Kip Tips
What You Should Know About Your Parents' Finances
Here's the information you should collect from mom and dad -- in case they ever need your help managing their money.
By Cameron Huddleston, Contributing Editor, Kiplinger.com
April 23, 2010
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Put this on your to-do list: Meet with your parents to create a list of their accounts and insurance policies and find out where they keep their important documents.
Why? Because someday you might have to help them handle their finances -- or take over money management for them entirely as I am having to do for my mom, who has Alzheimer's disease. It's better to have all the information you need before mom or dad can no longer take care of their finances. Otherwise, “it’s like trying to put together a jigsaw puzzle and you don’t always have the box to see what the ultimate outcome will be," says Greg Merlino, a financial planner and president of Ameriway Financial Services.
However, parents usually are reluctant to share their financial information with their children, Merlino says. For tips on how to start the conversation, see How to Discuss Money With Your Parents.
The information below that I am suggesting you collect is based on my experience with my mom and interviews with financial planners. With all this personal information from your parents comes great responsibility to use it only as intended. State your clear reasons for asking for the information, and live up to these assurances.
Let your parents know that, in most cases, you won't be able to access the accounts listed below unless you have power of attorney for them. There are safeguards they can employ to prevent power of attorney abuse.
Here's the information you should collect:
--The name of the bank they use and the type of accounts they have
--Insurance policy numbers (including Medicare) and contact information for your parents' insurance agents
--Contact information for their mortgage company
--Retirement account numbers and contact information for account managers
--Brokerage account information
--Where their income comes from if they are retired (Social Security, pension, IRA withdrawals)
--Financial planner's name and contact information -- if they have one
--Accountant's name and contact information -- if they have one
--Lawyer's name and contact information -- if they have one
--Their doctors' names and contact information
--A list of prescription drugs they take
--Their medical history (any drug allergies, past surgeries, etc.)
Find out ...
--Whether they pay for bills through automatic debit -- set up automatic bill-pay if they haven't already
--Whether they have to pay estimated taxes throughout the year (on dividend income, for example)
--Where they keep the deed to their home
--Where they keep their tax returns
--Where they keep their insurance policies
--Where they keep their stock or bond certificates
--The combination for their home safe
--Location of lock box keys
--Their final wishes/funeral arrangements
--Whether they have an updated will
--Whether they have designated anyone as their power of attorney
--Whether they have a living will
If they don't have a will, living will or power of attorney, see tips for using online forms to draft these documents or ask them to schedule an appointment with an attorney.
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Reader Comments (4)
Posted by: Bob at 04/23/2010 11:50:39 AM
In addition to this excellent article I would like to add a few comments. It may be necessary to help your parents monitor their bills (especially medical) and make sure they are paying them on time. In five years I caught over 50 so called billing errors totaling over $12,000 being charged to my parents. Unfortunately, many elderly people are far too trusting and won't challenge billing errors on their own. I also found it useful to create a spread sheet of all their financial accounts. This should include CDs, bonds, bank accounts, stocks, etc. Also include the names of the institutions, amounts, maturity dates, interest rates, and comments. Many elderly tend to let CDs just renew automatically at lower rates and let money sit in accounts paying little or no interest and end up getting stuck with inactivity fees. Give your parent(s) an updated copy of the spreadsheet every few months to remind them of their accounts and the ones that need to be managed. If the parent's condition gets to the point that they need constant help, it is a good idea to become joint on their accounts if possible so that you can have internet access to monitor them. From a trust standpoint this may have to be worked out among the parent(s) and siblings. Sadly, a parent's decline is difficult to evaluate. They may seem totally competent until you notice unpaid bills lying around or some other problem. To allow them to be in control as long as possible, I would sit down and go through their bills and finances with them every couple weeks until it reached the point that I had to take over for them.
Posted by: JM at 04/23/2010 04:03:52 PM
Great advice! Assist your folks in setting up a living trust if they haven't already done so. Eliminates probate and the need for lawyer's among other benefits. Have them designate their CD"s and bank accounts as POD (payable on death) accounts. Takes five minutes to fill out the form and will eliminate long delays in obtaining funds. Makes access to funds instantaneous so bills can be taken care of without delay in gaining access to those accounts. You may have to talk to a few people before you get someone at the bank who knows what POD accounts are. I had to elevate my request two levels before getting a person knowledgeable. Best advice of all: "Don't Wait"....
Posted by: JBP at 04/23/2010 05:10:08 PM
Great article! Another thing you might need is basis info on real and personal property if there is a chance your elders might die in 2010. Although there is no estate tax this year, there is also no step up in basis for this year. Of course this is all contingent - congress may pass some new legislation and it might become retroactive, but if you have a sick elder with a hugely appreciated estate, be safe and get the basis info before it is too late. The consequences could be draconian, if it goes to audit the burden of proof is on the taxpayer and if you can't prove basis, it is presumed to be zero.
Posted by: KW at 04/26/2010 09:45:10 AM
I have been through this process and it is critical to start sooner rather than later. Almost all aspects will require a form signed by your parents (and they are all different!) giving permission to discuss their accounts, most importantly health insurance issues. Make sure you have the necessary documents in place before needing them!