Adult Children & their Parents’ Finances

It is a little more sensitive when we have to talk to our parents about their finances as opposed to our kids. Our young kids don’t have a choice, right? But what about our parents? What would happen if we suddenly had to take over the finances of our aging parent? Are you prepared to do so?

It is definitely a tough conversation to have for many families. In fact, it may be a near impossible conversation to have. But, it is extremely important to discuss with your parent what happens if they become incapacitated. Even if your parents don’t want to get into the details of their finances—which is perfectly understandable—there are important things that should be done and which can be done without revealing too many personal financial details.

Here are some basic things you should know, without necessarily having to know all of your parent’s financial information:

DOES YOUR PARENT HAVE A DURABLE POWER OF ATTORNEY FOR THEIR FINANCES?

This is a very important document that anyone 18 or older should have in place, but the likelihood of one being needed obviously increases with our age. With a durable power of attorney (POA), someone names another person as their agent to handle their financial matters in the event of incapacity. The person making the POA doesn’t have to give up any control over their finances when they sign the POA. There are different ways to name one or more agents. I recommend having an estate planning and elder law attorney prepare the POA because there may be certain specifics that need to be addressed when it comes to certain needs of the elderly.

WHERE DO YOUR PARENTS KEEP THEIR FINANCIAL RECORDS?

Having proper documents prepared doesn’t matter if they can’t be found. Encourage your parent to tell you where their important financial and estate planning documents can be found, even if they don’t show them to you now. A safe? Safety deposit box? Desk drawer? I can’t tell you how many people come to see me and know their parents have these documents, but they simply cannot be found.

WHERE DOES YOUR PARENT MAINTAIN BANK ACCOUNTS AND FINANCIAL ACCOUNTS?

What banks do your parent use? What kind of accounts do they have at each (checking, savings, CDs, money market)? Does your parent have a financial advisor or investment company? Who is your parent’s mortgage company? Does your parent have life insurance and through whom?

WHAT MONTHLY EXPENSES DOES YOUR PARENT HAVE?

It is important to know who the mortgage company is, who a car loan is through, are there credit cards? Who are utility providers? What are other recurring expenses? Are there any automatic debits or payments?

WHAT ARE THE SOURCES OF ANNUAL INCOME?

Do your parents receive social security? What about a pension? Maybe teacher retirement? Do they receive dividends or royalties? Your parents may not want to disclose amounts, but it is important to know the sources of income.

WHAT INSURANCE POLICIES DO YOUR PARENTS HAVE?

Does your parent have long-term care insurance or life insurance? These policy documents are often lost or nowhere to be found. Just asking the question may jog your parent’s memory about policies they may have forgotten about.

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WHAT ARE THE USERNAMES AND PASSWORDS FOR YOUR PARENTS’ ACCOUNTS?

This one may be a little sensitive, which is understandable. However, it is important to know usernames and passwords for all online accounts. Examples include everything from bank accounts, utility providers, and cell phone providers (and even social media accounts, even though they are not finance related).

WHAT PROFESSIONALS HAVE YOUR PARENT EMPLOYED

Do your parents have an attorney who may know about their estate planning? Do they have an accountant or financial planner? If so, who are they and how can they be contacted? Where is this information kept?

If something happens to your parents, these are all questions you will wish you had known, and if your parent knew the problems not knowing can cause they would definitely want you to know. All of these questions can be asked and answered without getting into financial details, which is often a barrier that an elderly parent doesn’t want to cross. Providing too much financial information is often viewed skeptically as a way that a child is preparing to take over finances, so be prepared to address that issue. 

Even if your parent don’t want to provide this information now, please encourage them to put it all in a single document and let you know where that document is kept! It will make it easier on everyone!