FINANCIAL TIPS FOR ADULT CHILDREN OF ELDERLY PARENTS

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1 FINANCIAL TIPS FOR ADULT CHILDREN OF ELDERLY PARENTS PREPARED BY:

2 As our parents get older, family roles can shift in big ways. Older parents can suddenly seem distressed by financial management, and taking it on can be overwhelming for adult children. Siblings need to cooperate, parents need to be willing to relinquish control, and everyone needs to communicate clearly none of this is easy. This booklet is designed to assist you, your siblings and your parents to make this challenging transition successfully. We ve found that these steps and tips make it easier. The goal is to create the best financial outcomes for your parents and their heirs, and to create and sustain a positive trusting atmosphere for your family. It s not easy to watch your parents age. Doing what you can to gracefully change your financial roles, in a way that s best for your family s finances minimizes stress and makes the most of your time together.

3 BEFORE ALL ELSE This workbook is appropriate only if you already have a good relationship with, and consent from, a parent who is legally competent. Your parent should have the mental capacity to handle their legal and financial affairs, even if they need daily assistance with their physical care. If your parent is not legally competent or unwilling to involve you in their financial affairs, there are other avenues that you must pursue in order to assist them. An elder law attorney ( can assess the situation and make appropriate recommendations. First, take a deep breath. Begin with the right frame of mind check your opinions at the door. The attitude you adopt in assisting your parents with financial decisions is very important. Success demands that you step away from traditional child-parent dynamics. Consider yourself a fiduciary in all interactions regarding your parent s finances. As a fiduciary, you must, at all times, act in your parent s best interests. So, unless her spending puts her at risk of running out of money, pay your mother s bills without judgment about what she bought or how much she spent. She s lost some of her independence, but she is still an adult. The bottom line is that your attitude and choices must not be driven by your own financial stake in the outcome. Switching roles is hard. Be gentle. Imagine how hard it must be for your parent to give up control. It is rare that parents have already involved children in their financial affairs. As stressful and time-consuming as it must be for you to take on the responsibility, it s even worse for your parent to give up the responsibility to their child. Be sensitive to how it must feel for your mom or dad as you dive into the details of their private financial affairs. Respect them, even if you do not respect every choice you discover that they ve made. Digging into the details can be an emotional experience and you can feel a bit like a voyeur. Remember, take the attitude of a fiduciary ( this is my job ) to help stay above the bickering. 2

4 Make a Pledge to Care. Write down the ground rules to lay the foundation for success. We ve attached a sample Pledge to Care, a document that clearly lays out exactly how you and your siblings will approach your responsibilities. Use this as the starting point for your new role. Even the process of completing it provides an opportunity to communicate what is so critically important but often difficult to say. Prepare a pledge that is appropriate for your family, discuss it with your parent, and sign it. These are designed to spell out the assumptions under which all involved agree to participate in this undertaking. Most important, a signed pledge is consistent with a fiduciary approach to handling financial responsibilities. Get the whole picture. Learn every detail of your parent s financial situation. It s easy to make assumptions about your parent s finances. Knowing that the monthly $4,000 income from your dad s Social Security and his pension is a tad more than the cost of the assisted living center is comforting but it may not be the whole picture. Perhaps there are unpaid credit card balances, or other expenses that make this income inadequate. Write down what you know, or think you know. You will want to confirm all of this. Perhaps you think that dad paid off the mortgage a few years ago. Don t be surprised to find that he took out a small home equity loan to help your sister pay for her daughter s wedding last year. Your preliminary list will give you a window into where you need to look further. Use our Inventory of Financial Information to fill in all the blanks and get a full understanding of your parent s financial picture. What s the password? Make sure you find the info, in file cabinets or online. Access to information is the key to learning everything you need to know. But be ready because access could be a problem. With permission obtained in the Pledge to Care, the first step is to spend an afternoon going through the financial files in your parent s home or on their computer. You ll need to know usernames and passwords for any information stored electronically. The job of compiling the full financial inventory will probably include digging through old file cabinets, too. If your parents prepared a personal data record that lists all financial, legal, medical, insurance and professional advisor information, as well as the location of important records, start there (Everyone should prepare this document regardless of age). 3

5 Get organized. Use the inventory to pull it all together. The attached Inventory of Financial Information is a useful tool as you pull what you find into shape. Plan to approach this task in phases, and set realistic goals. In other words, don't expect to get entirely up to speed in one weekend. If you are dreading this role, get some support. Not everyone is cut out to handle financial matters with as much attention to detail as this requires. If you are not able to find time to pay your own bills or review your own investments, it is unlikely that you will be able to do this for your parents as well. If resources permit, a financial planner can help at this stage. Personal finance can be divided into basically four areas: assets, liabilities, income and expenses. Start by organizing the information you gather accordingly: Assets - What is owned. Examples: Home, car, investments, timeshare, 50% of some family land in Montana, etc. Concern yourself with major items, not the patio furniture or the silver. Liabilities - What is owed. Examples: Mortgage, car loan, outstanding credit card balance, life insurance policy loan, unpaid income taxes, etc. Income - List amounts and their source, and how and when they are received. For example, $3,459/mo, pension from Federal Government, by direct deposit, 1 st of the month. Expenses - Amounts paid periodically. List amounts, payee, how and when paid. For example, $690, Geico, automatic debit, semi-annually. If your parent is able, sit down and review what you learn. Your parent will gain a sense of involvement and you ll get valuable background information. Perhaps you will learn about the family dynamics regarding the land in Montana or will find out if the life insurance policy was purposefully allowed to lapse or if the premium was just not paid on time. (Again, make no judgments.) If it is helpful to you, organize a calendar of important dates (e.g., dates when property taxes are paid, income taxes filed, insurance premiums are due, etc.). Also, as part of this step, gather all important financial documents. The inventory helps compile a list of what should be included. 4

6 Financial triage. Deal with what is directly in front of you. Is your parent unable to live alone without assistance? Has there been a car accident and the threat of a lawsuit? Are you getting a sense that the bills aren t being paid on time, or at all? Are the files a mess? Family issues such as these often leave us paralyzed with inactivity, but don t let that happen. Make it a priority to handle the most pressing issues. A financial mishap or crisis of some kind might be what led you to this step to begin with, so remember to stay on top of it all. Again, remember your fiduciary duty and take necessary action. Bridge the distance. Get local help if you live far from your parents. If you live far from your parent, you can work with local professionals to assist you. A geriatric care manager (GCM) in your area can recommend someone in your parent s locale. The GCM will evaluate your parent s situation, suggest options, and coordinate other professionals. Even if your mom lives a mile away, GCMs can be useful if you are too overwhelmed to handle all of your parent s affairs. With the proper legal authority you can also engage a financial professional to assist with the financial issues. Google The National Association of Professional Geriatric Care Managers to start your search. Phone interviews can be the first step to finding someone you like. Succeed with a system. Apply what you ve learned. If you can, make a quick assessment of the financial situation and move in the right direction. Prepare a statement called Sources and Uses. Typically this statement covers all activity in a year. List all sources of cash (income), then projected uses of cash (expenses) and finally available assets that can be liquidated to cover cash shortfalls. For example, available assets may include mutual funds or bank accounts and even personally held assets that are no longer in use, such as a car. To stay on top of the monthly bills, you can either decide to do that yourself, or hire a daily money manager or bill paying service if that makes more sense. For more long-term planning, you might want to consider meeting with a financial advisor. Assuring yourself that your parents will not outlive their money is critical to making sure that your own 5

7 finances will remain sound. It s vital that you arrange the financial situation to be sustainable on a long-term basis. For instance, if a full-time aide in the home will be $30,000 per year and your mother can t afford this on a long-term basis, you must consider other options immediately. A good care manager is invaluable in helping with your alternatives. A financial advisor can help you make a realistic assessment of whether your parent s financial base is adequate and can advise on the best way to liquidate assets to stretch coverage. To be on the safe side, assets should last to a reasonable period beyond calculated life expectancy. A financial advisor can assist you with what living arrangements are within your parent s means. Typically the advisor will organize the investments, generate the income required in a way that preserves assets as much as possible and will review and confirm periodically that the situation is still healthy. This can be comforting. Unless you are already named as the agent in a durable power of attorney, it is unlikely that you will have the legal authority to act on your parent s behalf after their incapacity. Check with your parent s attorney or other advisor to see what your next steps should be to obtain the authority you may need. A FINANCIAL ADVISOR CAN ASSIST YOU... THIS CAN BE COMFORTING. 6

8 Managing a Professional Team If you choose to bring in more than one of the professionals outlined on the next page, remember that each of these experts knows a specific area of elder care, but they are also attuned to working with other professionals in the geriatric care community. Involving them expands the network of people and information available to you. Work as the central hub, and keep everyone connected. Each year, send a here s what s new to all of the professional advisors, including your parent s health care professionals. You might be surprised at how useful this is. For instance, letting the team know that you have engaged a daily money manager because your dad was forgetting to pay bills is useful information for your father s doctor as she considers medication schedules; and it gives the attorney a heads-up that implementing the financial power of attorney might be imminent. 7

9 WHERE TO FIND PROFESSIONAL HELP Financial Advisors: If you are concerned that there may not be enough money, do not hesitate to consult with a financial advisor or planner. Financial planners are trained to see how all of the financial pieces fit and where pitfalls and opportunities exist. A planner will look at the long term and help you make current decisions that can improve or extend financial security. Most financial advisors also manage your investments according to an agreed-upon plan. Financial planners are compensated in a variety of ways. We recommend that you only consider fee-only advisors. A fee-only financial advisor does not have a financial incentive to sell your parent unsuitable insurance or investment products. Locate a fee-only financial planner via The National Association of Personal Financial Advisors (napfa.org) or The Garrett Planning Network (garrettplanningnetwork.com) or the Alliance of Cambridge Advisors (acaplanners.org). Daily Money Managers: A daily money manager provides bill paying and bookkeeping services. A list of daily money managers in your area can be found at The American Association of Daily Money Managers (aadmm.com). A list of questions to ask when interviewing potential daily money managers is provided on this site. Professional Geriatric Care Managers: A care manager can coordinate home aides, living options, health care and other key services that your elder loved one may need. A list of care managers can be found at The National Association of Professional Geriatric Care Managers (caremanager.org). The site includes useful resources to help you decide if a GCM is right in your situation. Attorneys: Your parent may already have an estate planning attorney and if so, you should begin by contacting that person. If your parent does not have an estate planning attorney, The National Academy of Elder Law Attorneys (naela.org) provides a search feature to find a lawyer in your area who is trained in legal issues for the elderly. Accountants: A Certified Public Accountant (CPA) can be found via most state CPA societies. Your parent may already have a CPA and if so, you should begin by contacting that professional. Public Resources: Many local and national caregiver support groups and community services are available to help you cope with caring for your aging parents. If you don t know where to start, the U.S. Department of Health and Human Services offers an eldercare locator service that can assist with finding publicly available financial, legal, transportation, health and other resources for the elderly: eldercare.gov or Eldercare Locator is an information and referral service sponsored by the federal government that can direct you to resources available nationally or in your area. 8

10 PLEDGE TO CARE The Pledge to Care can be used to establish an understanding between and among all parties as to why and how they will approach handling the financial affairs of the elderly person. These are designed to spell out the assumptions under which all involved agree to participate in this undertaking. Although this document is not legally binding, it establishes the ground rules for everyone s role and provides the elderly parent with information, and hopefully peace of mind, about how these responsibilities will be approached. The pledge also provides an opportunity and a platform to communicate what is often difficult to say. Most important, a signed pledge is consistent with a fiduciary approach to handling financial responsibilities. A Pledge to Care can even be written for unrelated parties. And a pledge can and should be created among siblings in order to develop clear communication and responsibilities with respect to this undertaking. Visit to see a sample pledge for siblings who jointly assume responsibility for an elderly parent. A pledge should be developed by the parties involved, in their own words. The document below is only a sample and should be further customized to fit your circumstances and the tenor of your family dynamics. Prepare a customized copy and sign them, making sure that each party has a copy. 9

11 A SAMPLE PLEDGE TO CARE: As your (e.g., son, cousin, caring friend), I am grateful for the wonderful years we ve had together, and all that you have given me in life. I especially appreciate (e.g., your caretaking of me in my younger years, the education you made possible for me, your kindness as a neighbor, etc.). Fortunately, we have the pleasure of growing old together, and you are getting to the point where I really would like to watch out for you. I want to do this respectfully, keep you fully informed, and keep you in control. I will approach this from a place of kindness and respect, and have created this Pledge to Care to help guide us through this period. While this is not a legal document, it is an agreement to provide clarity and understanding to each other regarding the management of your personal finances. My primary purpose is to organize your financial information, make sure all bills are current, and make sure your best interests are taken into account so that you are supported in the future as your financial resources permit. In order to help you, I will need information from you, including access to your confidential financial files. You agree to provide me with the information that I may request and to discuss any questions I may have. I understand that this may be uncomfortable and I will be respectful of your concerns. I will maintain strict confidentiality of the information that becomes available to me. I will not discuss this information with any other family member, except as you may authorize or as may be required by your attorney, accountant, or other advisor to you. I can help you better if I am in communication with your banker, your investment advisor or financial planner and anyone else whom you feel is important in your financial life. By initialing this item you authorize me to contact them to discuss your financial affairs. I agree to spend the time required to fulfill the obligations I take on (such as paying your bills, organizing your files, or communicating with your financial professionals) to help you manage your finances. If I can t carry out my promises in a respectful and timely manner, I will resign from this responsibility. I will not make any changes in your finances without first discussing my suggestions with you and without your written approval. I cannot and will not attempt to act on your behalf without the legal authority to do so. I will gladly provide a report of my activities to whomever you wish. I will review this pledge with you (and make mutually agreed upon changes) at least once per year. If you wish, I will discontinue helping you with your finances at any time. Signed - (you) Relationship Date Signed - (parent/relative/friend) Relationship Date 10

12 INVENTORY OF FINANCIAL INFORMATION - as of (date) A record of all financial, legal, medical, insurance and professional advisor information, as well as the location of important records. ASSETS & INCOME List all income: income amounts, source, how and when received (e.g., IBM pension $3,560/month 1 st of month) Annual pension, Social Security, and annuity statements List all assets (e.g., car, home, other property) Checkbooks or registers Income tax returns (2 years)* Investment and bank statements Photos of all valuables in the home LIABILITIES & EXPENSES List all regular expenses, amounts, how and when paid (e.g., Comcast $59, mortgage $670, pays bills 20 th of month) List all liabilities (e.g., mortgages on all real estate, credit card balances, car loan, etc.) Medicare/Medigap documents describing coverage and costs; Medicaid documents, if applicable Insurance policies (health, homeowners, long term care, auto, life); are all policies paid up and current? Legal documents (wills, trusts, partnership agreements, etc.) List of advisors (if appropriate) RESOURCES Books: A Bittersweet Season, Caring for Our Aging Parents - And Ourselves, Jane Gross Coping with Your Difficult Older Parent, Grace Lebow & Barbara Kane The Complete Eldercare Planner, Joy Loverde How to Care for Aging Parents, Virginia Morris & Robert M. Butler Learning to Speak Alzheimer s - A Ground Breaking Approach for Everyone Dealing with the Diseas e, Joanne Koenig Coste Mom Always Liked you Best, A guide for Resolving Family Feuds, Inheritance Battles and Eldercare Crises, Arline Kardasis, Rikk Larsen, Crystal Thorpe and Blair Trippe Links: Excellent suggestions on how to organize financial information: Excellent list of documents to collect: The New York Times has a wonderful site that covers much more than just the financial elements of aging parents: 11

13 Attorney Name: Address: Tel: Fax: Tax Preparer Name: Address: Tel: Fax: Financial Planner Name: Address: Tel: Fax: Investment Manager Name: Address: Tel: Fax: Insurance Agent Name: Address: Tel: Fax: Geriatric Care Manager Name: Address: Tel: Fax: * Federal income tax law provides several tax benefits if you are supporting your parents financially. For example, you may qualify for the dependent care credit, dependence exemption and medical expense deductions. 12

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16 This document was prepared by The Family Firm, Inc. The Family Firm is a fee-only financial advisory firm helping individuals and families manage their financial resources successfully throughout their lifetime. The firm has offices in Bethesda, Md and San Diego, Ca. We can be reached at or via staff@familyfirm.com. This booklet can be downloaded from our website at All rights reserved. printed on recycled paper 15