Helping Parents with Financial Planning

When discussing finances with your parent and their potential future needs, we feel there are four essential steps to making a sound financial plan. This process should be done early in their retirement, kept updated, and reevaluated as their health changes or they need more assistance such as assisted living.

1. Evaluate Your Parent’s Assets.
Help your parent take a full inventory of their assets and debts to understand where they stand financially. A spreadsheet offers a straightforward way to track each item. If your parent is not tech-savvy, help them input their information into a spreadsheet. This inventory needs to include their debts, liability, savings account balances, income revenue, emergency funds, and insurance policies. Remember to list their properties, vehicles, and any other valuables that might contribute to their bottom line. While evaluating their assets, it is also an appropriate time to evaluate or, in some cases, establish their budget. This spreadsheet should be revisited often and kept current. Once you understand their financial picture, your family can plan accordingly.

2. Make an Estate Plan.
If in the future, your parent is unable to make their own financial decisions or they pass away, your family will want to know how your parent wishes their assets to be distributed. Estate planning can be complicated, so we encourage your parent or family to meet with a financial adviser or lawyer to help walk them through the process. Regardless of their net worth, an estate plan is recommended, so your parent’s wishes are legally bound, taxes are addressed, and your parent doesn’t hand over a costly administrative nightmare to a member of your family. Estate planning should include:

• Creating a will and determining an executor
• Assigning a power of attorney and healthcare proxy to make decisions if your parent is unable
• Appointing beneficiaries for retirement accounts and insurance policies
• Determining funeral arrangements
• Preparing for estate taxes
• And in some cases, creating a trust

3. Communicate Decisions with the Family.
Many parents are confused about what they should share when it comes to their estate plan. A parent could give their family peace of mind by letting them know their decisions are made, and their finances are in order if they were incapacitated or pass away. Your parent doesn’t need to disclose the details of what they are giving to each family member and stir up unnecessary tension. But your parent should make their family aware of the key points in their estate plan. Your parent can also reduce stress and confusion if they share the wishes expressed in their healthcare proxy. If they have met with an attorney or financial adviser, your family may find comfort that their wishes have been legally documented, and an executor has been chosen.

4. Update Documents Regularly.
Keep all documentation updated by reviewing them every 1-2 years. This paperwork needs to be kept in a safe place, either a safe deposit box or a secured location in their home. The family or their executor needs to know where the documentation is stored and how to gain access if required. A regular review of assets should then match the estate plan. Your parent should regularly consider any changes to their distribution plans, such as the birth of a grandchild, divorce in the family, or death of a spouse. Help your parent obtain copies of their insurance policies, annuities, and retirement plans to review their beneficiary designation forms. Set aside time to help them organize any related documentation that they should have on hand, such as their latest tax return or funeral instructions.

Most elderly parents are on a fixed income, so families need to make sure their parent is financially healthy. Your parent may not be comfortable setting up and sticking to a budget. But staying on a budget will allow them to live within their means and avoid racking up costly credit card bills. Many adult children find they need to step in to help guide a parent who may have lost their spouse who handled the finances for their household.

Your parent may become overwhelmed or not mentally able to manage their retirement funds. If your family notices behavioral changes in your parent, like forgetfulness, you may want to check that their bills are being paid on time or paid at all. If they miss an insurance payment, this could be financially disastrous for an elderly individual in need of care.

Seniors are often targeted by scammers who prey on their vulnerability or isolation to take advantage of them. Review these types of scams with your parent and offer to be available to help them if they are confused about financial matters. It’s critical that your parent avoids financial pitfalls as they get older, which can devastate their savings. Their finances need to be secure for required expenses such as medical costs, home care, assisted living, or nursing home expenses. Understand that you are not being nosy by checking on their finances but safeguarding their money and future.