In my blog post When to Take Over Parents’ Finances:  Avoiding the Kick In the Head, I introduced two clients of mine: Jane, who was able to recognize subtle signs and get involved with her father’s finances gradually as he started needing more help, and Jim, who had to take everything over suddenly as his parents experienced a housefire and rapid health changes.

In either case, managing aging parents’ finances for the first time is like being thrown in the deep end without swimming lessons or a lifejacket. Sure, you know how to set up online payments for bills, but how do you get a handle on what those bills are? You may have Power Of Attorney paperwork, but do you know where all the accounts are and how to access them?

And if you’re like Jim, you may not have much time to get a handle on the most important things. But what are the most important things? This blog post will walk through some practical tips on some of the most important things to do as you get started. By doing a few things proactively, you’ll make your own life easier when situations come up that you need to react to.

Practical Steps: Help with Organizing Finances

Once you’ve had the conversation, it’s time to get organized. Here are some practical steps to help with organizing finances:

1. Gather Financial Documents: Collect all relevant financial documents, including bank statements, bills, insurance policies, and investment records.  I suggest creating a Life Log to document all the important details of their life so that you have ready access to anything you need as situations arise.
2. Create a Budget: Work with your parents to create a budget that outlines their income and expenses. This will help you identify any areas where they might need additional support.
3. Set Up Online Account Access:  Wherever possible, I suggest helping your parents get online account access set up for all of their accounts you will be helping them with.  Make sure to use different passwords and store the credentials in a password management software so they are secure. 
4. Set Up Automatic Payments: Automate as many payments as possible to ensure bills are paid on time. This can help reduce the risk of missed payments and late fees.
5. Monitor Accounts: Regularly review bank and credit card statements to keep an eye on any unusual activity or potential fraud. If you don’t have time to do this, consider hiring a Daily Money Manager to help or purchasing software that can help automate some of these items and alert you when irregularities appear.

Managing Elderly Parents’ Finances: Legal Considerations

In some cases, you might need to take legal steps to manage your parents’ finances effectively. Here are a few things to consider:

1. Power of Attorney: A power of attorney (POA) allows you to make financial decisions on behalf of your parents. There are different types of POAs, so consult with an attorney to determine which one is best for your situation.
2. Representative Payee:  Social Security Administrationz (SSA) does not recognize Power of Attorney, even if it is drawn up by a lawyer and legally binding in other circumstances.  A Representative Payee authorization with the Social Security Administration allows you to manage your parent’s social security payments.  It does, however, also come with some red tape and auditing requirements so the SSA can make sure you’re using the funds properly, so this is typically only used when it is necessary because the person receiving the payments has been determined to be incompetent to manage their own benefits.
3. Joint Bank Accounts: Adding your name to your parents’ bank accounts can make it easier to manage their finances. However, be aware that this can have legal and tax implications, so make sure to consult with a CPA and/or attorney to determine if this is the best option for you.
4. Trusts and Wills: Ensure that your parents have updated wills and consider setting up a trust to manage their assets. This can help avoid probate and ensure their wishes are carried out.

The Emotional Toll: Balancing Care and Independence

Taking over your parents’ finances can be emotionally challenging. It’s important to find a balance between providing support and respecting their independence. Here are some tips to help you navigate this delicate balance:

1. Involve Them in Decisions: Whenever possible, involve your parents in financial decisions. This can help them feel more in control and less like they’re losing their independence.
2. Seek Professional Help: If managing your parents’ finances becomes overwhelming, consider adding professionals like a daily money manager, CPA, and financial advisor to your team. They can provide expert guidance and support.
3. Take Care of Yourself: Caring for aging parents can be stressful. Make sure to take time for yourself and seek support from friends, family, or a therapist if needed. Remember that you cannot help them if you’re not healthy and able.  If this rings true for you, check out this article with tips on managing stress for financial caregivers.

If you’re still finding it difficult to know where to start, consider hiring a professional such as Advocate Money Management.  Even if you plan to manage your parents’ finances yourself, we can provide consulting and guidance based on our experience to help you be successful.  Schedule a free consultation today!

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