As a family caregiver for elderly parents or other relatives, it’s likely you’ll provide financial caregiving at some point. Yet, the role can also be an overwhelming responsibility: Many financial decisions are not clear-cut, and navigating the options with your parents as they age is both emotionally and mentally trying. To make the process easier – and ensure you can carry out the decisions once they’re made – it’s important to keep financial information in order.
Be proactive with financial care
It can be difficult to discern when it’s right to help with the finances, or when you might need to take over the financial responsibilities. Sometimes the situation is drastic due to an accident, injury or sudden decline in health. However, in many cases, the effects of aging are slow and incremental. You don’t want to step in where you’re not needed or take away independence when your parents are still capable. Yet, waiting too long to manage finances can lead to disaster.
The best approach? Be proactive. Start the conversations before there’s a need. It might be uncomfortable, but dealing with money is part of life. And there are many financial decisions to make about housing, long-term care, medical care, how to handle debt and assets, insurance needs and more. The sooner you start talking about these needs, the better. As Harold Rohleder explained for MarketWatch, many of the steps are best taken while parents are still fully independent: “If they haven’t been addressed by the time the parents enter assisted living or the equivalent in-home care,” he said, “the clock is ticking and it’s time to get them done.”
You may have to broach the topic; it’s a common cultural taboo to avoid conversations about money, and that’s especially true with older generations. Just remind yourself and your loved ones that having a good financial plan and making necessary decisions now will help them maintain a good quality of life and peace of mind.
Set up financial access
To provide financial caregiving, you need to have the full picture of the financial situation. Once decisions are made, you’ll need access to the appropriate accounts and resources to carry them out.
The first step is to take inventory. Make a list of all assets and liabilities. Assets could include anything from savings and investments to real estate and owned property, from the Oldsmobile to the heirloom jewelry. Liabilities include any and all debts, open lines of credit, any (perhaps rapidly) depreciating physical property. If that Olds is owned via auto loan, it’s not an asset; it’s a liability. Once you have an exhaustive inventory, you’ll be better able to understand the whole financial picture.
Next, set up access for yourself or another trusted person as a financial caregiver:
- You need to be added as a joint account holder on bank accounts, investment accounts and other financial accounts. Contact each financial institution about the process to add another person to the account. (Some forms may require notarization.)
- Consider other accounts and institutions: insurance policies, Social Security benefits, Medicare, etc. You can be added to most accounts or policies as a person who is granted access. In some cases, a power of attorney may be needed in order to grant access to a caregiver.
- Review and ensure other important documents are in place, such as a will, a durable power of attorney and an advance directive.
- Gather all important documents and keep them in a secure location, such as a fireproof safe. Important documents include proofs of identity, such as passports, birth certificate and marriage certificate, as well as property deeds and documentation about financial transactions.
- Set up shared access to physical property and assets, such as the house, vehicles, safety deposit box or storage facility.
Make decisions together
As a caregiver, your job is to provide the help that’s needed while encouraging all the autonomy possible. This is a tricky line to walk. It’s OK if you don’t always get it right; just do your best. As far as finances go, make decisions together as much as possible. As loved ones age or decline in health or mental faculties, it may become necessary for you to make the decisions and handle the details by yourself. Until that point, consider a regular discussion about the financial situation so you can make decisions together. Talk about big issues, such as long-term care, housing, handling debt, downsizing and liquidating assets. Remember that you don’t have to figure it out all at once. Take one big topic at a time, go over the options, and then make the best decision together at the moment.
Simplify the financial situation
Making decisions will be much easier with a simpler financial situation. Here are some practical steps:
- Use apps and tools to keep track of bills in one place.
- Reduce property that requires a high degree of maintenance, such as a vacation home, boat, real estate, timeshares or unused cars.
- Research the best options for senior housing. Downsizing from a family home can free up income and reduce the daily responsibilities for you and your parents.
- Look into debt consolidation if there are multiple outstanding debts or lines of credit.
It can be difficult to let go of those possessions that represent youth and freedom—such as a boat, a vacation timeshare or a risky investment portfolio. Do your best to be sensitive as your loved ones grapple with the emotions of aging. If needed, consider a mediator, who is trained in helping people navigate tense conversations and come to a place of understanding and consensus.
Keep clear financial records
As you move into financial caregiving, be sure to keep clear records. This is important both for your parents’ financial well-being and for your own. If you pay for any expenses for your loved one, pay off debts on their behalf, or cover some of their medical or care needs, these expenses may be deductible on your taxes. You’ll need clear records to show what you paid for, so keep track of these expenses on your bank or credit card statement.
Try accounting software such as Quicken to keep track of your parents’ bills and spending, as well as your spending on their behalf. Keep your own personal finances entirely separate from caregiving expenses; set up a separate account or credit card for caregiving costs. These steps, along with getting key legal documents in order, will help you stay organized. While the transition to being a financial caregiver is difficult, the decisions you make will enable you to keep giving your loved ones the care they deserve.