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How to Take Over an Aging Parent's Finances
Like many difficult situations with people we love, planning
to take over an older relative's finances is best done in
happier times, when both sides are healthy and various options
can be considered. Unfortunately, events can sometimes intervene —
death, illness or natural disasters can make an elder's need
for assistance a critical matter.
Once stricken, older relatives may be unable to understand
questions or express their wishes in proper detail. If there is
no plan, family members grasp at responsibilities — or shirk
them — without any idea of what the older relative would really
want.
What's critical to understand is that such talks should go
far beyond money. They need to be discussions about independence
and basic preferences for the way an individual wants to live or
die. Demographers believe that with the rising number of single
Americans — those divorced or never married — these
conversations will become increasingly complicated as they fall
to nieces and nephews, younger friends or designated
representatives.
Want to avoid a worst-case scenario? Start the conversation
now. Here are some ideas:
Decide what's important to talk about first. Maybe
this conversation isn't just about where the will or health care
power of attorney is. Maybe this conversation is about you
noticing that a parent or loved one is moving slower, is more
forgetful, is clearly looking like their health has taken a turn
for the worse — and maybe that's why you want to know where the
will is. Jumping into money issues first is usually a mistake.
Deal with immediate health and lifestyle issues first.
Explain why you want to talk about finances. In some
families, having a successful financial discussion means several
attempts and some frustration. Don't let yourself become angry
or frustrated — just keep starting the conversation until it
catches on. It might make sense to say something like,
"You've always been so independent, Mom. I just want you to
give us the right instructions so we do exactly what you
want."
Prepare your questions in advance. When a parent or
relative is unconscious or unresponsive, the younger relative is
immediately in the drivers' seat. That's why it's critical to
make a list of questions for the elderly relative to answer in
detail. The basics: Where important papers are, how household
expenses are paid, who doctors and specialists are, what
medicines are being taken and whether there's a will, an
advanced directive and a funeral plan (and money or insurance
proceeds to pay for it). There may be dozens more questions
beyond these based on your family's personal circumstances. But
in creating this list, ask yourself: "What do I need to
know if this person suddenly becomes sick or dies?"
Offer to get some qualified advice. If you don't fully
understand your relative's financial affairs, it might make
sense for you both to talk to an attorney or a tax or financial
adviser. A qualified adviser can offer specific suggestions on
critical legal documents that should be in place and ways to
make sure accounts to pay medical and household bills are
accessible to the older person and the designated friend or
relative who will hold power of attorney.
Plan a care-giving strategy together. You should
discuss the relative's preferences and trigger points for
various stages of heath care. An individual always wants to stay
in his or her home, but you should have an honest discussion
about how much you can do at home as a caregiver and whether
various services (home health aide, geriatric care manager,
assisted living) should be introduced at various stages. Talking
through what a parent will be able to live with at various
health stages — and putting that information in writing — will
save plenty of doubt and bitterness later.
Discuss what should happen with the home. If an
elderly relative becomes sick and irreversibly incapacitated,
the equity in his or her home may come under consideration as a
resource to pay uncovered medical or household maintenance.
Since the home is both a major asset and an emotional focal
point, it's best to get good advice and spell out specifically
what the elderly relative wants done with his property and under
what conditions.
Make sure everyone knows the plan. Once you settle on
a strategy, make sure all family and friends understand the plan
and their assignments.
August 2008 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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