What to do when it's time to take over the purse strings
Creators News Service
One of life's most difficult passages is when adult children must begin making decisions for their aging parents, especially when those decisions concern money. At what point is it right to step in and take over? What issues need to be dealt with to make sure your parents are financially secure? Where do you begin?
"One of the circumstances that typically triggers the need for children to get involved has to do with the parents' perception of their own ability to handle their financial affairs," said Jorge C. Garrido of Garrido and Wooden Financial Strategies in Fort Lauderdale, Fla., a part of AXA Advisors, LLC. "This perceived need is much more prevalent in families where the parents are divorced or widowed and one of the parents, typically the mother, does not feel adequately prepared to make [his or] her own financial decisions."
Another trigger, he said, is when the parents' health deteriorates to the point where children must seize control.
"This may be a difficult transition for both sides, because in some cases the parents have to unwillingly give up control and the children have to take it from them in order to protect the parents," he said.
The best time to talk about these issues is much earlier, when the scenarios discussed are well into the future. Tell them that while you don't want to invade their privacy, you need to become familiar with their situation before the time comes when you might be asked to make decisions. Include siblings in the meeting so that everyone is in agreement about the plans.
Propose a durable power of attorney so you can make financial decisions if it becomes necessary. Or ask your parents to put your name on their checking account. Your name needn't appear on the actual checks, and you won't be involved in the account -- until you need to be. Then you'll be able to pay their bills without having to prove you have that authority.
Compile a list of assets -- savings accounts, CDs, IRAs, pensions, investments, Social Security and other sources of income -- and learn what their insurance plans provide. If they are on Medicare, do they have a supplemental policy, and if so, with which company and what does it cover? Is there long-term care insurance in case of an injury or lengthy illness?
Where are important financial papers kept -- the deed to the house, car title, insurance policies and investment and banking records? Are they owed money? If they have a safe deposit box, where is it located and where do they keep the key?
To make sure your parents continue to be self-sufficient, you may want to enlist the services of a financial planner. Garrido says the professionals in companies like his "quarterback" a team that might include lawyers, accountants, money managers, insurance and investment experts who work together to come up with the best plan. One way to ensure continuing income is with a reverse mortgage, which will allow your parents to live in their home for as long as they want and receive money to help cover expenses.
When the time arrives for hands-on financial caregiving, arrange to have your parents' bills paid directly from their checking account or sent to you to make sure vital services aren't discontinued. Or ask utility companies to contact you if the bills aren't paid on time so you can follow up.
"We're happy to add a third party to an account so that children can keep track on behalf of their parents," said Christy Heiser, spokesperson for San Diego Gas and Electric, who said this service is typical of that in most cities. It also allows them to flag the account so they can alert children in case of planned outages.
The most difficult task of all is making sure your parents have drawn up a will or established a trust. No one enjoys this conversation, but it is especially important if a family business is involved to ensure a smooth transition when parents must give up the reins, according to Garrido. It will also ensure that your parents' assets are eventually distributed the way they want so that they can continue to have a positive influence on their children's and grandchildren's lives.