As our parents age, they may need help managing their finances.
Between the constant flow of mail, bills, insurance paperwork, and other essential documents, it’s easy for things to slip through the cracks.
Stepping in to handle your aging parents’ finances can help ensure their financial security and bring peace of mind to the whole family. But how do you approach the subject? And once your parents let you in, where do you start?
Here’s a step-by-step guide to help you organize your aging parents’ financial paperwork, handle your parents’ finances effectively, and minimize stress for everyone involved.
When should you start handling your elderly parents’ finances?
There’s no one-size-fits-all answer to when you should take over your parent’s finances. Many seniors are capable of handling their financial affairs well into their 90s, while early-onset Alzheimer’s disease can affect some people in their 40s.
Often, it’s hard for an aging parent to ask for help—even if they need it.
Signs your parents need help managing their financial responsibilities
However, some common signs include:
- Unusual spending. You may notice your family members buying things that don’t fit their needs or lifestyle.
- Piles of unopened mail. Elderly parents may not open mail, causing them to fall behind on bills. You might find bags of unopened mail in spare bedrooms or other areas of the home.
- Physical setbacks. Vision problems can make it challenging to drive to the bank and arthritis can make check writing painful.
- Communicating stress around money. Your elderly parents may avoid activities they previously enjoyed because they don’t have enough money or express frustration about their financial situation when you’re with them.
- Memory problems. If your parents have trouble remembering the date or how to write a check, this could be a sign they need help handling financial matters.
If you notice these or other signs, try to avoid taking over your parents’ finances in one fell swoop. Instead, make gradual changes, like writing checks for their monthly bills together. This gives both of you some time to acclimate to the new situation.
How to handle an elderly parent’s finances
Organizing financial paperwork is the first essential step in managing your elderly parent’s finances. It can also bring peace of mind to their adult children and other caregivers shouldering the responsibility.
Here are some steps to get started.
Step 1: Sort and organize existing paperwork
First, get a handle on the paper your elderly parents have. They may have stacks of mail and other documents, file cabinets, and drawers of paperwork.
Go through their existing paper and sort it into three categories:
- Active paper. This includes bills, insurance-related paperwork, current tax documents, and other paperwork that needs to be processed.
- Reference paper. This includes financial and legal documents you may need to reference but don’t need current action. Reference papers include birth certificates, insurance policies, deeds, car titles, trusts, power of attorney, and wills.
- Paper to shred or toss. You’ll likely find a lot of paperwork that doesn’t belong in either the active or reference category. This can be tossed or shredded. Be sure to shred anything containing sensitive information to protect against identity theft.
Step 2: Create a process for handling incoming mail and active paper
Your next step is creating a process for handling active paper and incoming mail. One of the biggest challenges when managing a parent’s finances is dealing with the sheer volume of mail, from bank statements and insurance notices to junk mail.
I use the Organize 365 Sunday Baset system personally and with my clients. It offers a place for your elderly parents to put any mail or other documents that come in during the week—or between your visits.
Step 3: Create a system for keeping reference paper
Once you’ve sorted the mail and other documents, the next step is to set up a system for maintaining reference paper that works for your parents and you. A good system ensures that everything is easy to find when needed.
Many people turn to file cabinets, but the problem with this method is:
- Most paper stored in a filing cabinet is never accessed again
- Filing cabinets aren’t portable if you need to pack up and go in a hurry
For this reason, I recommend using the Organize 365 Paper Solution Binders to store reference paper. They’re portable if you need to take your medical information to a hospital or bring your financial information to an estate planning attorney. They also allow you to easily keep all of your reference papers up to date.
You may want to store legal documents in a safe deposit box and keep copies in your binders. Just remember that you won’t be able to access documents in a safe deposit box outside of regular bank hours. This could cause problems, for example, if your elderly parent is hospitalized on a weekend and you need their healthcare power of attorney.
You might also consider digitizing essential documents like estate documents, insurance policies, identification cards, and medical records. If you decide to digitize these documents, create a folder system on your computer or cloud storage that mirrors the categories used for paper files.
Step 4: Simplify and automate
Your elderly parents may or may not use online bill pay and get their bank statements, credit card statements, and tax documents electronically. If they’re open to having you set this up for them, it can save you a lot of time and frustration. Automatic bill payments also reduce the risk of missed payments and check fraud.
For bills that can’t be set to autopay, keep a detailed calendar for the payment schedule. You can set reminders on your phone or use a paper calendar depending on what’s easiest for your family.
If your parents have multiple credit card accounts or bank accounts, consider consolidating them into fewer accounts. This simplifies tracking and reduces the likelihood of missing a payment.
Step 5: Consider a power of attorney
A power of attorney is a legal document signed by a competent adult granting another person the power to make decisions on their behalf. If your parents are still able to provide written consent, consider asking them to sign a power of attorney that will let you act on their behalf when signing documents, paying bills, conversing with your parent’s financial institutions, etc.
There are several types of power of attorney forms, including a healthcare power of attorney that lets you make healthcare decisions when your parent can’t make them on their own, and a financial power of attorney that lets you handle financial tasks. The authority granted by a power of attorney can be broad or very narrow.
Discuss your options with an elder law attorney who is familiar with your state’s laws. And start the conversation early, since your parent cannot execute a legal document if they’re not mentally competent at the time of signing.
Overwhelmed by your elderly parent’s finances? Get help from a Daily Money Manager
Managing your elderly parents finances can quickly become overwhelming, especially if you’re juggling your own career and family obligations. This is where a Daily Money Manager (DMM) makes all the difference. A DMM helps seniors and their families keep up with everyday financial tasks, ensuring that nothing gets overlooked.
How I can help with your parents financial affairs
As a DMM, here are a few services I provide for my clients:
- Opening and processing mail. I can open mail and make sure every piece of mail is properly handled, stored, or shredded.
- Paying bills and reconciling accounts. I can set up high-tech or low-tech processes for paying bills and ensuring your parents’ accounts are balanced so you don’t have to worry about missed deadlines or overdrafts.
- Tracking income and expenses. I can help protect your parents financial future by tracking income streams and expenses to ensure they’re not spending beyond their means.
- Organize financial documents. As a professional paper organizer, I can help you or your elderly parents set up and maintain a filing system to ensure all important documents are stored and accessible.
- Prepare for taxes. As a CPA, I know what you need to be prepared for tax time. Whether you need me to prepare income tax returns or coordinate with your accountant, I can help organize statements from the Social Security Administration, 1099s from investment accounts, and other tax documents throughout the year, making tax season far less stressful.
- Protect against fraud. Seniors are frequent targets of scammers. I can help keep your parents personal information secure and spot red flags on credit reports and account statements that might indicate financial exploitation or fraud.
Managing your elderly parents finances doesn’t have to be a stressful, overwhelming experience. By following these steps to organize, digitize, and track important financial documents, you’ll help protect your parents’ financial well-being while reducing your own stress.
If you find the process of handling your elderly parents finances too time-consuming or complicated, contact Firefly Financial Organizing. I can help you take care of life’s daily demands, collaborating with their accountant, elder law attorney and financial advisor, and communicating with other family members or adult children involved in their care.
Reach out today to ensure your elderly parents finances are well taken care of and bring organization and peace of mind to your family!
