Managing Your Parent's Finances

Not long ago, a friend of mine asked her elderly mother if she needed help managing her money. The mother — a physically frail but totally competent woman — stared back in disbelief. My friend had asked too soon.

So when is the right time to ask? Obviously, it's different for every family. If you're lucky, your parent may open the door to such a discussion. But it's better to ask too soon, and risk some embarrassment, than to wait until your parent's finances are in disarray — or worse.

In the meantime, listen for any cues. Your mother, for example, might give you a list of her bank accounts, "in case something happens"; ask for help with her income taxes; worry aloud about the size of her income; leave unpaid bills in a cluttered pile; or complain that she's being financially cheated in some way. If this happens, don't focus only on the narrow question. Use it as an opening to ask if there's any other way you can help.

To prompt the conversation, try talking about your own finances. You might tell your parent, for example, that you're seeing a planner or tax preparer. Maybe your parent has a question he or she would like to ask.

If your parent says, "no thanks," don't push. Always respect your parent's decisions — even decisions you disagree with — unless, of course, the parent lacks the capacity to judge.

One area where your parent may welcome help is in double-checking Medicare bills if she has to pay a portion of the bill herself. Doctors submit your parent's Medicare claims, but you need to be sure that the claim has been properly paid. You can appeal if Medicare rejects a bill, but the process is aggravating and time-consuming.

In Times of Poor Health

If your parent has a serious bout of poor health, it makes sense to raise a "what if" question. What if you're in the hospital? Do you want me to pay your bills? If the answer is yes, you'll need two things:

1. An understanding of how much money your parent has — whether it's in the form of income, bank accounts, or other assets. You might spot some easy ways of raising your parent's income — for example, by switching some money out of passbook savings and into certificates of deposit. But your proposals should always stay within your parent's demonstrated tolerance for risk.

2. An easy way of paying bills. If you're an only child, your name could be added to your parent's bank, brokerage, or mutual-fund accounts. This allows you to write checks and sell shares. At your parent's death, these assets pass directly to you.

Joint accounts don't work, however, if you have siblings who should inherit part of that money. Some banks will add your name to the account "for convenience only." This lets you pay bills, but prevents the money from passing to you automatically at death. Alternatively, your parent could execute a "durable power of attorney." This lets you handle the money if your parent becomes disabled.

Lawyers prepare durable powers at a low cost (and free with preparation of a will). You might find a standard form at a stationery store, but be sure it transfers all the powers you want. Always ask the bank, brokerage firm, insurance company, or mutual fund, in writing, whether it will accept the power-of-attorney form you want to use. Some institutions require you to use their form. If your parent has a living trust, you should be named trustee.

It's important to settle these matters while your parent is of sound mind — otherwise you may need a court order to get control.

Wills and Paperwork

Two more things to attend to:

1. Updating your parent's will if necessary.

2. Naming someone to make medical decisions if your parent can't.

If you're going to take over your parent's finances completely, here's how to simplify the paperwork:

  • Arrange for pension and Social Security checks to be deposited directly into your parent's bank account.
  • Arrange for the bank to pay regular bills automatically.
  • Have all remaining bills mailed directly to your address. If your parent frets about losing control and lives nearby, you could write all the checks and have your parent sign them.
  • Keep all important documents in a single file in your home. If you have siblings, tell them what you're doing and keep good records. You don't want a family feud over whether you handled the money well.

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