Your parents raised you, loved you and provided financial security as you grew up. Now that you’re grown with a family of your own, the roles are reversed, and you’re a caregiver to your aging parents. Perhaps they need help managing day-to-day affairs such as finances, household maintenance or care for physical conditions like arthritis or gout. You might be concerned what would happen if they forgot to pay their bills, or if one of them suffered a stroke or received an Alzheimer’s disease diagnosis.

This guide explains those circumstances that may require you to gain control over your parents’ (or other elderly loved one’s) finances — including warning signs that it’s time to step in — as well as what legal steps are involved and how to talk to your parents about their needs in a sensitive way.

Knowing When to Intervene

One of the most difficult moments in life may be the moment you realize your parent is declining in mental sharpness. Maybe it’s when you beat your father at chess for the first time or when your mother forgot your birthday this year. Worries in the back of your mind nag at you, but how do you address them?

The time to talk about your parents’ finances may never seem right. You may feel like you’re invading their privacy and independence, even their dignity. You may feel unwilling to face reality — that life is short and your parents are mortal. But the signs are clear. You’ll need to take on an unfamiliar role and talk to them about their finances. Delaying this talk may prove costly to your parents. They may damage their credit, fall prey to elder financial abuse or identity theft, or even lose their home through foreclosure.

Warning Signs

If you live close to your parents and visit them regularly, you may already have an idea what their financial situation looks like. Even if you don’t, you may need to become nosy and ask them questions about their money and household management. Watch out for these warning signs:

  • Phone Calls
    • Are creditors leaving voicemail messages?

    • Are charitable organizations calling to solicit additional donations?

    • Are new “friends” calling to ask for favors or loans?

    Know who’s making phone calls to your parents. New “friends” may enter the picture because your parents have become more generous with their gifts or money.

  • Mail
    • Are credit card companies offering balance transfer promotions?

    • Are collection agencies requesting payment?

    • Are your parents opening their mail?

    Look at the type of mail your parents receive. Balance transfer offers and collection bills point to money mismanagement. Unopened mail may signal more than simple forgetfulness.

  • Cash and Checks
    • Do your parents know how much cash they have on hand?

    • Do they know where they leave their cash?

    • Do they have any bounced checks?

    • Are they ignoring unpaid bills?

    Take a peek at their checkbook and see whether they are paying bills and properly balancing their accounts. Being forgetful about cash and where they leave it may indicate mismanagement.

  • Increased Spending
    • Have they made out-of-character purchases?

    • Do you notice many new, expensive items in their home?

    • Have they upped the ante in their lottery ticket purchases?

    Take a close look at credit card statements for unusual spending. They may be victims of telemarketing scams.

The Aging of the U.S. Population

40.3 million 13%

of the U.S. population is age 65 and older.

36% of the U.S.

population age 65 and older have some type of disability, with 15% reporting independent-living difficulty.

Approximately 1 in 4 adults

cares for an elderly relative, friend or spouse with chronic conditions or a disability.

An estimated 5.1 million

people age 65 and older have Alzheimer’s disease, and the number is expected to grow to 7.1 million by 2025, hitting 13.8 million by 2050.

1 in 3 seniors dies

with Alzheimer’s or another dementia.

Sources: U.S. Census Bureau, MarketWatch.com, Administration on Aging, National Institute on Aging, Alzheimer’s Association, Argentum

How to Start the Conversation With Your Parents

An elderly parent undergoing a loss of independence may need his child’s help with finances, which may feel like a huge blow. The relationship change spurs an identity shift in your parent’s eyes — one loaded with emotion. You, too, may want to shy away from the topic. Who wants to talk about incapacitation or end-of-life issues? So it makes sense that it will be uncomfortable to have that first conversation with your parent about the need to depend on you.

If you don’t believe your parent will listen to you, you could send a messenger — perhaps a close family friend. It may be easier to stomach such a conversation with a peer than hearing the hard truth from a child.

Here are some specific sentences you can use to get the conversation started with your elderly parents, according to AARP and AgingCare.com:

‘What did you do financially to provide for me when I was growing up?’

Get your parents to open up about their financial successes, including the smart moves they made that put them in the position to care for you. Talking about their experience makes them less defensive. You can steer the conversation to their current situation and go over their options and possible outcomes without judgment.

‘I’ve chosen so-and-so to make financial decisions on my behalf in case something ever happens to me’

You can open up about what you’ve done to ensure your family — including children — will have an easier time taking care of you in case anything ever happens. Focusing on your actions gives your parents the opportunity to jump in and make plans too. If you show them your completed paperwork, they’ll have a better understanding of what they need to do. And the subject will no longer be taboo.

‘I want to know what’s important to you’

Listen to your parents instead of talking at them. Your parents may feel like they’ve been fighting an uphill battle to keep up with bills and expenses. Money Management International suggests you remove the focus on their financial failings by letting them know they’re not alone, and that you can help them maintain their independence longer by preparing for their care. Point them to a financial planner or attorney who can ensure their wishes are carried out. They can get outside help without feeling like they are losing control.

‘Let’s focus on ensuring you keep the most valuable things in your life’

You shouldn’t avoid talking about negative information altogether, but focusing on the best things in your parents’ lives and how to make sure those things stick around can keep your parents from becoming defensive. If your parents cherish a home where they’ve lived for most of their lives, then talk about how to ensure they can continue living in it. O, perhaps they want to provide for their children and grandchildren. Helping them secure their financial assets will allow them to set something aside for their heirs.

Legal Tools to Help Manage Your Parents’ Finances

Although you can certainly help your parents manage their finances in an unofficial capacity, in many instances, having a legally recognized role may not only prove useful but also be necessary. Here are the key legal documents that give you authority to act on your parents’ behalf.

Durable Power of Attorney for Property and Finances

What it does:

Gives a person other than your elderly loved one the authority to make decisions about property and finances. The person with authority, the agent, steps in to handle that person’s finances in case he or she becomes incapacitated and is unable to manage them. The power of attorney defines the powers you have as the agent: write and deposit checks, pay bills and manage investments, for example. It can also limit what the agent can do. Your parents should choose the agent, who should be someone they trust.

When it’s helpful:

If your parent develops Alzheimer’s disease or gets into a car accident that results in incapacitation, you step in and independently access your parent’s financial accounts to pay bills and expenses related to caregiving and household management. You have the authority to manage your parent’s property and investments, including meeting with a financial adviser. Having this power of attorney avoids the need to go to court to be appointed your parent’s guardian, which is ordinarily an expensive and lengthy process. It also helps avoid prolonged disagreement between family members because the agent is the final decision-maker.

How to set it up:

Before your parent suffers from any mental impairment, he or she meets with an estate planning or elder law attorney, who will prepare the form based on your parent’s wishes. Although powers of attorney are readily accessible through online legal-service providers, meeting with an attorney ensures the document is properly prepared and matched to your parent’s circumstances, so you don’t encounter any roadblocks if the need to use the power of attorney ever arises.

Durable Power of Attorney for Health Care

What it does:

Gives a person other than your elderly parent the authority to make decisions about his or her health and medical care. The person with authority, the agent, steps in to make medical decisions relating to your parent’s care in the case of incapacitation and the inability to make decisions relating to his or her own medical treatment. Your parent should choose the agent, and it should be someone trusted.

When it’s helpful:

Perhaps an accident or serious illness has caused your parent to be unable to speak for him or herself and expressing certain wishes. Coma and dementia are conditions that would make this power of attorney relevant. A physician may need you to make decisions about your parent’s medication. You can also use the power of attorney to access your parent’s patient information. Having a power of attorney for health care is useful, particularly in large families where they may be many differing opinions, because it can stave off uncertainty and disagreement on the matter.

How to set it up:

Before your parent suffers from any mental impairment, he or she meets with an estate planning or elder law attorney, who will prepare the form based on your parent’s wishes. Although powers of attorney are readily available through online legal-service providers, meeting with an attorney ensures the document is properly prepared and reflects your parent’s circumstances, so you don’t encounter any roadblocks if the need to use the power of attorney ever arises.

Living Will

What it does:

Allows your parent to set out specific, detailed instructions regarding health and medical treatment in case of becoming incapacitated or being otherwise unable to express personal wishes. A living will designates a separate person with the authority to make decisions about your parent’s medical and health care — including making sure medical treatment adheres to your parent’s instructions. The agent should be someone your parent trusts to make decisions on his or her behalf.

When it’s helpful:

A parent who has been diagnosed with a progressive impairment, such as Parkinson’s disease, can ensure certain medical treatment is carried out or avoided in the event that the parent is no longer mentally capable of making an independent decision. A living will gives your parent greater control over medical and health care even after becoming mentally impaired. Your parent may want to avoid specific measures that would prolong his or her life, such as artificial nutrition or a ventilator; specific instructions can be included to the living will.

How to set it up:

Before your parent suffers from any mental impairment, he or she meets with an estate planning or elder law attorney, who will prepare the form based on your parent’s wishes. Having an attorney prepare the document ensures the medical and health care decisions you make as the agent takes into account your parent’s express directions. The attorney also ensures the document is properly prepared and signed, so you don’t encounter any roadblocks if the need to use the living will ever arises.

Action Plan for Getting Your Parents’ Finances in Order

Getting your parents to accept financial help is a big step. Now that you’ve squared that away and they’re on the same page as you, how do you get started? Follow these practical steps for organizing their finances, and remember to document everything you do.

  • Gather your parents’ personal information, making a record of where it’s all kept.
  • Make a comprehensive list of all financial and investment accounts (including household utilities, credit card accounts and mortgage or rental information).
  • Collect all statements and documents for the financial and investment accounts.
  • Create a payment schedule for all bills (such as mortgage, telephone, property tax and homeowners’ insurance).
  • Start submitting timely payments according to the payment schedule.
  • Take inventory of your parents’ safe deposit box if they have one (and bring along a witness).
  • Locate any powers of attorney, living trust or other legal documents.
  • Determine whether their legal documents require updates.
  • Decide whether to hire professionals — attorney, financial planner or adviser — to assist with your parents’ finances or legal documents.
  • Rethink your parents’ investments — with or without the professional assistance of a financial planner or adviser — and update them to reflect your parents’ circumstances and needs.
  • Consider whether becoming your parents’ guardian is necessary.

Hiring a Professional: When Your Help Isn’t Enough

Turning to outside professional help to ensure your parents get all their financial ducks in a row is a good idea. Professionals can help you understand your parents’ position, make sure you’ve done things properly and alleviate some of the stress.

  • Estate planning attorney

    An estate planning attorney focuses on legal documents that state who receives your property upon death, often in a way that minimizes taxes. An estate planning attorney also can prepare legal documents that give you authority to make financial or medical decisions on your parents’ behalf. Documents such as the durable power of attorney and living will are highly useful — maybe even necessary — to facilitate proper and responsible management of your parents’ affairs. This attorney also can help set up a care plan, provided your parents have adequate funds to pay for their own long-term care.

  • Elder law attorney

    An elder law attorney also has the expertise to prepare powers of attorney, living wills and other related documents. Elder law attorneys are particularly versed in the legalities of common aging issues, such as caregiving, assisted living or in-home care. You might also consider seeking this attorney’s advice if you believe your parents may not have sufficient funds to cover long-term living costs. An elder law attorney can help find creative, legal ways to cover the costs.

  • Financial planner or adviser

    If your parents are blessed with wealth, turning to a financial planner or adviser to help manage their assets can take a heavy load off your mind. Your parents may have a variety of assets or complex investments that require knowledge from a financial expert. Depending on your parents’ circumstances, the expert can help determine the appropriate risk level for their investments.

  • Government programs

    If your parents are financially stretched, consider tapping into government programs for the elderly. Numerous resources exist, including:

    • Area Agency on Aging (city- or county-based elder programs, services and funding sources)

    • Administration on Aging (legal assistance and health insurance counseling)

    • Low Income Heat Energy Assistance Program (heat, gas and electricity bills payment assistance)

    • State-specific Telephone Assistance Program (phone service payment assistance)

    • State-specific prescription-assistance programs (assistance with prescription drug costs)

Use Checks and Balances in Parents’ Finances: Martin Shenkman Q&A

Martin Shenkman Martin Shenkman Author & Lawyer

Martin Shenkman is an estate planning attorney and CPA at Shenkman Law in Fort Lee, New Jersey. He’s written 42 books, including the most recent “Powers of Attorney,” which provides practical advice for protecting your family’s wishes. Here, Shenkman discusses what you can do to ensure you respect your parents’ wishes while managing their finances.

What can families do to more easily and effectively manage elderly parents’ finances?

Create a budget and investment plan, and revisit it each year to be sure all is on track. Once that is done, create checks and balances. For example, I strongly encourage parents to consolidate accounts into one or two institutions. Almost every older client I have had in the past 35 years has had accounts with a dozen or more banks, brokerage firms and mutual fund firms. Simplifying eliminates a lot of the problems and makes it easier to monitor finances, which is essential to minimizing elder financial abuse. Once consolidated, expenditures and deposits can be monitored against the budget to quickly identify problems. Also, a trusted person — a family member or CPA — can receive duplicate copies of each monthly statement. This costs nothing and is a great check on accuracy. Be sure that the person who gets the duplicate statement is not the child or family member who is paying bills or the agent under a power of attorney.

How can children know it’s time to gain legal control over their elderly loved one’s assets?

This question illustrates the problem. They need to step in before it becomes necessary. Too often, no one does anything until an elderly parent has already become a victim of elder financial abuse. If an aging parent cooperates with the planning before it’s needed, that parent can stay safe and in control longer. Many times, when an aging parent feels a loss of capability, he or she reacts by trying to hold on to anything possible.

What does a durable power of attorney for finances accomplish?

A power of attorney is a legal document in which the parent designates a person, the “agent,” to take care of legal, tax and financial matters. A major mistake is assuming this should only become effective when the parent is incapacitated. Capacity is, absent an accident or acute medical event, not like an on-off switch. Most people slowly lose capability as they age. The optimal way to minimize fights and avoid problems is to have a CPA prepare records and communicate them. This prevents the agent from having the opportunity to take advantage while no one is watching.

What legal documents should elderly parents have prepared?

A living will is a statement of health care wishes. A health proxy, also called a medical power of attorney, designates an agent to make medical decisions. A HIPAA (Health Insurance Portability and Accountability Act) release gives a designated person the right to see medical records but not to make medical decisions. There is a newer document, usually called a POLST — the Physician Orders for Life-Sustaining Treatment. This background information is important to understand your options. Most people sign a living will, HIPAA release and health proxy, which is optimal. For those aging or ill people who don’t have family — the largest and fastest-growing demographic in our country is single females over age 85 — I might have them sign a living will and POLST since they may not have anyone to name.

What suggestions would you give to families about deciding who will be primarily responsible for managing a parent’s finances?

It depends on the family situation. Some families get along, but others may look like something from a new TV series on family dysfunction. This is why I recommend checks and balances. Two kids act as co-agents, or, if you can afford it, use a bank as a trustee under a revocable trust. Have all accounts consolidated at one or, at most, two institutions, so the financial adviser can help. Have a CPA monitor accounts. While many will balk at the cost or complexity, compared to family fights I’ve seen over 35 years of practice, safeguards are a really wise investment.

Designate a Decision-Maker: Sharona Hoffman Q&A

Sharona Hoffman Sharona Hoffman Author & Professor

Sharona Hoffman Professor of Law and Bioethics at Case Western Reserve University School of Law, is the author of “Aging with a Plan: How a Little Thought Today Can Vastly Improve Your Tomorrow,” which discusses how to plan for aging or take care of elderly loved ones. She received her B.A. from Wellesley College, her J.D. from Harvard Law School and LL.M. in health law from the University of Houston. She discusses why aging preparedness is so important.

How do you begin talking with your elderly parents about coping with aging?

It’s difficult — they just have to dive into it. Emphasize that you’re doing it not to be nosy but because you care deeply about them. If something happens, then you know how to take care of them, and you know how to get the resources to help take care of them. A colleague of mine had parents in their eighties who lived independently in their house and suffered a catastrophic fire. The mother escaped, but she had dementia, so she didn’t know anything about their finances. The father died — he had been very independent and had told his kids that their parents’ finances were none of their business. The children were left with absolutely no idea about their parents’ insurance policy, retirement or anything else about their finances, or how to get access to their parents’ accounts to take care of their mother.

What options are available for elderly parents who are independent but don’t have family members nearby to help coordinate their bills and care?

There are emerging service industries that allow you to hire people to take care of various tasks. Daily money managers (see reader resources below) are a great idea in many circumstances. You may have the power of attorney and be the decision-maker, but you can’t be there to write checks. You can hire a daily money manager and give that person certain authority to do the day-to-day work. Or you can hire a geriatric area manager to coordinate your parent’s care.

What documents should your elderly parents have prepared?

Formally allowing someone else access to your financial accounts is done through a durable power of attorney for finances, in which you name someone as your agent, your proxy. This is different from a durable power of attorney for medical care, which empowers someone to make medical decisions on the patient’s behalf. A lot of people choose different decision-makers for their financial and medical decisions. If you do nothing else, name those decision-makers, including a substitute or alternate agent (in case your preferred agent isn’t able to take on the responsibility).

When and why should adult children get involved in their parents’ finances?

Everyone who has any money should have that conversation with someone they trust right away. Even people in their twenties need people who can access their documents and accounts. You need to have those conversations because you never know when a catastrophe might happen. If you do nothing else, have that durable power of attorney with decision-makers in place.

What are the consequences of failing to legally prepare for when an aging parent develops dementia, Alzheimer’s disease or other mental impairment?

You would have to go to court and get a guardian, which takes months. You’ll have to hire a lawyer to go through the process. It’s so much easier to already have the legal document that appoints the decision-maker. Not being prepared can tear a family apart. The colleague of mine who experienced the catastrophic fire illustrates the consequences. The colleague’s family members are still in court; they all have their own agendas, and they can’t agree on anything.

Preparing Allows You to Carry Out Parents’ Wishes: June Schroeder Q&A

June Schroeder June Schroeder Financial Planner

June Schroeder is a certified financial planner and founder of Liberty Financial Group in Elm Grove, Wisconsin. She specializes in financial life planning and retirement, and she is an RN. Here she discusses how adult children and aging parents can work cooperatively to ensure parents’ wishes are carried out.

How would you recommend adult children broach the subject of getting involved in their parents’ finances?

Every family is different in their interactions. There has to be a meeting of the minds and a gentle way to do it. Tax time is an excellent time to begin by offering to help with their income taxes, which is one of the most disliked and stressful times of the year financially for all of us, particularly for some elderly folks. This might be the first time a parent would welcome assistance, and it is a foot in the door. You could also begin by asking your parent for help. If you can at least open the conversation and be willing to talk about your own financial situation, your parent may offer advice. During that conversation, you can ask about how he or she files taxes and if it’s similar to how you do it.

What warning signs have you seen that more involvement from family members is needed?

I visited one client and found piles and piles of unopened mail. Another client forgot to come for an appointment, and another didn’t file an income tax return. We might send clients a letter with enclosed forms to bring to the meeting and they bring the envelope back unopened, or show up a day early or late. Anytime you’re not around your parents, you don’t see their decline, which is one reason you should identify a neighbor to assist in that evaluation process. Your neighbor might tell you that your mom has stopped taking out the garbage. There are many little signs.

Aside from the financial power of attorney, what other legal documents should you have?

The health care power of attorney and living will are just as important for discussing your parents’ wishes for their health and life. The living will details the extreme medical measures and your parents’ instructions for them. Most states, like Wisconsin, have the document available online for people to use. Wisconsin has the document online — it’s accepted by the state, although it’s written in more cryptic language than a more personal one written by a lawyer just for you. We’ve used the online document when a client resists hiring an attorney because of the cost. Every state has its own living will document. If your client moves to another state, make sure the document being used is accepted in the state of residence.

What else would you recommend to family members about getting children involved in their parents’ finances?

All of our clients have financial powers of attorney, and we suggest they update them on a regular basis. There should have been a long-developed relationship between the parents and their financial adviser, through which the children can also be involved. Some clients have been with us forever, and we know them pretty well. When we think there might be an issue, we ask what arrangements they’ve made about telling their children where their things are and getting their children familiar with their financial situation. We plant a seed in their minds. We also often suggest that they invite their children along.

Reader Resources

National Institute on Aging (NIA)

The NIA website offers information and resources for caregivers. It is part of the U.S. National Institutes of Health, through which it supports and conducts research — including in its role as the primary federal agency on Alzheimer’s disease — to better understand aging and promote quality of life among the elderly.

Administration on Aging (AOA)

The AOA offers home- and community-based services, such as legal assistance, transportation, adult day care, caregiver support and health programs. This federal agency promotes the well-being and independence of older Americans by providing funds to governments, organizations and communities for programs consistent with its mission.

National Council on Aging (NCOA)

Access online tools and tips geared toward staying healthy and economically independent. You can gather information about senior issues, such as common sources of senior debt or chronic disease, from its website.

Centers for Disease Control and Prevention (CDC)

Tap into online resources and educational material covering advance care planning, cognitive health and impairment, older adult health studies and other relevant information.

American Association of Daily Money Managers

The AADMM is a national membership organization representing 700 individuals and businesses in the profession of daily money management.