Credit Basics
Don’t Wait: Talk to Your Aging Parents about Money
We all know that talking about your parents’ personal finances can be difficult. Most of you, who have aging parents, have not even dared to broach the subject. You are used to getting advice from your parents rather than giving it. But there comes a time when the children must act like the adults and safeguard their parents’ finances. It’s a huge step that must be taken while your aging parents are in reasonably good health. If you fail to take this step, then the consequences could be financially devastating.
“This is a touchy topic for everyone involved," says Howard Dvorkin, founder of Consolidated Credit Counseling Services. “But if adult children think that is hard, just wait until their parents become sick and their whole life savings are sucked dry – that’s hard to take, and it happens all too often.”
There seems to be a myriad of ways that aging parents can damage or even exhaust their finances - bad investment decisions, poor tax planning, theft or fraud and, of course, injury or illness. That makes it even more important for you to help them protect their assets. It is a responsibility – just as your parents had a responsibility for your welfare when you were young. Yes, this can be uncomfortable, but think of the topics your parents had to cover with you over the years!
Experts warn adult children not to bully their way in – use discretion; do not just tell them that you are taking over their finances. You could mention the subject over lunch and then continue to talk about it over a few weeks; give your parents time to think it over. If your parents are showing signs of confusion and forgetfulness, be honest with them; tell them that you are concerned about their health and that you are there for them. Here are a few questions that could help start the conversation:
- How many bank accounts do you have now, and what are the names of the banks? Do you need help with these accounts? Would you consider establishing joint bank accounts?
- Do you work with any insurance agents, accountants, stockbrokers, lawyers or financial planners? Would you mind writing down the contact information for who you work with, just in case you need assistance in the future? Do you have questions about your finances?
- Do you have any financial business we can help you with such as property sales, stock transfers, credit matters or medical issues?
- Have you considered putting your money into a trust to help us protect your savings? Why don’t we see a lawyer together so he or she can explain the options for protecting your assets?
Plan Ahead
If your parents become ill and end up bed ridden at home, or in a nursing home without a financial plan in place, all of their life’s savings, everything they own, will be in peril. One seasoned nursing home administrator put it like this – “The reality is that individuals must pay for their health care, whether it be through Medicare, Medicaid or insurance, and in order to qualify you must pay into those systems. If you do not qualify then you must pay out of pocket and that is where people fall victim. People automatically think that the Government will cover them and that is not always the case. Families become unwilling to deplete and liquidate their assets and that is where it starts to spiral out of control. They get sent to collection for non-payment of fees and if they fail to pay the collection company they get sued in Civil Court, and their credit can be ruined and they can face having no money left.”
Okay, that is a grim picture. But what can you do to avoid such an unpleasant experience? The first thing you can do is look into a good elder care plan. This should address your parents’ legal and financial situations as well as their care needs. Let’s face it, elder care is expensive. It is possible that all of your parent’s financial resources may need to be sacrificed in order to pay for care. It is also possible, even likely, that if your parents’ have a progressive illness like dementia, that their mental state will become compromised and they may lose their right to represent their wishes in a court of law.
But you can prevent that with some foresight and planning; you can produce several methods for preserving your parents’ resources. If you are serious about this planning, and you should be, educate yourself and consult with a lawyer who is experienced in elder care and estate planning. The following are a few things that you should familiarize yourself with:
Wills and Estate Planning:
A will is a legal document that allows a
person to specify how their property
should be divided and how custody
of their children should be handled
upon their death. It exists as an
alternative to default methods for
dividing property and arranging for
child custody, which are determined
by individual states. But this usually
involves a lengthy and expensive legal
process known as probate, which
you should avoid at all costs. As
part of the estate planning and will
process, a person can choose to make
trusts or gifts to heirs or charitable
organizations, which can be used to reduce the amount of taxes due
upon death, as well as making sure that personal wishes are honored.
It is not necessary for a lawyer to be present during the creation of a will. Paralegal professionals can assist with will preparation, and do-it-yourself forms are available in paper or software format from respected publishers – just go online and do a search. Although legal wills can be created without the assistance of a lawyer, it is a good idea to hire a lawyer to assist with the process, particularly if elders' wishes regarding property division are at all complex, or if there is a desire to minimize tax implications surrounding inheritance issues.
In most states, wills are not legal until they have been signed in front of a Notary Public (a person who is government authorized to administer oaths and to attest to the authenticity of signatures), as well as multiple witnesses. Multiple copies of the will should be produced and stored in safe places where they can be easily retrieved in the event of death.
Healthcare Directive: A healthcare directive (also known as a living will or advanced healthcare directive) is a document that enables a person to legally record their wishes concerning whether 'heroic' or extended medical care measures should be taken to prolong their lives in the event they are incapacitated and unable to speak on their own behalf. In order for a healthcare directive to be considered legally valid, the document must be notarized and the person must be of sound mind at the time it is signed. The creation of a healthcare directive document is a good idea for all adults, and not just for your aging parents. Accidents that result in incapacitation may occur at any time, and without such a document in place, it is possible that one's life will be artificially extended against one's will.
