In many families, there comes a time when grown children have to step in to help manage their elderly parents’ finances. This often happens when parents have lost the mental capacity to make important financial and investment decisions themselves.

This can be a difficult time for everyone involved. Adult children sometimes feel like they are overstepping their boundaries. After all, they may have received wise financial counsel from their parents growing up, so it may feel awkward with the shoe on the other foot. And, parents may not want to acknowledge the fact that, yes; they are getting older and might need a little financial help.

Talk Sooner Rather Than Later

Regardless of how difficult or uncomfortable it might be, it’s critical that grown children and elderly parents talk openly and honestly about the management of the parents’ financial affairs. Ideally, these conversations should happen before it’s necessary for children to step in and take an active role in the management of their aging parents’ finances. Delaying these conversations will only make things more difficult and stressful later.

For example, if you haven’t had these kinds of conversations and made arrangements ahead of time, you might be restricted from access to your parents’ accounts if they become mentally incapacitated or after they pass away. A simple way to avoid this scenario is to have the proper legal documents, such as a Power of Attorney, as well as disclosure forms filled out and signed by all parties ahead of time.

Keep in mind that the more assets your parents own, the more advanced and in-depth these conversations need to be. This is especially true if your parents own a closely held business or real estate properties. When these discussions happen prior to any mental incapacitation, the path to continued well-managed financial and business affairs is much clearer.

How and When to Initiate Conversations 

OK, so how do you initiate these critical but often difficult conversations with your elderly parents? One solution is to have an objective third party (outside of your family) start the conversation. This could be a family financial advisor, CPA or attorney.

Another option is to suggest the idea of a family meeting to your parents. The focus of the meeting would be your parents’ financial future. Communication during this conversation is important to ensure your ability to continue to care for them in the manner they desire, if the issue of mental incapacitation ever arises. Then suggest that their financial advisor, CPA or attorney attend the meeting and facilitate the conversation to help avoid any awkwardness and lend his or her expertise to the discussion.

 As for when is a good time to initiate these conversations, the timing will be different for every family. Two times when it might be easier to get the conversation started are tax season and at the beginning of a new year.

For instance, you could ask your parents if they need any help preparing their tax return, which opens the door to a more in-depth conversation about their finances. Alternatively, at the beginning of the year, you might suggest that you work together in creating a new budget or conducting a portfolio review for the upcoming year.

Possible Warning Signs of Trouble in Your Elderly Parents' Finances

Meanwhile, there are a few possible warning signs to keep an eye out for that may well indicate that your elderly parents’ finances are in trouble and you need to take action sooner rather than later.

This could include the following:

• Bills are stacking up in the mail and found unopened.
• Creditors are calling their house.
• Parents seem unaware of financial issues and challenges.
• Parents suddenly make expensive purchases they wouldn’t normally make.

If you realize your parents are physically or mentally unable to perform normal daily tasks, it might prompt you to discuss finances with your parents. Adult children often do not connect the dots to how these signs could indicate problems in their parents’ finances in addition to impairing their daily lifestyle.

Financial Transparency Is Critical

At ACG, we strongly believe in financial transparency for all of our clients, regardless of their age. We have worked with many families to proactively initiate these kinds of conversations sooner rather than later. To learn more, please give us a call.