Stepping Into Your Aging Parent’s Finances: A Beginner’s Guide

As parents age and experience changes in their condition or behavior, it’s crucial to be proactive, prepared, and involved in many areas of their life. One of those essential areas, without question, is understanding and managing their finances.

It’s a difficult subject to broach, but necessary for aging loved ones who may no longer be able to handle their own affairs. Even if your parent is capable of managing their own money, it’s still beneficial to have the discussion about their finances. Outstanding debts, spending habits, insurance policies, monthly expenses – all good to know in case your parent needs support or faces financial hardship.

There’s a lot of information to wrangle and organize, but don’t worry – we’re going to cover everything you need to know to get started. In this guide, we’ll review:

  • Having the Initial “Money” Conversation
  • Helping Out with Their Finances: Where to Start?
  • Financial Planning for Their Future

1. Having the Initial “Money” Conversation

When should I have the finances discussion with my aging parents?

As a general rule of thumb, as you approach the age of 40 and your parents 70, then is an opportune time to tackle topics that may seem sensitive. Their health situation, end-of-life matters, and of course, their financial choices are all issues to discuss at this point. However, the sooner you can have these conversations, the better. The last thing you want is to have a crisis arise and hurriedly make decisions without feeling prepared or considering all options carefully. As part of being an advocate for your loved ones, approaching their finances early leads to less stress for you and better care for your parent.

How do I have the finances discussion with my parents?

You’ve decided it’s time to approach your parents about managing, or understanding, their financial situation. Awesome! But you’re feeling lost when it comes to navigating the subject. Here are some tips we recommend to make the most of the discussion, avoid conflict, and help everyone feel at ease:

  • Be open and neutral. The point of this conversation is not to figure out your inheritance or place judgment on any of their decisions. Regardless of your relationship with your loved one, the purpose of the meeting is to prepare, so you can both have peace of mind knowing their affairs are planned. When having the conversation, leave any other motives at the door.
  • Focus on the good, not the bad. If your parents are in a less-than-stellar financial situation, it’s imperative to stay positive. Criticizing them for their choices or habits is not productive and gets you nowhere. Instead, remain optimistic and set a plan in motion for them to bounce back financially. They’ll feel motivated to recover from their financial struggles with their loved ones cheering them on and helping them plan next steps.
  • Limit the discussion to a few people. When having this conversation, only include those who are necessary to be there – yourself, your parents, and any other siblings or family members. This signals to parents that you’re taking the matter seriously and makes for a less intimidating environment. Involving too many people may make it seem like everyone is banding together to ‘gang up’ on your parents.
  • Don’t overwhelm. In the initial conversation, it’s a good idea to just open the door and understand the basics of their finances. Bombarding your loved ones with questions and information may result in getting off topic and not accomplishing anything. Breaking the topic into smaller chunks and staying patient will make the conversations more manageable and unambiguous.
  • Specificity is key. When initiating the conversation, be specific about what you want to accomplish with your parents in that moment. Maybe you want this meeting to address power of attorney and end-of-life matters, or maybe you want to help them budget for the upcoming month. Whatever your concerns are, make them clear to your loved one so that everyone understands the purpose of the discussion.
  • Allow your parents to have a say. Maybe your parents have been estate planning all along, or maybe this is the first time they’re thinking about sharing their financial information. Whichever the situation, remember to tread delicately. As we age, we eventually give up aspects of our independence and control. Elderly people may have trouble facing this reality. Considering this, try to give your parents as much control over their choices as possible. Remind them that you are their ally and support system; you’re not completely taking over their lives.

2. Helping Out with Their Finances: Where to Start?

If your parents need help with finances or if you think you need to make decisions on their behalf, the first step includes finalizing any legal documents to authorize that responsibility. The three major documents that will legally bind you to their financial situation include the Power of Attorney (POA), Last Will & Testament, and Living Trust documents.

Securing these documents varies by state, so we recommend consulting a legal advisor or family attorney to help you navigate these materials. It could be costly otherwise.

Establishing Power of Attorney

A Power of Attorney (POA) document grants your parents the ability to designate you to manage their financial, legal, and health affairs if they’re unable to do so. In a POA with your parents, you are referred to as the agent while your parents are referred to as the principal. While there are different types of POAs, setting forth a Durable Power of Attorney allows the POA to remain in effect should your parent’s condition change, for something such as a medical emergency or developing dementia.

Reviewing Last Will and Testament

A Last Will and Testament outlines a person’s final wishes in regards to their possessions, property, and their dependents after their death. Their possessions and any other property belonging to them are included in what’s called an estate. A will requires their estate to go through probate, which is ultimately the court proceedings process to distribute their belongings. Whether or not your parent already has a will and testament, you’ll still want to review the major items defined in the document:

  • Who is the Executor of the estate?
  • Who are the Beneficiaries?
  • How are properties and business assets divided?
  • How are their final costs paid for (i.e. funeral expenses, outstanding payments)?
  • Are there any other special arrangements after their death?

This is different from a Living Will. A Living Will sets forth a person’s final wishes in regards life support in the event that they are still alive but unable to communicate their wishes. An example of where a Living Will comes into play is if the person is in an irreversible coma or vegetative state.

Living Trusts

A Living Trust is similar to a will, but ultimately avoids the probate process and is in effect while the person is alive. Someone who has a Living Trust has all their property and assets placed into a trust for their benefit throughout their life. Upon death, the trust is then passed on to appointed beneficiaries. On the other hand, a will only goes into effect after death.

After the legal documents are in place, then what?

It’s important to get an idea of your parents’ current financial state. If your parents have these materials, we recommend reviewing the following documents first:

  • List of their bank accounts and bank account statements
  • List of their credit cards and credit card statements
  • Weekly and monthly bills (such as rent, mortgage, car payments, food, etc.)
  • Outstanding debt or loans
  • Birth certificates
  • Memberships
  • Social security documents (Social security statements, benefits verification, etc.)
  • Medicare or Medicaid benefits
  • Marriage licenses
  • Retirement funds (Pensions, 401Ks, Annuities)
  • Tax returns (at least 3 years worth)
  • Investments information
  • Insurance policies (life, health, home, care, etc.)
  • Property deeds
  • Vehicle titles
  • Mail (to see if they’ve fallen victim to any scams or fraud)
  • Usernames and passwords for any online accounts
  • Keys or access to any lock boxes or safes

Armed with this information, you can get a full picture of your parent’s finances and address any concerns right off the bat. This is also an appropriate time to help your parents organize and manage their current finances. Look at these common income sources to understand the budget they’re working with to help them plan their finances:

  • Pension checks
  • Medicare, Medicaid, Social Security benefits
  • Disability money
  • Dividends
  • Spousal support/Alimony

Remember, you have resources at your disposal! Ask your parents if they already have an accountant, financial planner or family attorney. If not, consult a financial advisor or attorney to help guide you through the process and ensure you’re not missing anything.

3. Financial Planning for Their Future

At this point, you have a full lay of the land of your parent’s financial situation, but need to shift your focus to the future. Evaluate your parent’s health – do they or will they need assistance around the house? Or maybe they’ll soon need to move to a nursing home. Do you have a family history of chronic diseases, such as Alzheimer’s, that could develop? Who can provide that care and how will it be funded?

Financial planning for older age is necessary. Consider the following options:

Long-Term Care Insurance

Do your parents need or will they need any of the following?

  • Home Care
  • Assisted Living
  • Adult Daycare
  • Respite Care
  • Hospice
  • Nursing Home
  • Alzheimer’s Care

If your parents are in need of long-term care, you’ll want to take a look at their existing coverage and understand if they’ll need additional long-term care insurance (LCTI). This type of policy is sold by private insurance companies and provides coverage for long-term care that Medicare, Medicaid, and traditional health insurance does not cover. 

At this stage, preplanning for long-term care insurance is crucial, since insurance companies typically have rigid eligibility rules when it comes to qualifying for their policies. Even if your parent is currently healthy, they may have a family history of a disease or condition, or eventually may need support around the house and in their daily activities. Proactively considering LCTI is important because insurance companies are really only looking for healthy people to buy their policies. Additionally, they don’t offer insurance policies to those over 84 years old. 

Long-term care insurance is a valuable option as it can take a weight off your shoulders when it comes to figuring out how to fund and manage your parents ongoing care. However, do your research – LCTI is likely not a wise decision if you know you’ll struggle to pay the premium. If you rely on SSI or Social Security benefits, you’re probably not a good candidate for LCTI. Talk to an independent insurance broker to get a second opinion as well.

Medicare & Medicaid

Your parent may qualify for free or low-cost health care through Medicaid, a state-run program that offers health coverage to certain people who qualify financially, like low-income individuals or those who receive SSI. States vary in how they administer Medicaid, so you’ll want to contact your state’s program office if you have questions. For Pennsylvania residents currently receiving Medicaid waiver-based services, read about the state’s transition to the new managed care program, Community HealthChoices.

They may also be dual-eligible, meaning that they also qualify for Medicare. Medicare provides health insurance for Americans 65 or older and those under age 65 receiving Social Security Disability benefits. The caveat with Medicare is that, while the program covers medically necessary care, it typically does not pay for most long-term care services. Medicaid, in this way, funds long-term services and supports that can benefit your parent when it comes to their health care planning.
We offer home care services in PA, DE, FL, and Washington, D.C. through Medicaid programs and private pay. Learn more about our organization and find a location near you to talk with one of our team members about your options.

Veteran Programs

For parents who are veterans, there’s the option of the Veteran-Directed Care program (formerly known as Veteran-Directed Home and Community Based Services). The VDC program gives veterans the power to choose and control their long-term services and supports (LTSS). It provides a monthly spending budget to veterans to use how they want when it comes to ensuring they live safely at home. The budget is used in a number of ways, from hiring family and friends to be their caregivers, to buying goods and services based on their personal care needs in the home.

The budget provided from VDC can be managed by either the veteran or the family caregiver.

Wrapping Up

Stepping into your parent’s finances – whether you’re helping, managing, or becoming the sole decision-maker – can be a long and grueling process, there’s no doubt about it. Gathering, organizing, and evaluating all of their documents and accounts can seem intimidating. However, when you’re proactive and break your to-do list into smaller, more manageable tasks, you’ll find the process of managing their finances is much easier to handle and understand. By following these steps, you and your parents will have the peace of mind knowing that there is a plan in place to ensure they’re in good hands.