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The dos and don'ts of taking over your parents' finances

Key takeaways

  • If possible, initiate these discussions before your parents need assistance.
  • Get an understanding of their full financial picture so you don't make decisions in a vacuum.
  • Strive to be empathetic and open-minded during financial discussions. Do your best not to judge your parents' past decisions.
  • Enlist the help of professionals such as financial advisors, attorneys, and accountants to get outside perspective and advice.

Your parents likely helped you in countless areas of life, from learning how to tie your shoes to setting up your first bank account. As they get older, the time may come when the dynamics will shift, and you’ll need to assist them in areas such as financial management.

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It’s understandable if this role reversal feels awkward, especially if money wasn’t a topic of conversation in your household. But here’s the reality: As most people reach their later years, they’ll need a trusted person to help them in this area. If you’re able to step in, here’s how to make the transition as seamless and stress-free as possible.

Do start this discussion before they need extensive help. It’s best to begin a conversation while your parents are cognitively healthy so they can clearly share financial details and express their desires fully. “The earlier you do this, the better,” says Ryan Viktorin, CFP, vice president and financial consultant at the Framingham, Massachusetts, Investor Center.

Looking for a conversation starter? Consider using a relevant financial happening in the news, a seasonal event like the due date for quarterly taxes, or a money-related event in your life to bring up the subject. You can then bridge the topic to their finances.

If you need language to explain why you’re interested in their money, you could say, “I’d like to become involved now, so that if the time comes for me to take over, your voice will be in my head. I’ll know how you do things and what your wishes are,” says Meredith Stoddard, vice president of life events planning at Fidelity Investments.

Don’t wait for them to bring it up. “Very few parents are going to say, ‘Alright, I think I need some help,’” says Stoddard. Also, don’t expect them to accept your offer of assistance immediately. There are myriad reasons why your parents may hesitate to share their finances with you. They may feel self-conscious about a small nest egg or be concerned that knowing about a potential inheritance might diminish your work ethic. Based on their generation or background, they may think it’s inappropriate or unnecessary to openly discuss finances. And sometimes, a parent may be reluctant to relinquish their independence.

“It’s not always a seamless transition,” says Stoddard. “It probably took me 4 or 5 goes at it with my dad to try to get him to open up about anything, and I do this for a living.”

If you take small, consistent steps, you can gradually open the lines of communication, she says. As your parents become more receptive, you can offer to take on stressful tasks, such as paying bills, and then build upon that. (There are many online guides and resources to help you as you enter these discussions.)

Do look at their full financial picture. Work toward getting a complete understanding of their income, assets, expenses, debts, investments, insurance policies, and estate planning desires, says Stoddard. This will likely require time and patience, so, if possible, pace yourself. As you get more involved with their finances, ask about everything from potential pensions and Social Security benefits to daily expenses and housing costs. Identify which financial institutions manage their accounts, keep track of account numbers, and learn how bills are paid, such as by automatic transfers or paper checks. Using an app like Fidelity Full View®Log In Required to track expenses can let everyone involved see where money is being spent and help ensure that bills are paid.

Another item for your to-do list: Find out where important documents are stored, such as in a filing cabinet, safe, or a folder on their computer. Once you’ve found them, FidSafe® can be one way to save, organize, and share documents securely online.

If their accounts are spread out, consider whether consolidating them is appropriate, says Viktorin, who adds that “organization and simplification are significantly easier when everyone's feeling OK versus a situation where there could be some sort of diminished capacity.”

Keep detailed documentation of what you learn and any steps you take. Offer to share your notes with your parents and key family members, such as siblings, to ensure everyone is informed and on the same page.

Don’t judge or criticize. Your parents may have less in their retirement accounts than you thought, made money-losing investments, or have substantial debt. “Some people discover that mom’s been running up a credit card for years, or they thought their parents’ house was paid off, but it wasn’t,” says Stoddard.

If you’re hit with surprise news, take a deep breath, accept the situation, and address what is in front of you now. “Don’t enter any discussion through the lens of judgment. We can't change what has been done in the past,” says Viktorin. “There's no point in spending time there.”

Instead, do your best to approach the situation with openness, empathy, and kindness.

Do enlist professional assistance. Ask your parents if they are working with a lawyer, banker, financial professional, or accountant. If so, offer to set up a meeting with you, them, and the professional to talk through best practices for taking on some of their financial tasks. If your parents don’t work with someone, volunteer to bring on a professional they would feel comfortable speaking with about their finances.

Specialists can provide advice, reduce your workload, and help you minimize potential conflicts of interest. “It can be a tough thing to navigate the conversation when you are also the beneficiary of decisions that are made,” says Viktorin. “That’s where an uninvolved, third-party advisor can help.”

Legal experts, such as an estate planning attorney, can also explain the benefits of establishing a power of attorney, which would give you the ability to make certain decisions on your parent’s behalf if they are unable to do so.

Do keep your money separate from theirs. Avoid any temptation to have joint bank accounts or joint credit cards. “There's a perception that it could be easier because your name is on it and your mom’s name is on it, so you can see everything—but then you’re co-mingling estates,” says Viktorin.

And while it may be more convenient to use your own cash or credit card to pay for your parents’ expenses, keeping those costs separate is the best way to go. Using a specific credit card or checking account for their bills will help you to keep track of spending, manage your and your parents’ budgets, and help foster transparency for all family members involved.

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This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

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