10 Ways to Prepare to Help Your Parents Manage Their Finances

Jun 9

*These 10 actions can help open the lines of communication and determine where you can play a role.*

Legal Zoom by Sandra Beckwith
updated May 02, 2022

It's common for aging parents to reach a point at which they need help with their personal finances, though they may not initially recognize it. Cognitive decline typically begins in our 60s and can be gradual—so gradual that until problems arise, it may not be obvious that their finances are in disarray.

To help your parents avoid future issues with managing their finances, it's a good idea to start planning now.

Here are 10 ways you can prepare to help your parents manage their finances.

1. Start a Conversation

This is your parents' money you're talking about, after all, and if your goal is to make their later years simpler and less stressful, say that as you try to open the lines of communication about their finances. Asking questions about their long-term plans and what they've done to prepare for them will give you a better sense of how you can assist them.

However, your parents need to be ready to be transparent with you. "It's critically important for parents to share all of their financial information with their children so that an action plan can be put in place. It's very difficult, and perhaps detrimental, to implement strategies with half-truths or limited insights in information" says Ivan Watanabe, managing partner with Opus Private Client, LLC.

2. Review Their Records

To get a sense of where your parents are financially, and to be able to make informed suggestions going forward, ask if they will share their records and account information with you.

Knowing what they have, and where it is located, is a great start. Then, if problems arise, you'll at least know where to start looking for anything that may be missing or questionable.

3. Ask for Introductions to Their Advisors

If your parents have existing relationships with advisors, such as attorneys, accountants, brokers, and/or financial advisors, ask if you can meet them to better understand the services they're currently providing.

"It is always a good idea for the parent to introduce their adult children to their team of professionals, especially the financial advisor," says Arvind Ven, CEO and founder of the Capital V Group.

4. Hire a Financial Planner

If your parents don't have advisors, start by retaining a financial planner. A professional wealth manager can advise on who else your parents may want to bring into their circle of advisors to address their particular situation.

5. Set Up a Durable Power of Attorney

To allow adult children to make legal decisions on their parents' behalf, consider having a power of attorney be granted, advises Watanabe.

"It's important to put these documents in place while the parents are in good mental capacity," he says.

"The durable power of attorney allows someone to act as your agent if you are unable to handle your financial and personal affairs yourself," says Matthew Erskine, managing partner at Erskine & Erskine.

6. Get a Healthcare Proxy Signed

Having parents sign a healthcare proxy, or healthcare power of attorney, is important, says Erskine, "so that people can speak with your medical professionals without violating HIPPA regulations."

7. Consider a Revocable Trust

Clare Toth, JD, MLT, CFP, and managing principal of Peapack Private Wealth Management recommends revocable trusts—also known as living trusts—to clients "as they approach age 70 or so."

The reason for this preference is that "It's logistically easier to manage someone else's money as trustee of a trust than under a power of attorney […] It can also be easier to establish online access to accounts," she explains. For example, "Your mom sets the trust up for her own benefit. You and she can be co-trustees, or she can be the initial trustee, with you to follow."

8. Switch to Online Accounts

Setting up online banking makes oversight from afar much easier, and immediate, but "the one online account everyone should set up is Social Security," says Toth. "Once the account is there, an adult child can assist the parent with basic tasks, such as changing the bank into which payments get deposited."

You may also want to consolidate accounts, for simpler monitoring.

9. Automate Payments

To reduce the number of paper bills coming to their home, recommend that they set up automated payments for expenses like their mortgage, phone, and utilities. That will help ensure the bills are paid in a timely manner, with less effort on your parents' part.

10. Learn About Any Concerns They May Have

Knowing what keeps your parents up at night can put you in a position to help them better manage their money. For example, are they planning a major expenditure soon? Are their investments too aggressive for their current stage of life? Do they have a budget? Should they buy long-term care insurance? Find out what concerns them and brainstorm how to reduce that worry.