint property and accounts are accounts held by more than one person such as a husband and wife or parent and child. In the event of incapacity the joint owner continues to manage the accounts and maintains access to the accounts.

These documents can be complex and confusing, but can be helpful in times of crisis. Financial and Health Care decisions are important and should not be take lightly. Advanced planning will help you and your parents make better informed decisions when the time comes.


This is not legal advice it is provided as information only, consult an attorney for help with these documents.

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