As our parents age, financial challenges are inevitable. Unfortunately, the majority of people disregard this inevitability and is unprepared when this circumstance arises. Dealing with our parents in their later years can be trying, both emotionally and financially; however, the process can be simplified if you begin preparing before serious health problems arise.
1. Get Your Siblings and Professionals Involved
Have a meeting with all of your siblings to discuss your parents’ finances: Neglecting to do this could lead to a resentful situation between you and your siblings. Consider contacting professionals that your parents already trust (physicians, lawyers and financial advisors). By bringing in outside authority, qualms your parents have about being directed by their children may be avoided.
2. Begin the Conversation Gently
Asking your parents about their finances can be challenging. Framing the conversation properly is essential: Your parents are used to caring for you and offering their advice, this role reversal can be trying for everyone involved. Consider introducing the subject as if you are asking rather than offering assistance. For example, state that you are thinking about your long-term financial stability and ask your parents what steps they took to prepare for retirement: Asking this question may give you insight into their current financial situation.
3. Financial Overview
At some point, you need to sit down and go through your parents’ income and expenses.
- Income – document all sources of income.
- Expenses – determine monthly expenses and expenses that are paid annually or semi-annually (e.g., insurance and taxes). Once you determine all their yearly expenses, add them together and divide the total by 12. This result is their total monthly expenses (minus food and entertainment).
- Create a Budget – Use this information to create a monthly budget and start saving for unexpected costs.
4. Simplify Their Finances
While the majority of seniors are somewhat resistant to banking online, if you take the time to walk them through the process and assist them with setting up automatic bill pay, they will be able to avoid missed payments; thus, eliminating late fees and the hassles that go with them. Furthermore, with their permission, you can monitor their finances to ensure everything is in order.
If your parents have their financial assets distributed among several financial institutions, talk with your parents about consolidation.
5. Legal Matters
Durable Power of Attorney (DPOA)
Should your parent’s health begin deteriorating, a legal authority needs to be able to make health and financial decisions for them. Ask your parents to appoint a Durable Power of Attorney (DPOA). In the event that your parents’ become incapacitated, this legal document allows the appointed proxy to make decisions for them.
Living Trust
Similar to the DPOA, a living trust allows a proxy to manage an individual’s estate should he or she become incapacitated.
Will
Stipulates the handling of your parents’ estate following their deaths. If your parents’ create a will, they need to appoint an executor.
The Executor
The executor manages the decedent’s accounts until the distribution of the estate’s assets is complete; in addition, the executor obtains the paperwork necessary to address the decedent’s open accounts.
State Probate Court
Wills are subject to state probate, which means that upon the death of an individual, his or her last will and testament is presented to the probate court. A lawyer and judge provide for the individual’s assets to be distributed in an orderly fashion. There are costs associated with this process.
Trust
A trust functions as its own legal entity. A trust is not subject to probate court; a trust also avoids the costs associated with a second-state probate for property in another state. Trusts usually remain private; whereas, wills are public.
A trust is ideal for individuals with substantial assets since it allows one to avoid the expenses associated with probating a will. At the same time the trust is created, a pour-over will is drafted. Individuals can place their property in a trust during his or her lifetime; although ownership is essentially given to the person named in the trust, changes can always be made to return the property to the individual who created the trust.
Pour-Over Will
The pour-over will is designed to allow an individual to retain some property until his or her death. Upon his or her death, the property in the pour-over will is transferred to the trust for distribution. The individual creating the pour-over will is required to specify how his or her assets are to be distributed, as well as if the courts (public) should become involved or everything is to be handled by the lawyer and the executor (private).
Although creating a trust is more expensive than creating a will, a trust provides more flexibility; also, a trust does not go through probate court, therefore, no court fees are paid.
Georgetown Home Care provides its clients with compassionate and experienced staff members. Our goal is to keep seniors living in their own residences as long as possible. If you have a loved one who needs assistance, contact Georgetown Home Care today.
Post Excerpt
As our parents age, financial challenges are inevitable; however, the process can be simplified if you begin preparing before serious health problems arise.
Source
- http://business.time.com/2012/06/01/6-steps-for-financially-planning-for-aging-parents/
- http://assistedlivingtoday.com/p/resources/ultimate-guide-to-senior-finance/
- http://homeguides.sfgate.com/power-attorney-supercede-executor-estate-7967.htmlv