It is a matter of time before you may have to add managing your elderly parents' finances to your list of money responsibilities. It is not so much about your finding the time and energy to take on the additional responsibility, as it is about it being acceptable to your parents to accept that they need help and give up control over their finances.
Don't wait for a crisis to happen before you get involved to protect them from losing their hard-earned money to a scam or merely poor management. It is better to initiate the conversation as early as you can. The trick is to be able to do it without making them feel incompetent or treading on toes.
First steps
You cannot swoop in one day and take over your parent's finances. They are likely to see it as an attack on their independence and resist the idea. Approach the issue in stages. The first step is about earning their confidence that you are there to help when they need it. And from your point of view, it is about organizing their financial affairs so that it is easier to manage later when you have to take a more active role in it. This step is best taken when the parents are still capable of managing their finances and they are not as defensive as they would be later in life when they feel less in control.
Discuss your own money matters with them so that they see you as someone who is familiar with these matters, as well as build empathy and confidence in you. Retirement offers a good opportunity to get involved. Offer to help them consolidate and organize their financial affairs as they start on this new phase in life. Most people appreciate help with getting some order in their finances.
These include:
- consolidating bank accounts,
- listing investments and assets so that they (and you) know the accumulated wealth at that point,
- organizing all the documents related to the investments and assets,
- bringing together all the insurance policies and eliminating those that are no longer necessary, and
- putting all the documents related to retirement and
- retirement benefits together.
Once this is done, it is easy to update it as an annual exercise. It also gives you an opportunity to engage with them on a regular basis. This is the stage in life where you can also help them make a budget so that they can be sure of adequate funds to do the things they were looking forward to in retirement. It will give you an idea of their income and expenses and help them make better choices. Or, take small steps by volunteering to help them with a chore that they do not enjoy, such as filing taxes or organizing the paperwork or technology-related activities such as setting up online banking and payment facilities. Don't wait till they have significantly lost the ability to manage their affairs before you intervene. They may not be in a position to remember much of what they have and or have lost.
Estate planning is another aspect of old age that elderly parents have to consider. But it is again a very sensitive topic to broach. One way to do it is to discuss your own actions such as making a Will, and use that to encourage them to think about it too. At the very least, make sure that investments have nominations and joint holders to help make it easier to deal with them at a later point in time.
Once you have gained their confidence that you mean well and just want to work in their interest, make sure you keep the involvement going. Overtime they may themselves assign more responsibilities to your care. If there are things where you are not sure of your own expertise, it is a good thing to get outside help, obviously with your parents' approval. It may also give them the confidence that you intend to get them the best advice possible.
The signs
Watch out for signs that tell you may need to make a more serious and regular intervention in your parents' financial affairs. You may see reckless spending or overt caution with money, willingness to invest in dubious schemes on one hand while being excessively risk-averse on the other, excessive charitable giving, reluctance to take money-related decisions and balances building up in savings bank accounts, unpaid bills and forgetfulness, among others. Take these seriously as signals that cognitive abilities are deteriorating. If you have been able to establish a relationship of trust on money matters, it becomes easier for you to expand your role in their affairs. A power of attorney in your favour will make it easy for you to execute matters for them especially when both parents are not in a physical or mental situation to make their own decisions.
You are serving a fiduciary relationship when you take over the responsibility of your parent's finances. Remember, it is their money you are handling, not your own. All decisions should be made in their interest, and it important that they must see it as such too.
Keep a record of all your activities and decisions so that you can prove, if necessary, that you acted in their best interest. If there are siblings, then it should be a collaborative effort with everyone's knowledge, if not approval.
There are multiple skills you need to bring into play while dealing with your parents' finances in their old age. You should be tactful when trying to find information, focus on the positive aspects of the situation instead of disparaging their efforts, be patient in listening to their views and deal with their concerns in a respectful way. It will take a load off their mind and make it easier for you to manage the stressful situation.
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