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Steps for Managing Parents’ Finances

In some cases life comes a full circle. When you were young, in many cases it was your parents who taught you how to manage your finances. Now, as your parents grow older, in some cases they need you to manage their finances. Often, one parent always handled the family finances and now that he or she has either passed away or is mentally incapacitated, the other parent is unprepared and unable to handle the finances. Usually, this means that one of their children must step in and begin to manage their finances.

As an elder law attorney, I see the difficulty and emotional distress that this imposes on families. It is my intention that this article will guide you on some of the steps you may need to take, in the event that this happens.

  1. Locate all of your parents' financial accounts and documents.
    The best thing would be for the parents to provide one of their children with a list of all of their assets and the locations of the institutions where the assets are located. But this is not always done. Hopefully, your parents keep their bank and investment files in an easy-to-find place. Otherwise, your best bet is to locate your parents' most recent tax return. By looking at the various Schedules, you will see a list of what financial institutions paid dividends and interest income. You can use that information to begin locating their assets. Sometimes the tax return will list the name of the person who assisted your parents in completing the return. That person may have records and documents that will assist you in locating the assets.
  2. Collect and start paying bills.
    The first thing to do is to put together a list of all of the bills that your parents receive on a monthly basis. Then look at what monthly income your parents receive. This will allow you to determine whether there is enough money on a monthly basis to pay all of the bills. If not, you may then have to consider how to reduce their monthly bills and to begin to use their existing assets to pay the monthly expenses. It may be that you will have to prioritize the bill paying so that real estate taxes, rent, mortgage payments and utilities are paid to allow your parents to continue to live where they are. If you don't have access to your parents' checking account, consider paying their bills yourself and getting reimbursed later - provided that there is money available to do so.
  3. Find your parents' power of attorney or living trust documents.
    If your parents named you as their attorney in fact in their power of attorney, or as successor trustee in a living trust, you'll need to find and provide these documents to every financial institution you deal with. In most cases, financial institutions will not even discuss your parents' account with you until you provide these documents. Additionally, In most cases, you will need to provide these documents to the branch manager or the account advisor. But, be careful. Provide the original documents to the manager or advisor and have them make copies for their institution. Do not allow them to keep the originals. Make sure they give the original documents back to you because you may need them for other institutions.
  4. Have your parents prepare powers of attorney or obtain guardianship over them if they are not competent.
    If your parents are mentally competent, now is the time to have them prepare powers of attorney to allow you to have power to manage their affairs for them. An elder law attorney should be consulted so this important step is done right.
    If they are not mentally competent, the alternative is to start a proceeding in court to have you appointed as their legal guardian. Again, an elder law attorney should be consulted.
  5. Open their safe-deposit boxes - with a witness.
    In the event that your parents have a safe deposit box, and you need to access it, it is a good idea to bring along an independent witness to document what is in the box. Often siblings and other heirs will question what was in the safe deposit box and it helps to have someone who can verify what you found there.
  6. Keep detailed records of everything you do on your parents' behalf.
    Unfortunately, there may come a time when another sibling or heir questions the money spent on your parents' behalf. The best thing to do is to document everything that you do. Even if you are never questioned, it comes in handy later if you forget what you may have done. This is especially true if you have to take care of your parents' finances for several years. If you pay bills, keep copies of every check you write - either as checkbook duplicates or the check images that accompany statements. Keep all bank statements. If you pay for anything in cash, keep detailed receipts. These kinds of details can help show others that you're handling your parents' affairs responsibly.
  7. Consider hiring a financial planner
    If your parents have substantial assets, you may wish to hire a financial planner to review the assets and make recommendations as to the type of investment mechanisms best for them. What may have been a good investment strategy when you parents were younger may not be so now. For example, if your parents are having trouble meeting their monthly bills, their investments may have to be restructured to provide more income at the loss of growth. Even if you have investment experience, it does not hurt to have a second set of eyes reviewing your decisions. This is especially true if some of the investments lose their value. You do not want other siblings and heirs questioning your actions.

It is never easy to assume the financial responsibilities of your parents, but hopefully, in the event that it happens, this article will make it a little easier.