When the moment comes that you need to take control of your parents’ finances, it’s tough on everyone involved. If your parents become ill or incapacitated, someone needs to manage their accounts, pay all their bills, and make sure everything is safe and secure. Often, the task is left to an adult child. Being ready to face that financial situation is not only important, but it could also ease the pressure of those trying times. Taking the proper steps beforehand could help ensure your parents’ finances are taken care of for the present and the future.

What do I do if I need to take over my parents’ finances?

Generally, the first step you will need to take is obtaining a legal document called a “durable power of attorney,” or just “POA.” This gives you, as the agent, legal power to sign your parent’s name on any document and act on your parent’s behalf in any situation. It’s different from a medical power of attorney (in which you direct their health care and make medical decisions). And it’s different from a guardianship (where court-appointed guardians control entire estates).

“Durable” means the POA doesn’t expire if the person becomes incapacitated. Also note that a POA ends when the person it’s for passes away. To continue control after someone passes, you need to be appointed as the estate’s trustee. That usually requires submitting a will to the local probate office. Or establish a living trust or irrevocable trust, in advance, with you as trustee. Seek an elder law attorney to help with any of these options.

 

What are the warning signs that my parents need help?

Are your parents having an unusually tough time with financial accounts? As the years pass, eyesight and writing skills might degrade. Even normal cognitive decline could eventually make simple math difficult. Here are some warning signs to watch for:

  • Is their handwriting becoming poor or unreadable? This not only leads to mistakes on checks, but it’s a clear sign of cognitive diminishment.
  • Have they stopped balancing all their accounts or monitoring for unauthorized charges?
  • Do they pay bills by cash instead of dealing with online banking or writing checks?
  • Have they fallen behind on any payments?
  • Do they have trouble getting out for shopping or other tasks?
  • Are they getting fraudulent calls or fake notices of default? Often seniors are preyed upon by scam artists trying to convince them to sign over accounts and funds.
  • Has a recent medical event made them unable to successfully handle normal financial decisions?
  • Is there an unusual amount of unopened mail laying around?
  • Do they write checks to people or organizations new or suspicious to you?

Should I put my name on my parents’ bank accounts?

Your parents’ finances will be easier to deal with IF you get ahead of the curve. One of the first things you can do is become co-signer on your parents’ savings and/or checking account. If they can’t make it to the bank, you’ll need a POA to be added to your parents’ accounts.

If they visit the financial institutions with you, and personally authorize the co-signing, you won’t need a POA to start. But be ready for a level of suspicion from the bank agent, and don’t take it personally. They’re trained to be aware of people trying to exploit the vulnerable, and they’re concerned about your parents’ affairs. The agent might explain what’s going on and ask your parent several times if he or she understands what co-signing means.

This process isn’t as time-consuming as people think. If your parents are mentally able to handle this and agree, you could be done within 30 minutes.

Remember to request a debit card in your name while you’re in the branch. It makes paying bills and small expenses much easier. It also allows you to withdraw cash from an ATM if needed. Later, set up automatic payments and move to paying bills online to take care of their utilities and other expenses.

How can I legally manage loved ones’ finances?

There are many ways to take action. Having your parents’ finances organized helps create a solid picture of their current financial situation. That will help guide you through what is often a stressful time. It helps you make informed decisions when you need to.

Gather the information you’ll need

Here’s a list of tasks you may need to do. Many require a POA if your parent isn’t able to assist you in-person or on the phone:

  • Get a multi-slot document binder and organize all legal documents in one place for easy access. Also, obtain a fireproof box or safe to keep those documents in.
  • Round up all of your parent’s financial information, including all account numbers and what company they’re used for. Get the contact information of their financial advisor, insurance agent, attorney, mortgage company rep, and other legal and financial agents. If a financial institution isn’t local, get the customer service contact info as well. Gather information now while you have the time, and your parents and family members are able to help with details.
  • Checking and savings accounts: Get statements and balances.
  • Current direct deposits: Make a list of Social Security, trust payments, and all other retirement income. You’ll need to know their total annual income.
  • Current expenses: Make a list of what they are and how much is paid monthly or yearly.
  • Credit card statements: Get balances, monthly payments, interest rates, and customer support contacts.
  • IRAs and CDs: Get amounts, types, maturity dates, who the beneficiaries are.
  • Outstanding loans: Amounts, monthly payments, payoff dates.

Collect other essential legal documents and financial records

In addition to financial information, you may want to make sure you have copies of important legal documents such as:

  • Mortgages, reverse mortgages, or apartment rental agreements.
  • Home deed information. Who’s listed on the deed, what the tax assessment is, the lot number and section, other stipulations, or co-owners.
  • Stocks and bonds. Are the certificates on-hand, or held by a broker? Call for updated statements.
  • Home and car insurance policies. An insurance agent could provide copies.
  • Medical insurance plan information, such as authorized local providers and pharmacies.
  • Automobile, RV, boat, or other titles.
  • Any cemetery or family plots and/or funeral insurance policies owned.
  • Past tax records, especially if your parents file every year.
  • Open any safe deposit box they own. It’s best to have a witness video the opening and record the contents of the box.
  • Collect other legal documents, such as revocable living trust agreements, medical POA, or health care proxy. Check for life insurance and other policies through former employers.
  • If they’re a veteran, they may qualify for burial benefits. Find out the details in advance.

It may feel awkward at first, but you’re not alone

While it may be a tough conversation to initiate, talking with your parents ahead of time is often the best approach. Waiting until emotions are heightened and communication has declined may only make it harder. Be kind, sensitive, and loving about it — listen respectfully to their questions and concerns. And remember, you’re not alone.

If you’d like to learn more, check out Best Egg’s collection of financial resources at bestegg.com