There are so many conditions upon which adult children are forced to take over their elderly parent’s finances. For one, when they are no longer in complete control of their mental faculties since they are more vulnerable to fraud and other financial scams. Another is when there are concrete signs that they are starting to lose track of their financial life, like uncontrollable spending, gambling, having difficulty with simple financial tasks like paying their bills or balancing their checkbooks, being forgetful about where they leave and place their cash, getting plenty of calls from creditors, and many other signs. And most importantly, they are physically unhealthy and thus unable to make sound decisions
If you already have the power of attorney and beginning the process of managing your elderly parent’s financial life, here are five essential reminders to ensure a seamless transition.
1. Educate yourself
If you have never been knowledgeable on finances beyond the basic knowledge to survive as an adult in the United States, now is a good time to educate yourself further, especially if there are plenty of assets to consider and problems to fix. For example, if your parent is having a hard time paying for their mortgage, now is the time to explore other options like refinancing their mortgage. However, you can’t help them with this process if you don’t know what it is.
2. Assess the situation
Taking over your parent’s financial life means being up-to-the-minute on its current state. You won’t be of much help if you have no idea what’s going on. Take the following steps to ensure that you are being of service, and not adding to the problem:
- Take time to assess your parent’s current financial situation. If there are problems, you need to understand them from all angles so you can find the best possible solution. Take into account all their current assets, debts, liabilities, and income.
- Take inventory of legal and financial documents. This includes contracts, account numbers, birth certificates, deeds, wills, and insurance policies.
- Double-check the validity of all these files, and make sure that every account is still in good standing.
- Compile all this information because you need documentation if you’re going to fix issues or make claims. Make sure you file documents with sensitive information in a secure storage solution or location.
3. Establish a new budget
After you’ve done a thorough evaluation of your parent’s current financial situation, now is the time to establish a new budget or a payment scheme if there are debts that need to be paid. Here are some pointers to remember for this step:
The first step is to work with creditors to address problems like overdue or charged-off accounts. If you find that your parent is no longer able to pay off the debts, speaking to a lawyer might be a good way to know what your options are. A certified credit counselor might also be a big help in terms of coming up with a feasible budget or spending plan for your parent or parents. If you have the financial capability to bail them out, do so. Just make sure not to hold that help over their head—doing so is considered financial abuse, and that’s the last thing you want to do.
The next step is to create a new budget as well as a spending plan. Giving your parent or parents allowance might seem counterintuitive and unnatural, but if it will help control their spending or will prevent them from being scammed or defrauded, then it’s a good deterrent.
4. Make the habit of documenting everything
The task of being responsible for somebody else’s money can be stressful. Finances can also drive a wedge even in families with strong connections and relationships. To establish trust, make the habit of documenting everything. Keep receipts of every financial move or transaction you make. Having the ability to track your transactions will help build trust between both parties, and it will help ward off any ill feelings or negative concerns.
5. Remember to keep their best interests at heart
And last but not the least, remember that this arrangement is for your parent’s highest good, and no one else’s. The 2021 film “I Care a Lot” exposed all the ways that a system as conservatorship can be ripe for exploitation, and managing our parent’s finances can be the same way. Remember that this transition is to ensure your parent’s best interests at heart, and to ensure that dignity is bestowed upon them throughout this new chapter.
This process can be stressful. But if you lead with love and trust, then it can be seamless and for the good of everybody. Good luck!