When Roles Reverse...

Helping an Aging Parent Manage Their Finances
by Patricia Cutilletta, Morgan Stanley

There may come a time when those we love require assistance with money management. As cognitive decline progresses with age, once routine financial tasks, such as paying bills, depositing checks and reviewing statements, tend to become increasingly complex.

Many grown adult children are eager to lend a helping hand, but grapple with how best to strike the right balance. Additionally, it’s a difficult conversation that can quickly become uncomfortable if not handled delicately.

Over my nearly 35 years as a financial advisor, I’ve guided many families through this challenging situation. Here are a few tips that can make the process smoother and more manageable for all parties:

Start Early
Make it a point to have a conversation with your parents well before cognitive decline takes hold.

Start by discussing their overarching financial goals in a casual setting. This way you can slowly begin familiarizing yourself with their long-term plan and vision. Additionally, ask that they begin compiling a comprehensive kit containing everything from key account information and insurance policies, to credit reports, end-of-life documents and contact information for their financial advisor, lawyer, and other advisors. Eventually, this kit will serve as your roadmap, helping to ensure you can hit the ground running when the time comes to assume a more active role.

Understand the Red Flags
Most seniors are understandably defensive when the topic of their independence is broached. With that in mind, mom and dad are unlikely to come calling proactively when money management becomes a challenge. Instead, it is up to you to keep an eye out for the red flags and act accordingly.

Signs that your parents may require a bit of extra hand-holding and guidance, include: unpaid bills, double payments, late fees, irregular purchases/spending habits and trouble with basic math. In this scenario, mom and dad should keep the bulk of their fiscal independence, but you might consider spending a little extra time working together on financial tasks and priorities. Keep in mind that simple steps, such as enrolling them in online banking or going paperless, are effective mechanisms for keeping financial affairs organized and timely, while also granting you additional oversight.

In situations where cognitive decline is rapid and memory loss significantly impedes financial decision-making, you may need to play a more hands-on role in everyday tasks. The most severe scenarios (e.g. Alzheimer’s) often require triggering a Power of Attorney, or assuming the role of Successor Trustee, if the afflicted party is unable to make sound decisions in their current state of mind. Having these documents in place while they still have the ability to understand and sign them will ease the transition.

Build a Team
Effectively managing your own finances is difficult enough, let alone assuming some degree of fiscal responsibility for an aging parent. Working hand-in-hand with siblings or relatives can be an effective strategy for alleviating some of the burden. For example, consider assigning one person the responsibility of visiting mom and dad twice a month to pay bills, while someone else reviews monthly statements and keeps a vigilant eye for indications of financial fraud.

There is no right or wrong way to divvy up responsibility, as long as everyone is working toward the same goal. But one person should be designated the first point of contact for any questions.

The processes of helping an aging parent manage their finances may seem challenging, but with a proactive approach and a bit of planning, you can truly make a positive difference. iBi

Patricia Cutilletta is an executive director and financial advisor with the Wealth Management Division of Morgan Stanley in Chicago.