When Should Clients Begin Managing Aging Parents’ Finances?

It’s difficult for clients to know when to step in and assist aging parents with their financial affairs. Conversations about money are uncomfortable, and aging parents may become defensive, suspicious or confused. It’s easy to see why clients resist having these conversations.

Unfortunately, as parents age, they’ll inevitably lose the capacity to manage their financial affairs. Cognitive decline, abetted by isolation, is a powerful force that makes aging parents easy targets for scam artists, misleading advertising and offers for high-priced, unnecessary goods and services.

Clients should raise the topic of financial management for their aging parents well before they become incapacitated. Dealing with financial issues before the onset of cognitive decline allows aging parents to be fully involved in the management of their estate. Early and full involvement by aging parents not only preserves their dignity and right to self-determination but also allows a client to have the benefit of parents’ intimate knowledge of their own financial affairs.

This is a good time for aging parents to express their desires through binding legal instruments. A durable power of attorney or a trust can give the aging parent continued control over their financial affairs while also empowering a client to step in and help when needed.

In a best-case scenario, trust documents will designate a successor trustee who can take over financial matters when the need arises. The trust should specify the conditions that trigger a trustee takeover, and perhaps give the successor trustee guidance regarding the aging parent’s preferences and priorities.

If a durable power of attorney isn’t in place, then the client or other family members will have to go to court to obtain guardianship over the parent. Not only is this a cumbersome process, but it also can result in a loss of privacy for the aging parent, whose medical condition is now recorded in public court records.

Early intervention gives a client and family members the opportunity to acquire a thorough understanding of the aging parent’s financial affairs. What are the aging parent’s financial institutions and account numbers? What sources of income does the parent have? What recurring bills must be paid? Does the parent have private health insurance in addition to Medicare? Does the parent have an attorney or financial planner? Where are the parent’s important financial and estate planning documents kept?

Having this information readily available will help the family act quickly and decisively should the need arise.

If an aging parent isn’t initially willing to execute a power of attorney or create a trust, family members shouldn’t be reluctant to raise the subject up again. Aging parents should know that, when the time comes that they do need help, family members are available to provide it.

As parents age, clients should be alert for signs of incapacity or financial abuse. A deterioration of the aging parent’s ability to manage everyday life activities could be an indication that he’s struggling with financial matters as well. And signs of financial exploitation or abuse are direct indications that intervention is needed.

Seniors often resist doctor visits for the express purpose of being evaluated for incapacity. Short of a doctor visit, however, aging parents may display clues that they’re struggling and need assistance:

If an aging parent exhibits any of these warning signs, it could be an indication that they’re struggling with financial matters as well. Children and caregivers should take the opportunity, while addressing the parent’s non-financial challenges, to inquire whether the parent would like assistance with paying bills, balancing a checkbook or other financial chores.

Elder financial abuse is significantly underreported, with one estimate suggesting that just one case in 44 is reported. According to a 2016 Allianz Life Insurance Co. survey, 72 percent of elder caregivers cited embarrassment as the main reason why financial abuse isn’t reported.

Family members and caregivers should be prepared to step in if they observe signs that an aging parent is being financially exploited. Common signs that an aging parent might be a victim of elder financial abuse include:

The presence of any of these signs should prompt clients to investigate and offer assistance if needed. If multiple trouble signs are present, more aggressive action may be necessary to acquire control over the aging parent’s financial affairs.

Family and caregivers who lack legal authority to intervene when warning signs arise have a challenging task ahead. At least one family member will need to move quickly to acquire the legal authority to act on their parent’s behalf—either through a hastily granted power of attorney or as a court-appointed guardian. Legal authority in hand, the new financial caregiver will be able to effectively step into the aging parent’s shoes and begin to restore financial order.

The assistance of an experienced attorney is invaluable in this process; as estate planners, we can draft all necessary documents, provide advice on strategies for dealing with financial institutions and creditors, and make the task of financial caregiving as efficient and manageable as possible.