Often, the issues start with a move to a new home.
In my financial planning and investments practice, I often help middle-aged children help an older parent with his or her finances. The parent may have been living alone, as a widower or widow. Or the parent may be alone for other reasons.
Events start to snowball when a decision is made to move the older person from his or her home. This decision is often triggered by events related to health or aging. A meal left unattended on the stove starts a fire. Or, bills accumulate, and are not paid. Or a fall occurs, and help arrives hours or days later.
If the older person is my client, we have to reexamine his or her finances to see how to reallocate for a transition to another living situation. Often this may mean hiring a caretaker in the home, or moving to an assisted living facility or nursing home. If estate planning has not been done, then life events such as these usually prod my client into finally drawing up the will, trust, and health care directives that are needed.
Such parents will usually also want an adult child to take over financial decisions. This same person may be asked to validate the budgeting done for ongoing personal care. Investments can provide the income necessary to finance the new living arrangements. Someone – usually the person designated with trading authority on behalf of the parent – needs to work with the financial professional on the financial planning and on the oversight of the accounts. Whoever the fiduciary or family member, this person will need a formal power of attorney document, spelling out the scope of powers granted. This document should be validated by an attorney and witnessed by a notary.
These life transitions are challenging for everyone involved. It is important to involve professionals who can provide support, to make sounder decisions. These professionals can work as a team. Supporting professionals can include any doctors, but also potentially mental health professionals as well as your family lawyer and your parents’ financial planner, and their tax professional.
Consider these red flags as you evaluate your parent’s situation. You’ll know it’s time to help if you see any of these danger signs.
1) When handling their budget, your parent(s):
a) Seem organized and pay bills attentively.
b) Balance their own checkbook, live on a budget and save every month
c) Are clear and organized when meeting with tax professionals for tax filings
d) Are unable to live on what comes in.
2) When it comes to investments, your parent(s):
a) Never open their statements;
b) Open statements and review their investment income every month;
c) Haven’t changed their investments in many years;
d) Don’t know the difference between a certificate of deposit, a stock, bond or fund.
3) When it comes to their banking and investment relationships, your parent(s):
a) Call a call center for transactions;
b) Know a personal banker;
c) Rarely visit a bank or an investment professional;
d) Call neighbors and friends in to ask advice.
4) In their estate planning your parent(s):
a) Created a trust, and you know where it is kept;
b) Created a will, and you know where it is kept;
c) Named beneficiaries on our retirement plans and insurance policies;
d) Prefer to leave decisions to the probate court.
Red flags, 1= d; 2= a, c and d, 3 = a, c and d, 4 = d.
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