- Have a family conversation before a health crisis hits.
- Financial care giving does not happen suddenly; it is a gradual process.
- Find and securely store their vital documents.
For nearly 10 years, her mother was crumbling “like a block of Swiss cheese,” recalls Phyllis Cerys, 57, an education consultant with Cerys Consulting Consortium in Melrose, Massachusetts.
She had macular degeneration of her eyes, a heart that required a pacemaker to keep beating in rhythm, and had suffered a series of tiny strokes. “But mom was in denial that she was getting older and didn’t want to talk about her steadily deteriorating health,” says Cerys. “Every time, I tried to talk to her about her finances, she says. ‘Nope. I’m not going to let you take care of any of that.’”
The year her Mom, Georganne, who lived roughly 3,000 miles away in Huntington Park, California, turned 81, it all collapsed. Cerys’ mother fell twice in her home and broke two ankles, and, worst of all, she had a more severe stroke – that ultimately landed her in the hospital.
Cerys put her consulting practice on hold and flew to California to take over. One thing in her corner: When her father died of lung cancer two decades earlier, her mother, who was naïve about even the basics of opening a checking account in her name, allowed her daughter to be added as a co-owner, or joint tenant, to her bank account—where she deposited the proceeds from his life insurance and his pension.
“That was the only thing she was willing to do,” says Cerys. “I went on for a long time thinking, okay, that’s probably enough.” She did, however, periodically dole out cash when needed to cover home repairs, such as a new roof or to fix a broken pipe.
But it wasn’t until her mom landed in the hospital that she knew she had to act fast. “When I realized how things were spiraling down and how much her health had deteriorated, I told her that all of these things she had been putting off, like redoing her will, having her health care proxy in place, and naming durable power of attorney, had to be taken care of now—this week.”
The time had come to take the financial keys away.
Luckily, her mother was still mentally, if not physically, sharp. “This time, she wasn’t resistant,” says Cerys. “I was overwhelmed with trying to deal with Mom’s health care, but I knew I had to get the financial pieces in place.”
The independence myth
Talking about money with parents is rarely easy. In a Fidelity survey of 1,043 adult children, The Independence Myth: Decoding the Implications of Aging Independently,1 one in five adult children said they don’t like talking about money with anyone, let alone their parents.
But, in fact, three in 10 adult children are concerned about their parents’ ability to manage their finances, and 14% are already taking care of parents’ finances.
The biggest knowledge gaps were related to day-to-day finances. Half have little to no knowledge about how much their parents spend on basic things like the mortgage or electric bill monthly, according to the findings.
While everyone’s situation is different—and it might not be a parent, but rather a spouse or yourself whose welfare is at stake—there are certain financial moves to make now before a health crisis happens to your family:
1. Recognize the symptoms.
Weakened health and mental capability are slow and gradual, as Cerys witnessed firsthand. The more tuned in you can be to your loved one’s health, the more likely you’ll be to spot changes early, says Suzanne Schmitt, vice president of family engagement at Fidelity.
“The more planning you can do early, the smoother the transition of financial responsibility will be,” she says. “It’s a myth that becoming a financial caregiver happens suddenly. It’s not going to be a light switch that’s going to get flipped before you start this conversation.”
If you live far away, keep in touch with regular phone or video calls on Skype or FaceTime. Ask a friend or relative who lives near your parents to pop in on them periodically and let you know how things are going.
In Cerys’ case, her brother and other relatives who lived near her Mom weren’t able to help, so she hired a geriatric social worker to act as her health care advocate. He became her “feet on the street and dropped in on her Mom at least every week,” she says. When Cerys had to return home after her initial six-week stay, she credits him with finding the best assisted living option for her mother, and his reports kept her in the loop on how her mother was faring.
Read Viewpoints on Fidelity.com: Prevent financial elder abuse.
2. Make time for the tough conversations.
The best way to avoid financial missteps and potential financial abuse by outsiders is an early conversation with your parent and within the family, if you have siblings, before a health crisis, dementia, or other cognitive issues surface, says Schmitt.
These parent-child discussions, on average, start when the parent is about 70 years old, according to the Fidelity report. But other catalysts included the death of a spouse or family member, the deterioration of a loved one’s health, or someone making a financial mistake.
“The odds of having wealth preserved and transferred are severely diminished when people make decisions that are ill informed and under duress,” says Schmitt. “You need to be proactive.”
That means having ongoing conversations early and often. No one wants to suddenly have the rug pulled out from them and be told, “I’m handling your money now.” Says Cerys: "I wish I had been more persistent."
The trickiest part, though, is typically the role reversal. Telling your parent what to do is awkward for both of you. One way to kick off a conversation is to chat about how you’ve met with a lawyer to draft powers of attorney for financial and health situations so that someone, say, your spouse, can handle things if you’re ever in a situation in which you can’t make those choices yourself.
Then ask your parents what protections they already have in place. Or you might casually toss out that you’ve read recently about how important it is that kids have access to their parents' personal finance information in case they ever need help managing their money.
Tip: Another strategy is to suggest that you take over one of their financial tasks, such as preparing their taxes, or setting up automatic payments for regular bills to simplify checkwriting and be sure of timely payments.
One stumbling block is that parents often don’t want to share private financial figures. It’s personal. “We know a lot of people don’t want to communicate around specific amounts,” says Schmitt. “So don’t. The most important thing is to at least communicate about where various financial accounts are held.”
Read Viewpoints on Fidelity.com: Heart-to-heart: Talking money with your family.
3. Find the documents.
If your parents are open to it, dig out where they keep vital documents, such as the deed to their home, tax returns, wills, trusts, and powers of attorney.
Get a list of their bank and investment accounts, insurance policies, and credit cards. Ask where the passcodes are stored, so you can access these accounts down the road. Find out who the beneficiaries are and ask whether they have a power of attorney or other documentation associated with a more comprehensive estate plan.
Additional information you’ll eventually want to gather up includes contact information for their doctors, accountant, attorney, mortgage company, financial planner, and brokerage firm. If your parents are retired, you might ask about various income streams such as a pension, Social Security, and IRA withdrawals. Meantime, get their Social Security numbers.
Tip: You may want to consider helping your parents obtain copies of their credit reports at AnnualCreditReport.com or through another similar service, which can help you or your parents monitor for odd items and potential identity theft. And consider whether your parents should register their phone number(s) with the National Do Not Call Registry to help ward off phone solicitations. Home and cell phone numbers can be registered free at www.donotcall.gov or by calling 888-382-1222. There are also separate state registries. These sometimes provide additional safeguards.
Read Viewpoints on Fidelity.com: Five ways to protect what's yours.
4. Establish a power of attorney.
Cerys’ first legal move was to hire a local elder care attorney to obtain and sign a power of attorney for her mother that enabled her to legally take care of her mother’s finances. This document is key to paying bills, managing investments, or making important financial decisions for someone other than yourself.
If properly drafted and executed, a power of attorney can provide the authorization for one person to handle all financial transactions on behalf of another—from signing checks to selling a parent’s home, as Cerys had to do when her mother entered the assisted living care facility and it was clear she would never be able to live at home again.
However, you can’t wait until someone doesn’t have the mental aptitude to handle financial transactions before this document is signed. For a power of attorney to be valid, your parent must be competent when he or she signs it. Before a parent chooses someone to give power of attorney to, they should “think about a child’s personality and whether the child’s personality will be a good fit for them to work with on financial matters,” says Schmitt. “A child might be willing and able, but if he or she travels a lot for work, has young children, or has a ton of commitments, he or she may not be able to spend the time handling your financial affairs.
And if your parent or you and your siblings are concerned about a single person having all the power, put checks and balances in place,” she suggests. You might give one child power of attorney on investment accounts and name two children to have access to the bank accounts so they can see where those checks are going. “We know that approximately 90% of elder financial abuse is committed by somebody close to the person—a family member or a friend,” says Schmitt, “so this can be a smart move.”
Many financial institutions and brokerages have their own forms that must be signed by the account holder before the institution will provide account authorization to anyone other than the account holder; simply providing a copy of the power of attorney may not be sufficient.
Generally, a power of attorney should comply with the laws of the state in which it is executed which, in most situations, is the state in which the person granting the power of attorney resides. If your parents split their time between more than one location or have assets located in more than one state, your attorney will also consider nuances of other states’ laws in drafting the documents. Consider hiring a local lawyer who specializes in elder law to draft this document, as Cerys did. If someone does become incapacitated without having assigned power of attorney, the court will step in to appoint a guardian.
Read Viewpoints on Fidelity.com: "When the family’s financial boss dies."
5. Revisit the will.
This is also the time to review, or write, a will to determine how someone’s assets will be divided when he or she is gone. Cerys had her mother’s will redrafted to reflect her mother’s current wishes regarding how she wanted her assets distributed. Since the time her mother's original will had been executed, the occurrence of many personal changes and life events (e.g., death of her spouse, birth of grandchildren) caused Cerys' mother to rethink her original intentions.
Read Viewpoints on Fidelity.com: "Estate plan pitfalls."
6. Sign a health care directive.2
A health care proxy, or a living will, allows a parent to give a child or any other trusted person the authority to make life-and-death medical decisions on the parent’s behalf when the parent cannot. Let your parents’ doctors know you have this document. Your parents might also have to sign a Health Insurance Portability and Accountability Act (HIPAA) release form to give you access to their medical documents.
7. Store your documents in a safe place.
Make sure at least one family member knows where important documents, contacts, and account statements are kept. Important documents can be stored in an attorney’s office or a bank safe-deposit box, or any safe place where they can be retrieved in an emergency. A secure virtual safe, such as FidSafe®, is another good option.
Parting thought: This is not a one-time deal. Review your important health, financial, and estate planning documents at least annually.