Do's and Don'ts of Taking Over Parents Finances

Throughout your life, your parents have probably supported you in numerous ways, from teaching you to tie your shoes to helping you open your first bank account. As they advance in age, the roles may reverse, requiring you to assist them with tasks like managing their finances.

This change can feel uncomfortable, especially if money wasn't a common topic in your family conversations. As people age, many will need a trustworthy person to help manage their finances. If you're ready to take on this responsibility, here are some tips to make the transition smooth and worry-free.

Do start this conversation well before your parents require significant assistance.

It's important to talk about finances when they are aware. This way, they can clearly share their wishes and important information.

Need a way to initiate the conversation? Use a recent financial event, a seasonal deadline, or a financial milestone to start talking about money with someone. It can help open up conversations about their finances.

If you're unsure how to explain your interest in their financial matters, you might say, "I want to get involved now so that if I need to step in later, I'll know your preferences and how you manage things," suggests Meredith Stoddard, vice president of life events planning at Fidelity Investments.

Don't wait for your parents to initiate the conversation.

"Very few parents are going to say, 'Alright, I think I need some help,'" notes Stoddard. Also, don't be surprised if they don't immediately accept your offer of assistance.

There could be many reasons for their hesitation. They may feel uncomfortable sharing their small savings or fear that knowing about an inheritance could change your motivation.

Depending on their generation or cultural background, they may consider discussing finances openly as inappropriate or unnecessary. Additionally, some parents may be reluctant to give up their independence.

By taking small, consistent steps, you can gradually encourage communication. As your parents become more comfortable, start by helping them pay bills. Gradually take on more responsibilities as time goes on.

Do take the time to understand their entire financial situation.

Aim to get a comprehensive view of their income, assets, expenses, debts, investments, insurance policies, and estate planning wishes. This process will likely require patience, so proceed gradually if possible. When you become more involved, inquire about pensions, Social Security, daily expenses, and housing costs. This will help you plan for the future.

Make sure you know which financial institutions hold their accounts, keep track of account numbers, and understand how bills are paid—whether by automatic transfers or paper checks.

Find where important documents are kept, like in a filing cabinet, safe, or computer folder. This is a crucial step. If their accounts are scattered across different institutions, consider whether consolidating them is appropriate.

Keep thorough records of everything you learn and any actions you take. Offer to share these notes with your parents and key family members, such as siblings, to ensure everyone stays informed and aligned.

Don't judge or criticize your parents.

Their retirement savings may be lower than expected, they might have bad investments, or they could have a lot of debt. When you hear surprising financial news, pause, accept it, and concentrate on what you need to do right now. Don't approach the conversation with judgment. We can't change what's already happened, so there's no use dwelling on it.

Instead, try to handle the situation with understanding, empathy, and compassion.

Do seek professional assistance.

Find out if your parents are already working with a lawyer, banker, financial advisor, or accountant. If they agree, suggest a meeting.

The meeting should include you, your parents, and the professional. The goal is to discuss how to manage some of their financial responsibilities better. If they aren't working with anyone, offer to help them find a trusted professional they feel comfortable discussing their finances with.

Professionals can provide valuable advice, ease your burden, and help avoid potential conflicts of interest.

A lawyer can help you understand the advantages of creating a power of attorney. This legal document lets you make decisions for your parents if they are unable to do so themselves.

Do keep your finances separate from your parents'.

It may seem convenient to have joint bank accounts or credit cards with them, but this can lead to complications by mixing your estates.

Even though it might be simpler to use your own cash or credit card to cover your parents' expenses, it's better to keep those costs separate. Using a dedicated credit card or checking account for their bills will help you track spending, manage both your and your parents' budgets, and maintain transparency for everyone involved.

Bottom Line

Navigating the financial responsibilities of aging parents can be challenging, but with thoughtful preparation and open communication, you can help ensure their financial well-being while preserving their independence. By approaching these conversations with empathy, patience, and the right professional support, you can create a plan that honors their wishes and keeps everyone on the same page.

Remember, this transition is not just about managing money—it's about caring for those who have always cared for you.

Sources:

https://www.fidelity.com/learning-center/personal-finance/how-to-take-over-parents-finances

Disclosures:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information