There are times when you realize that the elderly around you are experiencing a decline in their ability to remember things. An adverse effect of this comes in their ability to handle their finances.
When you realize that you need to help them in going about their lives with dignity and comfort, you do not want to be perceived as rude or insensitive. There are a few things to keep in mind while helping seniors manage their finances.
This comprehensive article is aimed at answering your questions about protecting your elderly parents’ money and finances so that you and they can feel more at ease.
When Do Aging Parents Need Help With Finances?
At the very onset, one might debate whether or not one’s parents need help managing their money. Having handled their own finances for their entire adult life, it can be very difficult for our parents to give up control of their money. Further, they may feel uncomfortable admitting that they need help at all.
At such a time, it is helpful to know what signs to look out for that indicate our aging parents need our assistance. Dr Melissa Henston, a geriatric psychologist with Colorado NeuroBehavioral Health suggests looking out for signs that something might be ‘off’.
For instance, an elderly parent may seem more forgetful than usual or food in the refrigerator may have expired without them noticing or their appearance may seem disheveled. These could be early signs of the onset of a disease or decline in health.
Importance of Discussing Financial Management With the Elderly
With time, a lot of older people in the family need some amount of help in managing their finances. However, it is common to see grown-up children feeling uneasy discussing their parents’ financial situation with them. This happens despite knowing that failure to broach the topic could result in financial difficulties soon.
It is thus quite important to assess their situation sooner rather than later. We have laid out details on how to go about every step when trying to assist them in managing their finances efficiently.
Even when you believe that your parents or the elderly are fully capable to handle their finances on their own, it is still considered a good idea to keep a check on their financial state.
As a part of inquiring about their state, you might want to know if there are any substantial debts that they have. If yes, then how are they faring with the debt payments? Are they comfortable incurring their monthly living expenses or facing any difficulty related to that?
Sometimes parents are not transparent about their finances willingly. In such a scenario, it is a good idea to observe their behavior to check for any signs of financial issues, unnecessary and reckless spending or fraud of any kind. If these issues are unaddressed, they may lead to bigger financial problems at a later stage.
As mentioned earlier, some signs that an elderly needs a helping hand with her or his finances are:
- You notice that the household has repeated instances of unpaid bills or second notices or the same set of bills paid multiple times.
- The debit or credit card statements often have some unusual purchases mentioned in them.
- There are stacks of unopened mails.
- You discover donations or contributions to causes that they have not supported in the past.
- There are unexpected and expensive purchases of often unnecessary things – this may also indicate them having fallen prey to high-pressure sales tactics.
- They are finding it difficult to handle their bank account and pension funds.
- This age group is also susceptible to ‘grandparent scams’, where someone poses as a grandchild or relative in need of money and calls or emails a grandparent.
- You observe them struggling with daily activities like getting dressed or managing their personal hygiene.
- You notice different signs of them being victims of scam or fraud.
An intervention is required if you have observed any of these issues. Once this has been identified, you need to initiate the process of assisting them. If they seem to be handling daily activities fine, then you may offer your assistance in basic financial tasks like balancing their checkbooks.
As you have this conversation, you may feel guilty or uncomfortable. It would help to remember that you are taking care of those who once held your little hands. It is about making the best choice for your loved one.
Arriving at decisions together will increase the likelihood of your parent’s co-operation in the matter. It may seem tempting to make the decision for them, but including them in the decision-making process is a sign of respect and will make the changed circumstances that much easier for your parents to accept.
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Where Can the Elderly Overspend?
Elderly persons, especially patients with dementia or Alzheimer’s disease, may be prone to overspending or may be guilty of donating a lot of money to charity. Many organizations typically ask for monetary donations during the holiday season when the probability of consumers being generous is higher. Typically, elderly people can overspend at any of these places-
- Order catalogs on physical mail
- Church donations
- Contributions to charitable organizations
- School fundraisers that include students selling cookies or magazine subscriptions door-to-door
- TV marketing or product sales during the holiday season
- Online email offers
- Spam email that can sometimes risk their identity theft
- Telemarketing offers
- Holiday Home repairs
- Store sales
Identification of Scams or Fraud
It has been found that close to 5.5 percent of older adults have been victims of monetary scams or frauds. Older people generally have more cash, are more vulnerable when they are alone, and thus are more likely of being targeted for fraud or scams.
Financial scams are difficult to prosecute as they go unreported most of the time. This is the reason why they come under the category of low-risk crimes. However, they have a devastating effect on older adults who have been victims. This leaves them in a very vulnerable situation with little to no time to recover the loss.
Sometimes, it is not just the wealthy seniors who are targeted by these scams. Even low income older adults are vulnerable to financial abuse through these scams and fraud. If you are not aware of these financial scams, here is a list of the most common financial scams that target seniors.
- Medical or Health insurance scams: Every US citizen or a permanent resident over the age of 65 is eligible for Medicare. This leaves no requirement for a scammer to research on the private health insurance company that older people subscribe to scam them. In these types of scams, the con artist posing as representatives get personal information from elderly people. They can also provide fraudulent services to them at makeshift mobile clinics to gain their personal information. The scam artists would then use the collected personal information to bill Medicare and pocket the money.
- Counterfeit prescription drugs scams: This kind of scams have been on a rise with the FDA investigating an average of 20 cases annually since 2000 as compared to 5 in the 1990s. These scams operate online where the elderly often go to get specialized medications at discounted prices.
Besides paying for medication that is ineffective on their health condition, there are chances that the elderly might purchase unsafe or harmful substances, thereby, inflicting as much harm on the body as it would on the wallet.
- Fraudulent anti-aging products: These scams offer new treatments promising youthful appearance and medications. These treatments can vary from bogus Botox treatments or completely fake homeopathic remedies. A bad batch of such treatments and medications can be toxic and harmful and can have unsettling health consequences far beyond drooping muscles or wrinkly forehead.
- Telemarketing or phone scams: This is one of the most common scams to prey on older people. Older people make twice as many purchases over the telephone as compared to the national average, partly because they are more familiar with shopping over the phone than online. Since there is no face to face interaction or paper trail, it is extremely difficult to trace the origin of these calls. Sometimes the buyer name is shared with similar scammers leading to repeated defrauding of the same individual. The most common tactics used are ones where the money is solicited for fake charities, natural disasters, or on the pretext of financial need for a person’s child or relative being admitted to the hospital.
- Internet Fraud: Considering the slower speed of adoption of internet technology by some older people, they become easy targets automated internet scams that are present all around the web. Pop-up browser windows that simulate virus-scanning software fool the victims into downloading fake programs that allow scammers to access the personal information of the victims from their computers including passwords. Email or phishing messages that seem to appear from legitimate companies, asking the users to update or verify their personal information is another such example. Some of the emails appear to come from the IRS for tax refunds. The unfamiliarity of older people with less visible aspects of web browsers like the firewall or virus protection makes them susceptible to such traps. Learn how to keep seniors safe on the internet.
- Homeowner scam: In this case, scammers send personalized letters to different properties apparently on the behalf of the County Assessor’s Office. The letter looks authentic and official but displays only public information. It would identify the assessed value of the homeowner and offer a reassessment for a fee highlighting the tax burden associated with it.
- Sweepstakes & Lottery scam: Here, scammers would inform the victims that they have won a lottery promising a huge sum of money, and the victim is asked to make a payment to unlock the supposed prize. Often, a check is sent for the victim to be deposited in their account. While the check will reflect in the account immediately, it will be deposited after a few days. In the meantime, the scammer would pocket the money for supposed fees while the fake check bounces, and the victim’s prize money is removed from his or her account.
Even if you think that the elderly folks are cautious enough to identify a scam, you should still check their physical mail and emails for any unusual activity. In case they have fallen victim to a scam, you would need to identify the source, determine the amount of money that was lost in the process. It is also advisable to notify the respective financial institution and cancel any accounts that have been compromised in the process.
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How Do You Initiate Financial Conversation With the Elderly?
Once you have identified that there is a need to assist the elderly in their financial management, the next step is to initiate conversations. Sometimes it is quite difficult to have conversations like these. We are listing down a few steps and how to deal with this situation.
Talking Money With the Elderly
If they bring up topics related to retirement or power of attorney, take this opportunity to initiate a conversation. Start by asking them about what they have planned for themselves. Alternatively, if no such conversation has taken place, you can bring this indirectly. you can tell them that you are in the process of drafting your retirement plan and would like inputs from them considering they would have created one for themselves.
It is also a good idea to bring in other people like immediate family or a trusted family friend into this to broach the subject.
Respecting Their Wishes
Sometimes the elderly would not like the idea of you taking control of their financial situation. As much as you wish well for them, they might see this as an encroachment of their privacy. In such situations, you need to make it clear beforehand that you are in no way trying to take over their life or dictate terms about who should they leave their assets to or even lecture them on their spending.
You need to make it clear that you are doing this so that everything stays in place once they retire and you have the authority to assist them in case trouble of any kind develops.
Informing Them of the Benefits of Better Financial Management
While informing the elderly that you would like to help them with their finances, you should emphasize how good estate planning can help them pass on more of the assets that they have created in their lifetime to their children, grandchildren, or charity.
You should apprise them of the fact that a living will and having a clear statement of their intent can help in preventing any family battles on their assets or whether to disconnect life support.
Having clear instructions on where to find all their important documents related to insurance, investments, real estate, etc. – could make handling a crisis easier for the future.
Understanding Their Situation
Never assume that you know what they want or how are they feeling. Although you want the best for them, in the end, they decide and define what is the best situation for them. You should make it clear that you understand that, and that you are just trying to help them, not take over their life.
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Looking After Elderly Parents Money
As you involve yourself in understanding your parents’ financial situation, you would want to look into their cash flow. Where do they receive funds from, including pension, rental income, other investments etc.
At the same time, you would want to list out current expenses and future expenses. Future expenses could include the possibility of healthcare or retirement homes you know they would require due to a diagnosis.
It is also imperative to ensure your parents’ taxes and other commitments are paid off. Depending on local laws, you may need your parent to sign a document authorizing you as their bank and tax representative.
Enquire about tax benefits that your parents may qualify for. For instance, in Canada, seniors with severe or prolonged impairment qualify for a non-refundable tax credit.
How Can You Protect Your Aging Parent’s Assets?
Apart from cashflow and immediate financial obligations, you would need to have a comprehensive list of your parents’ assets, so as to help them make the best decisions financially.
These could vary from investments like mutual funds to real estate. They may also have life and health insurance with ongoing premiums. Help your elderly parents set up their wills and power-of-attorney and ensure from time to time that these are updated and legally valid.
Getting a simple will made is an easy and straightforward process these days. Online services like Legalwills (click here if you are in the USA and here if you are in Canada) can have you up and running in under an hour.
After having listed out and streamlined your aging parents’ income, expenses, assets, and liabilities, you will be in the best position to make an informed decision along with your parents.
How to Stop an Elderly Parent From Giving Money Away?
It may be debated that your parents’ money is their own to deal with how they like. In a literal sense, that is true, but if they burn through all their cash and then become financially dependent on you, it can lead to a difficult and unpleasant situation for everyone involved.
If you notice your parents running through their funds rapidly, making large expenses that are not commensurate to their income or receiving frequent notifications of insufficient balance in their accounts, it is time to step in and help them.
If they are receptive to your feedback, you can help them prepare and follow a budget so that their expenses don’t exceed their income. However, in more extreme cases, adult children have had to go to the extent of blocking withdrawals from their parents’ accounts and setting up debit cards with limited access.
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How to Protect Parents’ Assets From Nursing Home Costs?
Open discussions with your aging parents about how and where they see themselves settled after retirement can help you know more about their wishes. Would your parents prefer in-home care or a nursing home? Evaluating the costs as well as the benefits of each option with them can help them make the best decision for themselves.
Should your parents need a nursing home, the facility costs could burn through their finances. The government-led Medicaid program in the United States can cover some nursing home costs, but after a Medicaid recipient passes away, the government may recover its money from one’s estate. This can be prevented through proper and smart estate planning.
Having one’s aging parent named as a life tenant on one’s property, while clearly appointing a family member as the future owner can prevent the government from staking a claim on the property. Be aware though that there could be some penalties involved in this approach. It is best to get legal counsel on this matter to ensure that one’s life estate is drafted in the best possible manner.
Protecting Parents Assets From Siblings
While you worry about saving your parents’ assets and money from scammers, nursing homes, and the taxman, in some families, one may also have the added anxiety of an imprudent sibling frittering away the parent’s finances. If someone guides your parents to place their assets in joint ownership with you and your siblings, find out more about the tax, estate, and family law consequences of this step.
What Do You Do If Parents Refuse Financial Help?
The elderly might refuse your help. They may think that this is not the right or appropriate time and this should not be thought through at this point. They might also become indignant with you asking questions about their finances.
In this sort of a situation, do not pressure them to decide on it right away. If they are not dependent on anyone and in complete control of their senses and lives, you cannot make them disclose any financial information or update their will.
You would need to decide whether giving up at this point is a better idea or you should try again at a later point in time. You are the best judge of the situation.
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How to Start Helping the Elderly With Finances?
Often, the first step is the hardest. Start with the basic tasks.
If the elderly are capable of handling their day-to-day activities, then you might need to provide help only for basic financial tasks like balancing their checkbook. You can also start to assist them with filing their taxes.
Online banking makes it easy to keep a tab on the personal account. You can check for signs of any unusual spending activity regularly.
You can enter their number in the National Do Not Call Registry so that they do not receive the constant stream of credit card offers or insurance offers. You can choose to opt-out of the mailings to avoid these offers coming through the mail.
You can prevent sales pitches for holiday home repairs and other offers all year long. You can visit the Consumer Credit Reporting Industry website and enter their information and stop telemarketers from calling.
Identifying Their Income Source and Insurance Information
To take stock of their financial state, you would require to locate their sources of income, considering they may have multiple streams of incomes or are recipients of different government benefits. Typical sources of income include Pension checks, investment dividends, social security or Medicare benefits, alimony, or disability money.
Apart from the source of income, you should get information about all insurance policies that they have taken out, ranging from auto insurance to a life insurance policy. Ensure that the payments for these policies are kept current. The elderly might risk damaging their credit cover if payments are neglected and this might even jeopardize their healthcare benefits.
Automation of Finances
Most companies today offer online payment portals and the facility of automating payments. This not only helps in streamlining the monthly payment cycle but also makes the whole process paperless. If you are considering this route to make things simpler for them, remember that sometimes it is quite difficult for them to remember all online passwords. You should store the usernames and passwords for them at a secure place.
If you think that your folks would struggle with remembering passwords, try using any of the free password tools that are easily available online and can help them manage their accounts and passwords.
If they are not comfortable in setting up automatic payments, you can save their preferred payment method online. The key is to make the process as simple as possible for them. By using this method, they would not need to re-enter account credentials for recurring payments and you can manually make the payments online. Generally, this would require you to enter an account number and a routing number to their bank account.
You should also get the respective companies to notify you and your parents over emails of due payments so that there are no missed payments. This should simplify the process for you and your folks.
Hiring a Daily Money Manager
Sometimes you are too occupied with your work that it becomes difficult to help the elderly manage their finances daily. Taking care of their finances on their behalf is a huge undertaking and sometimes they require more care than you can give. It does not harm in such cases to get external help and hire a daily money manager. A money manager is a financial professional who can assist in managing everyday tasks related to their client’s finances.
Daily Money Manager can assist in tasks like management of monthly bills, payrolls, balancing checkbooks, organizing tax records, creditor negotiations, and notary services.
If you believe that hiring a daily money manager can help you out, you can find a suitable candidate for this job by connecting with organizations like the American Association of Daily Money Managers (AADMM).
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Understanding Important Legal Documents
If you have their approval of helping them manage the financials, you can start with helping them finalize certain legal documents. For this, you would need authorization from them to make financial decisions on their behalf. You should also discuss their will and living trust if they already have worked on them.
As a next step, it would be a good idea to consult a legal advisor or attorney since the legal rules and regulations of structuring and obtaining these documents changes with every state. Expert opinion on the situation can also help you in avoiding any costly oversights.
We will now discuss the basics of some of these legal documents.
Power of Attorney
A Power of Attorney or simply POA is a written document that authorizes a primary agent who can take decisions and act on the behalf of your parents or loved ones. The details on the extent of financial or medical decisions are stipulated in the document.
Depending on the extent of control provided to the primary agent, the POA can be differentiated as-
- General Power of Attorney: A general POA allows the primary agent to make both financial and medical decisions for the grantor irrespective of the fact whether they are incapacitated.
- Limited Power of Attorney: As the name suggests, a limited power of attorney allows the primary agent to exercise specific or limited powers that can terminate at a time specified in the document. Limited POAs are mostly used and are ideal for situations where the grantor needs a primary agent to make decisions on their behalf since they cannot be present.
- Durable power of attorney: A durable POA can be general or limited and terminate with the grantor’s death. It grants the primary agent the powers as defined in the document and comes into effect the moment it is signed.
- Springing power of attorney: In case of a springing power of attorney, the primary agent gets the powers specified in the document. However, it would come into effect only once the grantor becomes incapacitated.
If after discussion with the granter, you decide to take complete control of their finances for an indefinite period, a general power of attorney would be the best option. It is advisable to discuss this matter together with a legal advisor or attorney to determine the best possible course for both you and the granter.
Living Will and Testament
The last will and testament details out the last wishes of the elderly regarding their estate. To explain the term ‘Estate’, it includes any and all property that belongs to them, ranging from personal effects to real estate. Depending on how much property is under the question, these documents can be a lot more detailed and complicated than expected initially.
The key benefit of discussing a last will and testament is that it can avoid multiple feuds and arguments about the estate and can thus prevent the estate from being stuck in probate. As a part of planning to communicate with them about their last will and testament, you should consider a few specifics.
- Executor: An executor is a representative who is appointed to ensure that all wishes mentioned in the legal document are carried out as specified.
- Beneficiaries: Beneficiaries are those people who are named in a will to receive a share in the property.
- Division of property: If the author of the will (also known as the testator) wishes to divide the property, they would need to clearly define the way in which they would want it to be divided and distributed.
- Business assets: Business assets are generally listed and divided separately from personal assets. However, depending on the wishes of the testator, this may change.
- Debts, expenses, and taxes: Ideally, the will should explicitly state how the final expenses like funeral costs and an inheritance tax should be paid.
- Special instructions: There might be some additional instructions that a testator might want to provide in their will. This can vary from arrangements after their death such as how the home would be cared for or who should be the caregiver to their pets, etc. This can vary from one situation to another.
A living trust and a will are almost similar. After the demise of an individual, his will has to go through a process called Probate. This process is expensive and time-consuming. The benefit with a living trust is that it bypasses the probate process completely. The wishes that are specified in the trust are thus carried out by an appointed trustee in a situation when the grantor of the trust is considered incapacitated or has passed away.
Living wills are ideal for individuals who are facing complicated financial situations like blended families, having properties in multiple states, or owning estates with considerable assets.
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Personal Care Agreements
Personal Care Agreements are legal contracts between the designated caregiver and the individual who is receiving care (mostly an adult child and their aging parent). These agreements ensure that the caregiver is compensated for the time that they are devoting to the care. These should be drawn up with the assistance of an elder care attorney and the consultation from doctors to determine the extent of care that would be needed as per the situation.
These agreements make sense considering caregiving requires both time and money to support the elderly.
A Conservatorship provides the authority to manage the elderly’s estates, finances, personal affairs, assets, and medical care. The process includes petitioning the court outlining the reason why the individual is no longer in a situation to manage their personal or financial affairs. Since the process involves elderly people belonging to advanced age, it takes away their basic rights to freedom of choice with the removal of their power to make personal and financial care decisions.
There are two kinds of conservatorships
- Probate: In the case of a Probate, the petition can be filed by an adult child, a relative, or even a person outside of the family. Here, the court decides the extent to which the conservator would be exercising their power.
- LPS (Lanterman, Petris, Short Act): This type of conservatorship is designed for people experiencing serious mental disorders or those who may be mentally impaired by drug or alcohol addiction. In this case, family and friends cannot submit their petition to be the conservator.
A conservator or guardian assumes the responsibility for the care, health, and safety of the elderly while they enjoy all personal, civil, and human rights that they are entitled to.
The benefit of choosing guardianship as the option over a power of attorney is that it is much harder to revoke a guardianship. This gives the guardian more authority to protect the elderly from con men or scheming lovers. If they are already incapacitated (say, by an accident), it may be the only option for you to obtain the power to assist them.
Where to Find Legal Aid?
To know more details about the legal options available with you, it is a good idea to consult an attorney who is experienced in matters related to elderly people (for example, Social Security, Wills, Medicaid, Estates, Geriatric Issues, etc.)
There are multiple ways in which you can locate an attorney, some of them being-
- Legal Aid Office
- County Bar Association
- Senior Support Groups
- Phone Books (Attorneys are mostly listed in alphabetical order and based on their specialties in the yellow pages)
- You can also look for recommendations from friends or relatives who have sought legal assistance in a similar situation.
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How to Help Parents With Finances – Parting Words
Offering to help an elderly person manage their finances can seem awkward at first, but it is a discussion that you need to have. It does not harm to be carefully vigilant about their spendings considering that they might inadvertently spend lots of money and risk their lifelong savings.
Also, it is better to talk with them in advance and plan for an adverse situation as compared to finding yourself responsible for their mortgage, investments, and bills all of a sudden.
Protecting and managing one’s parents’ finances in addition to one’s own is not the easiest thing to do. Arming yourself with knowledge, passing that on to your parents early on, and making informed decisions together can prevent financial complications and heartache at a later stage.
Stay watchful, have frequent conversations with your parents, and keep your ears peeled for any mention of money related difficulties. Your swift and decisive actions can give your parents a lifetime of financial security.