Discussing finances is rarely easy, especially when it involves your aging parents. It's important to know how their money is allocated, so you can help them manage it when needed.
It's important to handle the topic with care. Releasing control of personal finances is difficult for those who have been managing their money for many years.
Financial planner Brent Neiser recommends asking the following questions:
What investments do they have?
Where are those investments held?
Who are the contacts for the investments?
How are these investments titled (joint accounts, individual, etc.)?
Is there a financial advisor in the picture?
How you can help
1. Get started now
It's better to talk to them about financial things while they're physically and mentally healthy, but sometimes that's not possible. Regardless, Royal writes, "The sooner you make an action plan and ready things, the less their finances can degrade."
2. Tidy up financial accounts
If your parent has a wide variety of accounts, you may want to clean up unused accounts & those with minimal balances. You might also want to add beneficiaries to any accounts you plan on keeping. This helps to simplify the legal process.
3. Check up on 401(k)s and IRAs
"Both 401(k) and IRA plans may need to be handled in special ways, such as required minimum distributions, depending on the owner’s age. If these accounts are not managed correctly, they can create more financial difficulties and needless expense, including severe bonus penalties."
4. Make sure investments align with your parent's goals
If they're retiring and their portfolio is too aggressive, their future income may be at risk if the market declines. If retirement is a ways away and their portfolio is too conservative, they might be losing out on potential gains.
5. Establish a financial power of attorney
"In the event of a parent’s incapacity, perhaps due to hospitalization, who’s going to manage the finances? In these situations, it can be useful to have a financial power of attorney that allows you to manage your parent’s affairs, pay bills, and the like."
6. Call in an expert
Financial issues are complicated. Don't be afraid to call in an expert. Whether it's a financial planner or elaborate estate planning with a lawyer, they can bail you out when you're in over your head.