Taking over a Loved One's Finances

While you certainly want to help your parents maintain their independence as long as it’s in their best interest, sometimes taking over the finances is a must. No matter the reason, the best time to talk about shifting financial responsibility is before it’s absolutely necessary. “You can always ease into it,” says Nancy D. Butler, a certified financial planner and long-term care specialist in Waterford, Connecticut. “Have your parents tell you how it’s to be done and you do the physical work for them. If you let them maintain the feeling of control, you’ll gain their confidence and as time passes, it can become easier to take on more control when it’s needed.” It’s best to set up a financial plan, power of attorney and will as early as possible. It frequently helps to loop a professional, like a financial planner, an elder law attorney or an accountant, into the discussion, too. He or she can help direct the conversation and avoid miscommunication. Here’s what you need to find out.

First Up

• Do you have power of attorney? In order to sign checks and access accounts, you'll need to show Power of Attorney documents to every financial institution you deal with. If your parents have not given you that right or created a living trust, and it’s too late to have that happen, you'll need to consult an elder law attorney and go to court to seek guardianship.
• Where’s the money coming from? Locate financial records including bank statements, tax returns, IRAs, 401k paperwork, annuities, insurance policies, safety deposit boxes, trusts and pensions. Pay close attention to the Schedule B on your parents more recent tax return. There, dividends, interest income and the names of financial institutions should be listed.
• Where’s it going? Tally monthly expenses with the help of receipts, credit card bills, cancelled checks and bank account deductions. And since a lot of people spend cash, pay close attention to how much money has been withdrawn from the bank. “It may not be possible to account for every dollar, so if the income doesn’t equal the expenses, that’s okay as long as the difference is reasonable,” Butler says.
• How much money is accessible? Look to bank and investment statements, or in safe deposit boxes, for the info. It’s also smart to have a financial professional review your parents’ portfolio.

Next up: Streamline as much as possible

• Set up Direct Deposit. Whether your parents are receiving money from Social Security or another retirement fund, arrange to have it directly deposited into their bank account. And be sure to double check to make sure the checks are actually getting deposited.
• Consolidate accounts. “But be careful. There may be high income taxes or investment fees to pay. Before streamlining have your financial advisors help you evaluate a cost-effective way to consolidate accounts to make management easier,” Butler says.
• Put bill-paying on autopilot. Arranging to have recurring bills, like utilities, mortgage, health and life insurance, rent and car payments automatically paid from their bank account. You can also do minimum payments on credit cards and loans so a scheduled payment is never missed. “Before doing this, however, make sure there’s always more than enough to cover the bills. If the balance is too low even one time, it can be a nightmare to fix,” Butler says.

Finally

• Get help. Your parents may be eligible for discounts on property taxes, utility bills and health care. The National Council on the Aging (benefitscheckup.org) can point you in the right direction.