How to Talk with Your Parent about Their Money

What if your parent was in a serious accident tomorrow? Could someone they trust step in and temporarily handle their financial affairs, even if it’s just to pay their bills?

What if your parent should die tomorrow? Could heirs easily find the personal and financial records they’d need to settle your parent’s estate? Or, will the heirs find a jumble of unorganized records scattered throughout your parent’s house? At their attorney’s office? In their safe deposit box?

Starting a conversation with your parent about their money can be far easier said than done. Expressing your concerns is certainly one way to start. But, be careful to express your concerns in a way that does not patronize or embarrass your parent. Above all, don’t use phrases like “You need to …” or “I need you to …” or “You have to …”.

Your best starting point may very well be right after you’ve finished talking with your parent about their advance directives.

First, are their personal and financial records in order? Here are two organizers to help you and your parent answer that question. Both are PDF documents that you can download and print out. To download either one, simple click on its title.

Our organizers are all PDF documents. If you have Adobe Reader DC on your computer, you can fill in information, save it, close the document, then reopen it later to update or add new information. Get the latest version of Adobe Reader here.

Your Personal Document Organizer — Where is the best place to keep insurance policies and other important records? Which ones should be kept? — for how long? This organizer answers those questions and provides space for your parent to write down where they keep theirs.

Household Finances Organizer and Our Investment Organizer — These will help your parent’s designated representative step in and handle their financial affairs while they recover from an accident or extended illness. They will also help their heirs easily settle their estate. But, more importantly, they will help your parent manage their own affairs more easily, with greater peace-of-mind.

The next step is for your parent to name someone they trust to step in handle their financial affairs if and when that becomes necessary. This is accomplished through a legal document called a Power of Attorney. This document delegates legal authority to another person. The person who signs (executes) a POA is called the Principal. The POA gives legal authority to another person (called an Agent or Attorney-in-Fact) to make property, financial and other legal decisions for the Principal.

A Principal can give an Agent broad legal authority or only very limited authority. It is frequently used to help in the event of a Principal’s illness or disability. Unless otherwise specified, the POA applies only to assets owned directly by the Principal, not to any assets transferred into a trust by the Principal.

A simple Durable Power of Attorney allows the Agent to act for the Principal even after the Principal is not mentally competent or physically able to make decisions. A simple Durable POA may be used by the Agent as soon as it is signed by the Principal, and is effective until it is revoked by the Principal, or until the Principal’s death.

A Springing Durable Power of Attorney becomes effective at a future time. That is, it becomes effective upon the happening of a specific event chosen by the Principal, and spelled out in the POA. The springing event is usually the determination that the Principal is no longer competent to handle his or her affairs. The Springing POA will frequently provide that the determination of non-competency will be made by the Principal’s physician (or by the Principal’s physician and another qualified physician). A Springing POA remains in effect until the Principal’s death, or until revoked by a court.

Because your parent’s Power of Attorney gives so much authority to the person or persons designated as their Agent, I highly recommend against a do-it-yourself approach. If set up wrong, the POA could easily be the same as giving a fox the keys to the hen house. (Unfortunately, adult children rip-off their parents far more often than most of us want to believe.)

8 unexpected reasons why you should have an advance care plan

Consult with a competent attorney who specializes in elder law or estate law (not an attorney who claims they can handle everything). While their fees may seem somewhat expensive, they could be one of the best “investments” you and your parent will ever make. A competent elder law attorney will help you avoid more costly problems down the road, and will help alleviate many other frustrations that seem to come hand-in-hand with being a caregiver.

To find a nearby attorney who specializes in elder and estate law, simply do a Google search. In my case, I searched “elder law sarasota fl” and “estate law sarasota fl.”

What Happens When the Principal Dies? How do funeral expenses and other bills get paid before their estate is settled?

There are many ways this can be handled. But, from my own personal experience, each one could be filled with unexpected and very unpleasant surprises. Trust me, it’s not as simple as naming joint surviving account holders to your parent’s bank account. That’s another reason why your parent needs to work with an experienced elder law attorney.