Eventually, the time will come when your parent is no longer able to manage their money. It may be sudden or gradual, depending on the situation. The prospect of managing someone else's money can be stressful or intimidating for some people, but with the proper preparation, it does not have to be. How well the situation goes depends on how familiar you are with the things you need to know – before taking over someone's finances.
Here are some things you should know before the situation arises and it is necessary for you to step in and manage your parent’s finances.
Do You Have the Authority – It is imperative that you be assigned Durable Power of Attorney before management begins. This is secured through the courts and gives you the authority to make account changes, pay bills, and deposit money on behalf of your parent. Without this, many banks and financial institutions will deny you access to your parent's account.
Where They Keep Important Documents – Many people keep important documents (like social security cards, birth certificates, financial information, etc…) in a variety of places. Without knowing where these are located, it can be like trying to find a needle in a haystack. Ask them where these are located. Are they kept in a bank, safety deposit box, or even under the mattress?
What Financial Institutions They Use and How To Access Them – Ask them to write down the names of their banks, financial advisor, or any other pertinent information. Have them include account numbers, passcodes, usernames, and passwords. If you do not have this information and suddenly need to access accounts, it can be challenging even with the proper authority. It is best to update this every six months in case information changes.
Their Monthly Expenses – Know what is coming out of your parent’s account on a monthly basis. Knowing this will help prevent fraud and ensure they are not overpaying for any service they may have. Some bills may include mortgage, car payments, credit card bills, internet, electricity and a variety of other household expenses.
How They Pay Their Bills – Also relevant along with their account information is how they pay their bills on a monthly basis. It is possible things are automatically withdrawn from their account, or that they mail a check on a monthly basis. If they are tech-savvy, they may even pay them online!
Their Monthly Income – Chances are, even if they are retired, your parent is receiving money on a monthly basis from a variety of places. From social security to pensions, dividends, and Medicare or Medicaid – there are lots of standard programs that give seniors money. Knowing how much coming from each deposit can help you more accurately determine what your parent can afford and how to get them the best care they need.
We hope when the time comes to take over your parent's finances that the transition is a smooth one. Why it may be difficult to start the conversation early, being prepared is the most important element to making sure their money is well managed and safe while they are unable to care for it themselves.