Many people find themselves helping ill or elderly loved ones manage their finances.  The situation tends to be emotionally charged, leaving even the most financially savvy overwhelmed and unprepared for the task.

With an estimated 10,000 baby boomers turning 65 every day, the odds are high that you will eventually find yourself stepping in to manage a loved one’s finances. If you or someone you love is aging or facing the onset of medical issues, have a discussion and make a plan before help is actually needed.  Society tends to consider discussing money as taboo, but it is usually less threatening to discuss these issues while a person is still able to control their own finances.  Waiting until the need arises may mean your loved one will not be able to answer even simple questions, and worse yet, may not be able to grant you the authority to act on their behalf.

  • Power of Attorney: Obtain a durable power of attorney which will allow you to make legal and financial decisions for your loved one (the principal).  This form needs to be executed while the principal is still competent, otherwise a court will need to grant these powers.  The form can grant you authority effective immediately, or it can specify that authority will be granted upon a specific event, such as when the principal becomes incompetent. 
  • Bank and Investment Accounts: Gather a list of all bank and investment accounts.  Find out if there is a personal contact at the financial institution, so you can continue that relationship.  Are paper statements actually mailed or are they only available online?  Paper statements are becoming less common.  In these situations, without having a list of all accounts, you may never know if one is missing.
  • Know the Sources of Income:  Does the principal receive social security, pensions, disability, or long term care payments?  Once you have taken over the financial life of the principal, they will be counting on you to make sure they actually receive payments that are due to them.
  • Identify Monthly Expenses: Once you identify all recurring expenses, you can create a schedule to make sure nothing becomes delinquent.  Consider less obvious payments such as gardeners or dog walkers.  Make sure to review the principal’s checkbook and bank statements going back  several months to understand the spending pattern and make sure you have all information.  In today’s age of paperless billing, you may not actually receive a bill in the mail.
  • Online Access: If you have the luxury of easing into your new role, it may be easier initially to keep an eye on things by viewing accounts online, logging in periodically just to have an overview of what is going on.  This can also help to keep the conversation open, so you can ask questions about transactions you see happening online.  Gradually transitioning finances is usually less traumatic for all involved.
  • Health Insurance: Be sure you are aware of health insurance details.  Does the principal have medicare, or a medicare advantage plan?  Do they have a previous employer’s insurance? Their own insurance? You will want to understand the type of insurance coverage they have and arrange for any insurance reimbursements that may be due.
  • Long Term Care Insurance: Consider if there may be long term care insurance or a disability policy in place.  Are there payments that may be due from these plans?  Also be sure to continue paying premiums for these types of policies.
  • Taxes: Do not forget to consider the tax obligations for the principal.  Make sure you have contact information for their accountant, who will have information regarding any ongoing filing requirements.
  • Estate Planning:  Be sure to ask if there is an estate plan in place.  If there is, make sure it is reviewed regularly.  Many people make the mistake of setting an estate plan in place and then not updating it for new law changes, changes in the estate size, or changes in the wishes of the principal.  If there is not an estate plan in place, it may to time to broach the subject. 

If you are tasked with helping a loved one with their finances, a little forethought and planning will go a long way to easing the transition. You are doing yourself and your loved one a favor by starting the process sooner than later.  The conversation may be difficult, but necessary.