A recent round of ‘reply all’ emails among classmates of mine brought up a common issue: how to handle financial issues with aging parents.
A couple of classmates who make up my ‘crew’ from 40-plus years ago in school are now are now addressing the inevitable and unenviable task of managing their parents money. The stories from my classmates range from the benign–a parent with memory problems who just needs to have bills paid and checking accounts and investments monitored, to the horrific–a second marriage and an unscrupulous new stepmother who attempts to clean out a lifetime of savings from her older and vulnerable new husband.
I’m going to offer up a couple of suggestions in this post, based on common sense and personal experience. (Mommy Dearest and my late father were absolutely obsessive in their preparation for the future, and doggedly pragmatic, so–thankfully–I have had little to be concerned with on this front.)
What I would really appreciate on this subject is comments from you. Why? Because I just think this is a subject that really benefits from group discussion. One man’s (or woman’s) experience, no matter how broad or expert, can’t cover all the bases. So please, chime in.
What I say in this post, or in any other post on this blog, is not legal advice. Talk to a lawyer.
First, parents and children are going to have to communicate with a maximum of love, patience, and honesty, and with a minimum of emotion and absolutely no ulterior motives…about one of the most sensitive subjects on the planet: money. This is challenging under the best of circumstances.
My advice: write down your concerns and the issues you need to address, talk face to face if possible, in private, with no time limits, and go down the list, one by one. Ask questions, and listen. Be candid, but kind: one day you’re going to be in this position, and you want to be treated fairly when that time comes.
Second, plan in advance. Get a lawyer to draft a will or trust that’s appropriate for the situation and the size of the estate…and valid in your parents’ domicile. (Wills in Boston, MA can be very different from wills in Los Angeles, CA.)
Be careful in trying to use dowloaded forms from the internet. Think long term for children–education being a primary concern–and short term for the parents: what’s the next 6 months, year, and two years hold for them?–with financial stability and healthcare being primary concerns.
Third, if the family tree and financial portfolio permit, I would encourage parents and children to keep it simple. A lot of problems can be avoided and a lot of daily transactions made easy if a child’s signature is added to a parent’s checking account, for example. If the parent is incapacitated and needs care, the child can withdraw money or write a check to a home-care nurse. If the parent dies, the child can access funds for a funeral. This is a lot easier than brining a death certificate and a copy of the will into the bank and trying to access the funds then.
Caveat: parents have to trust their children not to dip into the till, and children have to be trustworthy. Note: it’s better to go hungry and sleep in the streets than betray your parents trust and take money that’s not rightfully yours. You did stupid things as a teenager (not me, of course). But you’re an adult now: the costs of being deceitful or irresponsible are greater now, emotionally and financially.
Fourth, I would encourage parents to really think about and then clearly articulate their wishes for ‘who gets what’–from the crystal punch bowls to the blue chip stocks–while they are alert and in good health. Wills can be contested if one party thinks the parents were mentally incapable or if their decision-making ability was diminished. Decisions made in a hurry can be less than the best. Then, once decisions have been made, I would encourage children to accept and agree to these wishes if they make sense.
Finally, I’d encourage parents not to change their minds about these things. Talk about it. Think about it. Make a decision and live (and die) with it. Exceptions would be if a child develops an addiction to drugs or alcohol, for example. If that happens, then it’s back to the drawing board: everybody sits down again and discusses the situation, concerns and options are kicked around, and decisions are made and executed again, with the new considerations in mind.
I wish you all the luck I’ve had in this area.
Now, it’s your turn to contribute with expertise and personal experience.
Thanks.
- BGT
“Exceptions would be if a child develops an addiction to drugs or alcohol, for example.” Or in our family’s case, an addiction recovery led to a rewrite of the wills. My brother lived as an addict for years. He hit bottom and turned his life around. He went to school and earned an advanced medical degree and has been working clean and sober in the medical field for nearly 20 years. Our parent’s original will was updated with his long-term sobriety.
What an inspirational story, Janet. Thank you for sharing. And congratulations to your brother…and your family. I’m sure he didn’t pull through it alone. – BGT
I have an insurance view of money and wealth. Martin Sheen’s charcter from the movie Wall Street once said, “money is only something you need in case you don’t die tomorrow.” This is true, but you must also remember that there are people who come after you. This is why you need health, life, disability, long term care, and pensions and annuities to see you through your life. After these bases are covered, the rest of your wealth is “no touchies.” This is money that will never be spent for any reason. Education, emergencies, retirement,etc are not the point of “no touchies.” The “touchies” are what you build and they should insure your future success. They come out of active income and are never drawn from the family pot for any reason. “No touchies” can be in the form of primary residential real estate, bank cds, prepaid life insurance premiums, stocks held forever, and all other personal property. Education, vacation homes, cars, jewelry, clothes and travel come out of active income. You have heard of never touch principal, but I say don’t touch the interest either. Makes money seem pointless to non-Old money but follow my advice and watch your children’s children be well off.
PS. – make sure you place assets in a trust to avoid ex spouses from destroying your hard earned fortune. Always consult with an attorney to make sure you set the right kind up with iron clad instructions.
Great insight, Dario. Thank you, sir. – BGT
Oh Byron, what a difficult subject, and I applaud you for taking it on. I read somewhere once that if there’s two nickels left on the table, you can guarantee a fight. Sadly, I think this is true is many circumstances. I’ve seen people steal from their parents when they were the executors of the will and the parents had diminished mental capacity, have known people who died broke, seen people sit around waiting for someone to die, hoping they were going to take it all. And in the other direction, I’ve known people who love and care for their parents immensely and had complete trust between all parties involved. Trust is paramount. As usual, your advice is spot on with honest, open communication. We only have one parent left, and she is being cared for by an honest family member, so we have no concerns in that area. I highly recommend a will drawn up by a lawyer who specializes in this area, revisit the will often (life happens), and be forthright with your adult children about your wishes. And the best advice I was given on this subject is to be your own man or woman, make your own way in life, and if something comes your way, be grateful for what you may receive and let it go at that. Fortunately for us, we’re in this camp and we are grateful.
Thanks, Bev. That’s solid advice. Sounds like you’ve seen a lot! – BGT
Dear Byron. This is wise advice. I have recently had to deal with this situation with my late mother. Fortunately she had thought about this before she needed the help and had made me Power of Attorney, Legal Guardian and a signatory on her bank account, which also meant I could operate on her accounts through internet banking. She also put all her household bills on automatic direct debit payment. When Mum needed me to take over everything was already in place to do that from a legal aspect. She recently died at the age of 96 and I managed all her affairs for the last 7 years of her life. For the last 3 years of Mum’s life she needed extra help in the home which increased as time went on. She had a private carer in her own home for the last 2 years which meant she could stay where she wanted to be instead of going to a nursing home. All this was possible because of careful cash flow management by me & of course I liaised closely with her financial advisor with regard to Mum’s investments. I really like reading your articles – they make perfect sense and reflect how my family thinks and how I was brought up.
Hi Amanda, thank you so much for sharing. Your story–and your mother’s wisdom and foresight–are great examples of how to manage things as we age. Much appreciated. – BGT