Managing your aging parents’ financial affairs

Nine steps to help with money matters in their golden years

Creeping in on little crow's feet, age eventually affects a person's ability to manage their money and make sound financial decisions. There's a lot to consider when it comes to helping your aging parents with their finances. 

It can be one of the hardest parts of family dynamics. Our parents raised us and were always there when we needed them. But there may come a time when the situation is reversed. As your parents get older, they may need your help – especially in managing financial matters. Here are nine steps to get you started.

1. Start as early as possible

Beginning the discussion can be difficult, touching on the highly sensitive issues of competence and independence. In many cases, an accident or illness precipitates a crisis and plunges everyone into scramble mode. Making a plan before that happens can make a big difference.

Elder care experts suggest holding a family meeting where everyone can openly and honestly discuss the situation. Opening these lines of communication early lets your parents know their wishes are being respected and helps everyone prepare and define caregiving roles.

2. Collect and assess information

Assuming greater responsibility for your parents' care involves accessing important information about their health and finances. You'll need to collect and copy documentation around their bank accounts, housing (leases, mortgages, and other property), Canada Pension Plan benefits, retirement and investment portfolios, insurance† policies (health, home, auto, life), and medical coverage.

You'll also need their SINs, access to tax returns, and contact information for lawyers, financial advisors, accountants, doctors, and dentists. Make sure everyone else in your family knows where these documents are stored. For a convenient way to organize this information, download our Estate Planner Record Keeper or get a hardcopy at any branch.

3. Seek professional advice

Go with your parents and visit their bankers, brokers, financial advisors, lawyers, accountants, and insurance agents to get a more complete picture of their finances and to see how each of them can help you put together an action plan. This may involve strategies like consolidating multiple RRIFs into one or calculating RRIF withdrawal amounts to ensure your parents don’t have their Old Age Security benefits clawed back. If they don't have a financial advisor, take them to yours, to get expert help in designing the most beneficial strategy for their situation.

4. Add another family member to financial accounts

At least one of the children needs to take financial responsibility by adding their name to accounts as a person of interest and getting authorization to view or conduct transactions. This can be a good way to monitor financial activity and be alerted to potential problems, such as missed payments or large unscheduled withdrawals. There are many scams, cons, and investment frauds targeting the elderly – it's important your parents be aware of them and know to contact their designated financial caregiver after receiving any solicited financial transaction.

5. Stay alert to online banking security

Concerned about an elderly parent being taken advantage of or perhaps falling prey to a scam? Give everyone greater peace of mind and help your parents set up email or text notifications on account activity. Make sure you’re included on the alert distribution list. If there’s ever suspicious or potentially fraudulent activity on their accounts, you'll all get pinged and you’ll all sleep easier.

6. Automate bill payments and direct deposits

You can easily arrange for mortgage payments, rent, utility bills, insurance, and other regular commitments to be paid electronically. This eliminates hassles and service interruptions if required payments aren’t made.

The same convenience applies to direct deposit of pension and benefit cheques into bank and brokerage accounts. This way there are no lost cheques or delays in getting funds deposited. You might want to reduce the number of credit cards as well, cancelling those with high rates or that are rarely used.

7. Review insurance and think about future care needs

Many seniors have too little life, health, disability, or long-term care insurance. Others are so concerned about burdening their children with medical expenses, they buy too much or the wrong kind. Review your parents' coverage with an insurance advisor you trust.

It may also be a good time to talk about the possibilities for future care if one or both of your parents become ill or need more care. These conversations can be very difficult, so you may want to handle them separately from the other financial issues. Instead of a Power of Attorney, it's possible to have two Representation Agreements – one for financial matters, the other for health. Talk to legal counsel for more information.

8. Discuss Power of Attorney and Representation Agreements

One of the most important aspects of helping parents with their finances is making sure there is someone in place who has the legal authority to act on their behalf if necessary. It's crucial to have a Power of Attorney should your parents become incapacitated through physical or mental illness. Don’t make the mistake of thinking a family member can simply take over and act on their behalf – they can't.

A Power of Attorney (POA) designates you to make legal and financial decisions on their behalf in the event they can't. An Enduring Power of Attorney is preferred, because unlike a regular Power of Attorney, it doesn't become invalid when the parent becomes incapable.

A Power of Attorney gives you the right to receive income, pay bills, and buy and sell property. It doesn't give anyone the right to make medical or health care decisions. For that, a Representation Agreement is needed. There are two kinds:

• General, which gives power to make every kind of decision, including financial (similar to a POA) and health care
• Limited, which restricts the type of decisions that can be made

9. Review wills, estate planning, and final wishes

Of course talking about your parents' passing is a grim, uncomfortable topic, but it is necessary to discuss the inevitability. You'll need to locate the will, know who the executor will be, and understand the pertinent details concerning bequests or trusts.

The goal of estate planning is to distribute and preserve assets for heirs as well as minimize taxes. Make sure wills are up-to-date, allowing for the addition of new grandchildren. Find out what your parents would prefer regarding final arrangements. Once everyone knows their wishes, it will be easier to prevent misunderstandings later – especially during the already difficult and emotional period at their passing.

Assuming more responsibility for your parents’ financial and personal affairs can seem like a daunting task. Your BlueShore Financial advisor has a network of financial and legal specialists they can call on to help you find a solution that works for your family.