Taking on financial responsibility for your elderly parents: A 3-step guide
As your parents get older, it may feel like you’ve switched roles. Now you’re the one who takes care of everything, from scheduling Mom and Dad’s doctor’s appointments to driving where they need to go. But even if your elderly parents accept some aspects of this conversion role—you gave them anxiety-induced heartburn throughout your teenage years, and conversion is fair game—it may be difficult to accept when you first take responsibility for their finances.
It can seem impossible to balance your parents’ need for independence and your need to protect them, especially when it comes to difficult matters like financial decisions. But ignoring the very real financial risks your aging parents face can hurt you all.
Here’s what you need to know about taking responsibility for Mom and Dad’s finances as they get older.
Know when to start
When it comes to making financial decisions for elderly parents, many of us think we can cross that bridge when we come to it. Rather than broach the subject before it’s necessary (and get angry saying “I’m not that old!” from the old man), it is easier to wait until there is a problem.
Unfortunately, a lot can go wrong before you know the problem. In fact, the first sign of difficulty in understanding the decline of financial power. According to a study published in JAMA Internal Medicineseniors with Alzheimer’s disease or dementia were more likely to miss loan payments in the six years before receiving a formal diagnosis.
Additionally, all adults, regardless of their cognitive abilities, are more vulnerable to deception than other age demographics. The FBI reports that more than 101,000 Americans over the age of 60 reported being victims of elder fraud in 2023, losing an average of $33,915 per victim. Considering how often financial fraud is underreported, the estimated $3.4 billion in reported elder fraud losses by 2023 may be an underestimate.
Waiting until you know your elderly parents are struggling financially can cost them money. So, although the subject may be uncomfortable, it is wise to bring it up before you think it is necessary.
Create a list of accounts
Tracking down information for various accounts when the main account holder is nowhere to be found can be emotionally and physically overwhelming. That’s why it’s a good idea to start with an account list. You can talk about this as a task you do together, as it is important for everyone, regardless of their age, to make information available in an emergency.
Specifically, you’ll want to make a list of all of your parents’ (and your own) financial accounts, loans, and regular debts, including check-in information. If your parents are not comfortable sharing login information, you can consider sharing with a password manager. These systems allow you to share passwords and designate administrators of digital assets (ie, people who have access after incapacitation).
Get legal approval
When it comes to taking care of your elderly parents’ finances, having access to your parents’ accounts doesn’t mean you have the legal right to pay bills or make decisions on their behalf. To do that, you will need to take on one of the following roles:
- Associate account manager: Being added to your parents’ account as a joint account manager allows you to access the account, make deposits and withdrawals, write checks, and pay bills. This option is easy to use, but it may affect your parents’ eligibility for Medicaid or your child’s eligibility for college financial aid.
- Trustee: As the trustee of your parents’ living trust, you will have the ability to manage any accounts, funds, or property within the trust. However, anything outside of the trust (such as utility payments) should still be handled by the account holder. Setting up a living trust can also be more complicated than adding you as a joint account holder.
- Power of attorney: When your parents are compos mentis, they can name you as their agent under a power of attorney. This allows you to access their financial accounts and make legal and financial decisions on their behalf. A general durable power of attorney takes effect immediately and remains in effect if your parents become incapacitated.
- A conservator or guardian appointed by the court: If your parents are no longer able to make decisions for themselves, you will need to apply to the court to be appointed as a conservator or guardian. This process can take time and will cost money, so it’s best to get mom and dad to buy before this is necessary.
Mother, Father and Money
Handling the financial tasks and decisions of your elderly parents will likely feel uncomfortable for everyone involved. But your parents will probably need your help managing their money—and they may not be able to ask you.
Start the conversation early, before you think Mom and Dad need any help. Starting with a list of accounts—yours and yours—can prepare the whole family for potential emergencies. From there, you can discuss what legal permissions you may need in the future. You and your parents will be glad you did.
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