Oct. 16, 2023 BARRON'S
Aging parents or relatives need more help managing their finances.
If the onus is on you, here’s a primer on where to start. Even if you have financial power of attorney—an important tool—you have some work ahead of you.
In the best possible scenario, your parents or other loved ones will have good records of all their income, recurring bills, income sources, bank accounts, investments. Don’t count on it.
“Unfortunately, a lot of times, once mom or dad has gotten to the point where they need help with this, things already might be in a little bit of disarray,” says Joellen Meckley, executive director of the Center for Special Needs at the American College of Financial Services
In other cases, you may have to do some sleuthing to learn where the money is coming and going, wrestle with banks to get access to accounts, and perhaps have to deal with past-due notices or lapsed insurance coverage, all without upsetting your parents or making them feel they are losing control of things.
Here are four tips to manage a loved one’s finances.
Learn what they own and what they owe
Start by getting a sense of your parents’ financial history, their income and expenses.
For income, look at a recent tax return, says Emily Irwin, senior director of advice at Wells Fargo Bank. Tax returns should include information about monthly or annual income from sources such as dividends, retirement accounts, and pensions.
Create spreadsheets of your parent’s financial accounts including checking, savings, investment accounts, business interests, securities, and other assets. Some older adults may bank online, but many still receive mailed financial statements, have paper securities stored in safe deposit boxes at banks, or have accounts at Computershare, a stock registration and transfer service firm, says Nancy Hearne, partner in the personal wealth, estates and trusts practice division at Saul Ewing Arnstein & Lehr.
Next, create another spreadsheet of bills that need to be paid, including routine bills such as utilities, credit cards and others. Start another tab for quarterly, semiannual and annual bills, such as property taxes and insurance.
Scrutinize checking account and credit-card statements for bill-payment patterns over several months and be alert for anything that looks suspicious, whether it Is bills that may be delinquent or payments to unknown entities. If you have any doubts, run a credit check on your parents to ensure accounts haven’t been opened by swindlers in their name. You can run a credit check on them only if you have identifying information such as a Social Security or bank account numbers, Meckley says.
Get access to accounts.
A financial power of attorney should allow you access to your parents’ accounts, but it isn’t automatic. Banks often refuse to honor a power of attorney agreement until it has been examined and deemed kosher by their lawyers, and that can take weeks or even months. You can save yourself a lot of grief by getting your parents to sign a separate power of attorney agreement from their bank before their health deteriorates. That will give you immediate access to their accounts when you need to step in.
Having power of attorney will let you be added as a trusted contact for vendors such as utilities, insurance companies and others for account access which will ease communication with these entities. Expect that to take a while.
Meckley suggests you become a signer to bank accounts and other accounts, rather than a joint owner, as it could cause issues if you need to apply for Medicaid or other needs-based programs for your parents. “Just get that signing authority because it keeps everything clear regarding ownership,” she says.
Although parents may agree to let you handle bill-paying duties, they still may feel uneasy. Sit with them for a few months as you pay bills so they get comfortable, Irwin says. Try to stay away from being critical or overly controlling, especially if they have missed payments. Approach it with the idea of helping.
“How can we take some things off of your plate and make it more organized for you? Things of that nature, I think, are much more well received by the adult parent,” she says.
Once parents are comfortable, automate bill paying as much as possible and review expenses. Check to make sure they are using the services and subscriptions they are paying for, such as streaming services or gym memberships.
Don’t be afraid to ask for help
Just because you have financial power of attorney doesn’t mean you have to manage everything, says Alyson Nickse, partner at Crestwood Advisors. Sometimes it means coordinating with other advisors your parents may have, such as estate lawyers, financial advisors, accountants to ensure nothing is overlooked
Meet with the financial advisor to understand how investment decisions are made and whether the risk level is appropriate for your parents.
Ask the advisor to review current titles to existing accounts, Hearne says. Make sure that beneficiaries on assets line up with the estate plan, as certain beneficiary designations, such as pay-on-death, can trump a will.
If your older loved ones’ finances are too difficult to entangle, reach out to bookkeepers or financial advisors, Hearne says. Bookkeepers can get day-to-day finances in order, and they may make the transition to someone else paying the bills more palatable for older relatives.
Be transparent with siblings
Keep siblings and other family members updated on your parents’ financial situation so they are aware of the choices you are making to avoid causing resentment, Nickse says. Sharing spreadsheets may help with transparency, but if you don’t want to share dollars and cents on each expenditure, send a modified version. The key is to keep siblings engaged and aware that you are spending your parents’ money judiciously in line with your parents’ desires.