How to Help Aging Parents Manage Their Finances
Money can be a sensitive subject among many families. So, as parents age, adult children may be reluctant to recognize any difficulties their parents may experience managing their own finances. That is until the first signs of trouble appear.
These might show up as a stack of unopened bills marked “past due,” or unusual charges on a credit card statement.
As we age, financial capability may decline – a vulnerability that fraudsters often target.1 Taking the right actions to help monitor and manage parents’ financial tasks not only protects their assets, it also prepares you to lend a helping hand when necessary.
To plan for the responsibilities and decisions ahead, review these five strategies.
Begin the Conversation
Some older adults may not notice their money management skills are fading. Others may be reluctant to admit it for fear of losing their independence. If you and your parents rarely discuss money, open the conversation by sharing some of your own retirement and estate planning, and then asking them what steps they have taken. Or, start by asking your parents where they keep important documents in case of an emergency.
Another good idea is to offer assistance with small tasks at first. For example:
- Help parents organize financial paperwork.
- Set up automatic payments so they don’t miss important bills, such as utility payments or insurance premiums.
- Arrange for distributions from retirement accounts to be automatically deposited into their savings account.
- Consolidate multiple bank and investments accounts so they are easier to track.
By starting with these small steps and developing parents’ trust and comfort level, it may be easier for them to turn over more responsibility to you later. If you have siblings, enlist their help, too, or at least keep them informed.
Meet the Professionals
Your parents likely work with a team of professionals, such as an accountant, banker, lawyer or financial advisor. Ask your parents to introduce you to these pros. This way, they can become part of your team to manage your parents’ finances together.
Also, find out what services financial institutions offer to help you stay informed about your parents’ accounts. For example, some banks offer “read only” access to online statements. Others may be able to send you text alerts when withdrawals over a certain limit are made from a parent’s account. And your parents’ brokerage firm may allow you to receive duplicate statements as a so-called “interested party,” without giving you the ability to make transactions.
Establish Legal Powers
Managing a parent’s financial affairs someday will be easier if your parents have signed a durable power of attorney for finances in advance, naming you as their agent. With this document, your parents can give you broad powers to manage their money or set boundaries, such as limiting you to paying bills, filing tax returns or selling assets. (Without a durable power of attorney, you would have to be appointed by a court to manage the finances of a parent who becomes incapacitated.)
Note: Many financial institutions, wary of fraud, will only honor their own power of attorney form. To avoid problems accessing accounts later, check with your parents’ financial institutions to see what they require.
Consider Outside Help
Managing a parent’s finances on top of your own can be a time-intensive job. For assistance, consider hiring a daily money manager. These professionals charge by the hour and typically meet with clients twice a month to help with a wide range of tasks, from bill paying and negotiating with creditors to organizing tax documents and reconciling checking accounts.
For help finding a daily money manager, contact your local Area Agency on Aging or the American Association of Daily Money Managers.
Although many cases of elder financial exploitation go unreported, in documented cases the average monetary loss is $34,200.2 Financial professionals can be the first to notice if a client has trouble managing money or might be a victim of financial abuse. For years, however, professionals felt powerless to intervene because of regulations to protect a client’s privacy.
But FINRA, which oversees brokerages, changed the rules in 2018 to protect seniors. Brokerages now must ask clients for the name and contact information of a trusted individual who can be reached when a firm suspects a client is being financially exploited. And brokerages can place a hold on disbursements from clients’ accounts while the suspected exploitation is investigated.3
Similarly, Congress passed the Senior Safe Act of 2018 that provides immunity from liability if certain brokerage and investment firm employees report suspected financial exploitation of clients ages 65 or older.4
If you’re concerned that parents may become victims of fraud, one step you can take is to help them freeze their credit reports at the three major credit reporting companies. A security freeze prevents new creditors from accessing the reports, making it unlikely an identity thief can open lines of credit in a parent’s name. But a freeze isn’t foolproof. Review reports once a week for free through April 2021 (thereafter every 12 months) at AnnualCreditReport.com to check for errors or suspicious activity.
In addition, pay attention to the latest financial scams by checking the Federal Trade Commission’s scam alerts online.
Discover more general financial planning tips and advice in Tackle My Finances.
1 Old Age and the Decline in Investment Performance. Michael S. Finke (The American College of Financial Services) and Sandra J. Huston (Texas Tech University), May 9, 2020.
2 Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends. Consumer Financial Protection Bureau, February 2019.
3 New FINRA Rules Take Effect to Protect Seniors and Vulnerable Adults from Financial Exploitation. FINRA, Date Accessed: July 6, 2020.
4 Senior Safe Act Fact Sheet. FINRA, May 23, 2019.
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