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Help Aging Parents Organize Their Financial Affairs
Resources Help Aging Parents Organize Their Financial Affairs

Has your family had “the talk?” You know, the one about aging parents’ finances. Seven out of 10 people surveyed by the National Endowment for Financial Education (NEFE) said that major barriers prevent their families from openly communicating about who will make financial decisions on behalf of an aging family member if that person becomes unable to decide.* Family dynamics often interfere with the discussion.

“Unfortunately, if you put off this discussion too long, it may be too late,” notes Chris Adams, VP Deposit Operations, Athens Federal Community Bank. Not arranging for someone to step in and take over finances if needed can have dire consequences. In the NEFE survey, of those who experience cognitive decline, 47 percent had trouble paying bills, 35 percent made irrational purchases and 21 percent depleted their savings accounts.

“Talking about financial matters is much easier when there isn’t a pressing need for a plan,” comments Adams. “The best time to have a conversation is when things are going well and everyone’s in good health.”

Outline what needs to be done and offer to help!

Organized paperwork is a tremendous advantage for anyone who isn’t already intimately acquainted with the situation. “We often see cases where the husband has always managed the finances and, after he passes, his widow doesn’t have any idea where to begin,” Adams says.

In addition to initiating a conversation with your aging parents (and, ideally, your siblings), start with these eight steps to help ensure that your parents’ finances remain well-managed and ultimately that their wishes for passing on their assets are followed.

Make a List of Assets

Your parents should have a list of all their assets, including account numbers, contact information for the financial institution holding the assets and approximate balances. This includes:

  • Bank accounts such as checking and savings accounts, certificates of deposit (CDs) and money market accounts.
  • Retirement accounts such as 401(k) or other employer-sponsored retirement plans, individual retirement accounts (IRAs) and rollover IRAs.
  • Insurance contracts — life, health, long-term care, home, auto — and annuities.
  • Home and vehicle titles (don’t forget boats, RVs, motorcycles, etc.).

Itemize Regular Expenses

Another list should summarize all routine expenses, such as mortgage payments, insurance premiums, property taxes and utility bills, plus loans and credit cards. “Be sure to make a note if bills are set up for automatic payment,” Adams suggests. “Listing due dates is helpful, too.”

Consider Options for Titling Accounts

Payable-on-death accounts will pass directly to the named beneficiary upon the death of the owner, but do not provide the beneficiary with any power while the owner is still alive. Durable power of attorney allows an agent to manage the account for the owner if he or she becomes incapacitated, but it ceases upon the owner’s death. Having a joint account with a co-signer gives the co-signer full access to the account both while the owner is alive and after his or her passing.

Locate Personal Papers

For example: birth certificates, adoption records, marriage certificates, divorce records, death certificates, military records and name changes.

Provide Access Information

If your parents have a safe deposit box, list its contents and location, plus where to find the key. If they manage their finances online, understand your rights and ability to access these accounts.

Gather Estate Planning Documents

At a minimum, each parent should have a will. Durable powers of attorney for health care and finances provide an individual(s) the power to make decisions on your parents’ behalf if they’re unable to make decisions themselves. A trust can help protect their finances while they’re alive and help ensure that assets are distributed according to their wishes after they die.

Think Through Options for Granting Power of Attorney

The powers granted to the agent named in a durable power of attorney can be broad or narrow. “Ideally, it should be as broad as the person granting it is comfortable making it,” Adams suggests. “But they must completely trust the person they’re naming as agent. If an appropriate person does not exist, a court can establish a guardianship when someone becomes incapacitated. Although that’s far from ideal, it’s better than having a power of attorney with an agent you don’t trust.”

Update Regularly

Finally, be sure you or someone else knows where to find all this information, and that it is reviewed and updated periodically.

* Source: Financial Disconnect Among Seniors is Harsh Reality. National Endowment for Financial Education, July 8, 2013


Fred Burke, INVEST Retirement & Investment Services Division