Does the idea of dealing with mom and dad’s finances send you into spasms of anxiety? Afterall, financial caregiving is a delicate undertaking, especially if your parents are private about their affairs and fiercely independent. Luckily, for you, we’ve come up with a few guidelines to help smooth the process.
Don’t put off the discussion about money
Before taking over your parents’ finances, you must, of course, initiate a talk with your family about money. Yes, the conversation might be awkward but too much is at stake to let to let it slide (think unpaid bills or financial fraud). To excel in the financial caregiving role, you must understand how your parents think about money and what their wishes are.
Another pointer: Don’t presume your family will get everything settled in one big discussion—it can be more peaceful to have several small conversations over time. And never wait until your parents are in a crisis and your hand is forced. If you see signs of cognitive decline, act swiftly--it’s far easier to put processes in place when mom and dad can still sign a power of attorney (POA) for property document. This piece of paper is crucial if you want to make financial transactions on behalf of your parents. (If your parents haven’t planned their estate, find an estate planning lawyer who can draw up a POA for property as well as a health care advance directive and a will.)
Get a grasp on your parents’ finances
Once the POA is in order, gather up relevant financial documents, like bank and credit card statements, bills, tax returns, pension statements and insurance to find out your parents’ source of income and expenses. (Also check whether your parents have long-term care insurance, an additional income source should they require care-- “regular” health insurance plans don’t cover the cost of senior living with round-the-clock skilled nurses on staff.)
Your next step: Create a net worth statement that clearly shows the difference between what your parents own and what they owe. After that, set up a budget that includes expenses such as mortgage payments, heat, electricity, telephone, Internet, cable TV and car payments.
Make sure you keep clear, detailed and accurate records of all financial transactions, especially those that involve expenses incurred by you or your siblings on behalf of your parents. And to save yourself time, set up online banking including automatic deposits for income and automatic withdrawals for regularly recurring bills.
Think about the future
You also need to size up your family’s financial resources and make a plan that takes into account future healthcare costs. Even if their health needs are low now, keep in mind that someone turning age 65 today has a 70 percent chance of needing some type of long-term care services and supports, according to the Administration on Aging. If mom or dad loses mobility, it can be costly to renovate a home or pay for home care. (The average cost of a full-time home health aide is about $4,000 per month, according to the Genworth Cost of Care Survey 2018.) Of course, senior living is another viable option (it costs about the same as a full-time paid caregiver) especially if you and your siblings live long distance and mom and dad can no longer drive.
One final piece of advice: don’t forget to ask your siblings to share the caregiving load and do contact a financial planner if you’re in over your head. Although helping your parents may be top of mind, don’t block out others when you need support yourself.