Nothing truly prepares you for the day you\u2019re sitting across from your aging parents, trying to piece together a financial picture they have spent a lifetime likely keeping private. For many adult children, that conversation often comes too late, triggered by a diagnosis that changes everything.<\/p>\n
Mine came when we learned that my 86-year-old father had dementia, and I was living 200 miles away from my parents. I am an only child. And I had no idea if they had enough money to pay for a home health aide and memory care.<\/p>\n
I knew that my father had a pension, that he and my mother collected Social Security and that they had a generous health insurance policy. I knew nothing more.<\/p>\n
Eventually my mother revealed something big: She had managed to sock away half a million dollars. When my parents sold their house on Long Island and moved to a 55-plus community in New Jersey in 1998, she realized their tax bill had plunged. She opened a money-market account and saved the difference every month.<\/p>\n
Her financial discipline floored me. I stopped worrying about paying for their care, and I started planning for them to move to a senior living community a mile from my home. But I skipped the most important step. Instead of asking my mother what she wanted, I told her what she needed. That mistake shut down our conversation.<\/p>\n
Experts who work with aging parents and their adult children say this is one of the most common mistakes the children make: treating their parents\u2019 crisis as a problem to solve.<\/p>\n
\u201cLead with love, not logistics,\u201d said Jessica Smith, a co-founder and an adviser at Vitality Wealth in Boise, Idaho. Before getting into paperwork and bank accounts, ask your parents what they want and how you can support them, she said.<\/p>\n
Here are five ways adult children can prepare to help manage their parents\u2019 finances, regardless of how much the parents may have been able to save.<\/p>\n
Parents often hesitate to talk with their adult children about their finances, but that\u2019s not always because of distrust or secrecy, said Ashley Quamme, a financial therapist and founder of Beyond the Plan in Augusta, Ga. \u201cThe underlying thought is often, \u2018If I admit I need help, then I\u2019m admitting I\u2019m declining.\u2019\u201d<\/p>\n
Yet it\u2019s essential to start these conversations before a crisis hits, particularly if you\u2019re noticing a change in a parent\u2019s health. \u201cI\u2019ve seen too many families try to get this in place when it\u2019s too late, and it becomes much more difficult and expensive to properly represent loved ones,\u201d said Ben Smith, the founder of Cove Financial Planning in Wayzata, Minn.<\/p>\n
Having that conversation can be challenging, and the onus is often on adult children to broaden the discussion, said Cathleen Tobin, the owner of Moonbridge Financial Design in Rhinebeck, N.Y.<\/p>\n
Ms. Tobin, 53, and her 92-year-old father, Ed Tobin, started talking about his finances about eight years ago after a national retailer announced a major customer data breach. Ms. Tobin used the news as an opportunity to ask her father if he had a credit freeze and offered to show him how to get one.<\/p>\n
\u201cHelping your parents in small ways builds trust and normalizes your involvement,\u201d she said.<\/p>\n
Their conversations deepened in 2021 after Mr. Tobin fell for an online financial scam<\/a>. After that incident, he agreed to share his account passwords with her so they could both watch for unusual transactions.<\/p>\n The ways you help will increase gradually, Ms. Smith said. Initially, your parents might continue to manage their own finances while you check in occasionally. When you notice it\u2019s becoming harder for them to manage, suggest working through their finances together, she said. When it becomes frustrating for them to steer things on their own, offer to take on the task while still giving them control by saying, \u201cI\u2019ll manage this for you and report back.\u201d<\/p>\n 2. Understand their budget<\/p>\n Once your parents are open to talking, find out where they bank and how they pay their bills. Don\u2019t be surprised if they still receive paper statements and pay bills by check<\/a>, said Dinon Hughes, a partner at Nvest Financial in Portsmouth, N.H.<\/p>\n Print the last 12 months of statements from their accounts and credit cards to determine what money is coming in, how much is going out and which bills are paid monthly, quarterly or annually, Ms. Tobin said. Figure out if your parents still get paper pension and Social Security checks or if the funds are deposited directly.<\/p>\n Looking into your parents\u2019 affairs may reveal they need financial help. If that\u2019s the case, and you can afford to cover some bills, it\u2019s important to decide how you will contribute, Ms. Smith said. Set a monthly maximum and be clear about what you will pay for \u2014 perhaps only necessities like groceries, prescriptions and medical co-pays.<\/p>\n Don\u2019t lose sight of your own financial goals, Mr. Smith said. \u201cYou don\u2019t want to jeopardize your own retirement.\u201d<\/p>\n 3. Get account access<\/p>\n When it becomes harder for your parents to manage their finances, ask to become an authorized user of their accounts. This will allow you to deposit, withdraw and transfer funds; pay bills; and create a unique user ID and password to manage their accounts, Ms. Smith said. However, when your parents die, the accounts will default to either the listed beneficiary or the heir named in the will or could wind up in a court-supervised legal status called probate. (This can take many months to play out.)<\/p>\n Adult children often push their parents to add them as a joint owner to every account possible \u2014 bank accounts, utility bills, credit cards and sometimes even their investment accounts and mortgage \u2014 but that has serious implications, Mr. Hughes warned. He recommends becoming an authorized user rather than a joint owner because once you\u2019re added to these accounts, they legally become yours. That means that your creditors or anyone suing you can tap those assets, Mr. Hughes said.<\/p>\n Becoming a joint account owner also has tax consequences. If your parent\u2019s account has a value greater than $19,000, which is the annual gift exclusion<\/a> set by the Internal Revenue Service, you must file a gift tax return<\/a>, which could affect your tax rate, Mr. Smith said.<\/p>\n 4. Ask about durable power of attorney<\/p>\n A durable power of attorney<\/a> is a legal document that empowers a trusted person to make financial and health care decisions on your behalf if you are alive but incapacitated. Most people are familiar with a health care power of attorney, or P.O.A., because it\u2019s often done when you draw up a will, but many people don\u2019t realize that a health care P.O.A. doesn\u2019t allow you to make financial decisions for someone else, Mr. Smith said. For that, you need a durable power of attorney.<\/p>\n