When your elderly parents get lost on the way to the local supermarket, you start worrying about whether they should be driving. But how do you know when your parents should no longer be handling their own finances?
When your elderly parents get lost on the way to the local supermarket, you start worrying about whether they should be driving. When they can no longer mow their grass or shovel their sidewalks, you wonder if they need to move out of their home.
But how do you know when your parents should no longer be handling their own finances?
That, financial experts agree, is a complicated subject.
“I’ve been doing estate planning for 25 years now, so I see this situation a lot, and, unfortunately, there is no black-and-white answer,” said Rial Moulton, an attorney, certified financial planner and co-founder of Spokane, Wash.-based Retirement & Tax Planning Specialists.
Recognizing the signs
Adult children need to pay particular attention to their parents’ general mental state as they age.
Are they easily confused? Do they forget to turn off the stove? Do they struggle to remember recent conversations?
If you see that your elderly parents are struggling with routine tasks, it might be time to offer your help with the finances. Doing so might avoid serious money problems in the future.
“This doesn’t happen overnight. Diminished capacity comes on over time,” said Ty Young, president and chief executive officer of Atlanta-based financial advisory firm Ty J. Young Inc.
Your mother might mention that she accidentally paid her Visa bill three times this month.
Maybe your father, instead of writing a check to his local church once a week, wrote a check to it once a day last month.
These are telltale signs that your parents might need you to step in and help manage their finances, Young said.
Another clue might be the parent who explains to you the same financial issue several times in one conversation. Your mother might tell you three times in 10 minutes that she forgot to put a stamp on the envelope containing her credit card bill. If she continually forgets that she told you this, there may be other financial matters that are slipping her mind.
Some parents, though, are private. Others are proud. They won’t mention any financial mistakes they are making. In such cases, adult children have to look for other signs of dementia or forgetfulness. Parents who are getting lost on quick walks are probably struggling with remembering to pay their bills on time, too.
A soft approach
Recognizing that a parent needs help with finances is one thing. Approaching your mother or father with this news is another.
Young recommends breaking the news as an offer of help. This is preferable to barging into your parents’ home and demanding access to their finances.
“You might say, ‘I noticed that you wrote four checks for the same Visa bill last month. When we showed you this, you had forgotten that you’d done it. Can I be of some help to you with your finances?’ The best way to approach this is as a method of help from someone they trust,” Young said.
Moulton recommends talking about this topic long before it becomes an issue.
“The best way to handle this is to set up an estate plan when the parents are still mentally competent,” Moulton said. “This makes for a much easier transition if they do need help one day.”