If you have elderly parents, there may come a time you realize they require assistance with their financial affairs. They may stubbornly be reluctant to ask for help, even when they need it. A good idea is to help them with financial matters now, or at least broach the idea, so as to hopefully alleviate future financial stress. Here are some tips to gradually assist aging parents with their finances.
- Maintain an Inventory of Assets and Liabilities: Your parents most likely have multiple investment and bank accounts at various firms, not to mention other types of assets such as, for example, real estate, private equity, life insurance, annuities, and/or collectibles. Do you know what they own, what they owe, and where all their assets are held? You may have a general idea, but having a concrete list will likely prove invaluable. It may also be prudent to know login information for key online accounts, especially if a parent is showing signs of diminished capacity, confusion or dementia. More on this later.
- Review Powers of Attorney: Do your parents have a Power of Attorney? If so, do you know who is appointed as the attorney-in-fact? Review it as needed and read about recent changes made to New York’s Power of Attorney here.
- Review Health Care Proxies: Do your parents have a Health Care Proxy? Who have they appointed to legally make healthcare decisions on their behalf if they become incapable of making healthcare decisions? Remember that the appointed agent cannot make decisions regarding the health care financial matters.
- Estate Documents: Do your parents have wills and/or trusts? You should know the location of the original will and, if appropriate, review it to determine if changes are needed. Modifications are often needed due to changes in personal and family circumstances or the tax laws. You should also keep copies of any trusts, deeds, and insurance contracts.
- Use a Trusted Contact: Many brokerage firms, custodians, and insurance companies ask clients to provide information for a trusted contact in the case of emergency or if they cannot reach the client or if premiums are not paid. This trusted contact typically lacks authorization to act on the account, so your parents may feel at ease knowing no changes would be made prior to their consent. Ask your parents if they have a trusted contact on file. If they don’t, urge that they add you or a reputable third-party.
- Review Beneficiary Designations: Your parents may have already named beneficiaries of their Individual Retirement Accounts (IRA) or insurance policies, but it’s a good idea to review these periodically as you would a will. It is possible a beneficiary may have died, or perhaps a contingent beneficiary should be added. Refer to the inventory of assets to identify assets that can pass directly to the named beneficiaries by operation-of-law. You may wish to enlist a financial advisor to help you. Keep in mind that the designated beneficiaries of an IRA will supersede the beneficiaries under a will.
- Consider Probate Avoidance: So called “Transfer on Death” or “Totten Trust” accounts are methods for which your parents can often name a beneficiary of regular bank and brokerage accounts. Upon the death of the account owner, the money in the account will automatically go to the chosen beneficiary, bypassing a sometimes onerous probate. If your parents have an individual brokerage or bank account, consider re-registering the account as a TOD or Totten Trust, if the goal is avoiding probate.
- Review insurance Policies: You should be aware of all insurance contracts including life, long-term care, and homeowners. You want to avoid the cancellation of a policy due to unpaid premiums. It may be worthwhile to contact each insurance company to ascertain if you or the trusted contact can be notified in the event of a missed premium payment. Moreover, having the premiums paid automatically may be a desirable option.
- Advisor Contact Information: We also suggest gathering the contact information of your parents’ advisors including their financial advisor, accountant, lawyer, banker, and insurance broker. Update the information as needed
- Be Alert: Be cognizant for signs of diminished mental capacity. Remind your parents to be aware of scams, fraud, and requests for personal information (even if not suspicious). If they have any doubt as to whether something is legitimate, ask them to contact you immediately and before divulging any personal information.
At Navis Wealth Management, we suggest talking to your parents about their finances while they can make mindful decisions. Approaching the topic can be delicate so showing respect and concern may help make your parents feel more comfortable. If you have any questions, please don’t hesitate to contact us.
*Letizia Carlisto is a Wealth Advisor Associate at Navis Wealth Management, LLC. David Bruckman is a Senior Consultant at Navis Wealth Management concentrating in Wealth Transfer and Risk Management.
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