How to Deal With Your Aging Parents’ Finances the Right Way

Daniel Penzing
Written by
Last update:

Get a Financial Power of Attorney

One way to provide guidance and help – and protect your parents financially – is by becoming their financial power of attorney. Obviously, because this relationship is so important, you need to go to a lawyer to make sure you’re doing everything legally and properly.

The first step is to get a financial power of attorney (POA). This document means that you, as the person who holds the power of attorney, can manage and deal with financial matters on behalf of the person who has granted the POA – namely, your parents.

Anyone with this document can do things like deal with a financial institution that holds an account or make a decision about a financial matter. If you are dealing with these issues in the U.S. or Canada, the financial power of attorney is called a durable POA.

Before you can become the financial power of attorney, you need to get the document signed and notarized. And if your parents have lost mental capacity, the POA must be witnessed by two people who know that your parents are no longer of sound mind.

Find Out What Your Parents Have and Where They Have It

Before you begin changing the way you pay your parents’ bills or withdraw money for them, you need to find out how they’re doing financially.

Begin by reviewing all of the bank accounts and other financial accounts your parents have. List any accounts you find, including checking and savings accounts, mutual funds, pensions and annuities, CDs, the money in their missing money jar, insurance policies, and retirement plans. Be careful, as most mutual funds and annuities also have restrictions on minimum withdrawal amounts or can only be withdrawn on a regular schedule such as monthly or quarterly.

In addition to having a list of your parents’ financial accounts, you’ll need to know what they have in each account. Without knowing how much money they have in each account, you won’t know how best to manage it. Don’t be afraid to ask your parents if you’re not sure of something.

Get Online Access to All Financial Accounts

Many parents rely solely on paper checks when it comes to making payments. This can be risky as checks can easily get misplaced, and people further down the line can end up not getting paid. They may also put off getting new checks printed and continue using old checks even when the old payees have stopped being paid.

The most effective solution would be to get them a safe-deposit box if they have all these checks. After that, you will need to get online access to all financial accounts. You can ask for statements to be sent to you in the post, but virtual access will be faster. Make sure you use a secure password and keep it to only yourself. Also, explain to your parents why it is a good idea to have ready access to an online account along with checks and paper statements.

Take Over the Monthly Cash Flow Using Their System

Having a system for paying bills and tracking income that you get from any source is key to not getting into trouble with your parent’s finances. When you take over the monthly cash flow, you can use your parent’s system or use your own. What you take over should be saying more about the strengths and weaknesses of their financial system.

It might have a great budget, but they never file a tax return, or they have a lot of debt and no emergency fund.

The great thing about software in this era is that you can track their finances from your own phone and then choose which accounts to keep, which accounts to close, which accounts to transfer to your own, and which accounts to leave alone.

Using this information, you can transfer the money you can take responsibility for to your own bank account and adjust the monthly budget. Combine your personal accounts with your parent’s to create one big pot that you can manage and control.

This also takes full advantage of the automated bill pay system. You can now manage the entire system from your phone.

It’s easy if you have a single source. You can go to any bank and ask them to consolidate your accounts.

Turn on Automatic Payments for Recurring Bills

Aging parents are usually more apt to get frequent calls about bills coming out of their account. To make sure bills get paid on time, switch to automatic bill payments for recurring bills like telephone, utilities, and credit cards. You can have the money automatically withdrawn from your parents’ checking account the day the due date hits. These payments can be made with cash, checks, or direct deposit.

Simplify and Merge Accounts Where Possible

When an elderly person’s financial situation starts to deteriorate, the best thing you can often do for them is to simplify things. Consolidate their accounts where possible and merge all paper and electronic statements to make the statement process as simple as possible.

Set up Direct Debit for Bills

Do the same with bills. Set up direct debit to allow them to make the minimum payment on time, or sign up for automatic payments online. However, be careful to look at the bills and ensure that they are correct and have all of the items you want covered, so you don’t pay for unwanted goods and services.

Update Their Will

If your parents still have a will that revokes you as the beneficiary if you are married, update it. If they have any assets that aren’t mentioned in the will, sign them over to you. Dealing with a will from a deceased parent is something you may be aware of by now.

Update Investments if Needed

Yes, you are still a child and no matter how much you do, you will never be your parent’s financial decision maker. You will never take the role of your parents’ right hand and you will need to accept that. But as your parent’s child, you have a responsibility to keep a check on their finances and make sure that they are being taken care of.

So, make it a point to be involved in things like connecting your parent’s account with a financial advisor, handling recurring investment options or making sure home bills are being paid on time. You can’t do it all yourself but you have to be involved.

If you find something off, check with your parents and find out more about it. Try to clear the air as soon as you can so that they don’t feel bad or become worked up about it. That may help solve the problem at root.

However, if you are unsure of what to do next and you simply cannot reach a happy, comfortable medium, then you may need a professional help. But only ask for help when you need it. Don’t be overeager and try to get into your parent’s account too soon.

Conclusion

(two final facts about the aged population)

In terms of health conditions:

O Aging adults have had time to deal with the most serious health problems.

O Many have addressed any health-related issues that might interfere with their independence.

O Those with the most serious issues still have access to such things as medical alert systems.

O Many people in the 70s and 80s are in good shape physically and mentally.

In terms of finances:

O Retirees have typically been enjoying the good life for quite a few years.

O They don’t typically have a lot of income-producing assets.

O For the most part, they live on a fixed income.

To sum it all up:

O They still have many interesting years ahead of them.

O Their life now is not so much as a vacation as a second act.

And this leads to the last point:

O In one way or another, they continue to work hard.

Overall, they have a lot to live for, yet there is always some kind of need that requires assistance. It’s easy for caregivers to get stressed to the point of being over-involved, over-protective, or over-committed.