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Senior Financial Planning: Talking Finances with an Aging Parent

Talking to an aging parentThe U.S. population is getting older. According to the Administration on Aging, people over age 65 represented 12.9% of the U.S. population in 2009 and that number is expected to grow significantly; in 2030, seniors will make up 19% of the population.  While these numbers are dramatic, they don’t tell the whole story — and this isn’t something that affects older people alone.  Most adults will need to care for an elderly family member at some point in their lives, and as people live longer and the incidences of Alzheimer’s and Dementia go up, proactive planning becomes even more essential.  Although taking the initiative can be intimidating, everyone needs to think about what to do when parents won’t be able to make financial, health, or day-to-day decisions for themselves.

If you need more convincing as to the importance of getting involved with your aging parents’ affairs, The New York Times recently published an article about money woes due to Alzheimer’s.  Apparently, managing financial affairs is one of the first things that a senior with a progressing case of Alzheimer’s can lose grasp of – and without a trusted advisor to consult with, an Alzheimer’s patient can face financial ruin due to simple mismanagement of funds, or even worse, fall prey to a scam artist who takes their hard-earned money and runs.   What complicates matters is that an adult child may live in another city or state, and may not be aware of a parent’s mental decline until after the disease’s onset.

Even if your parent has always been a pro at organizing finances, diseases like Alzheimer’s and Dementia can change things, fast.  The key is to be involved early.  It’s a lot harder to clean up a financial and legal mess after the fact, and when the money’s gone, it’s gone.  Do what you can to avoid a bad situation before it starts:

  1. Talk about it. Find out if your parent has made any plans for how to manage their affairs if they become mentally incompetent or disabled. If not, help them set up a plan – see #2 and #3 below.
  2. Discuss who can help with financial decision making, and create a Power of Attorney.  A Power of Attorney is a document where the principal (the aging parent) authorizes an agent (another person) to act on their behalf in a variety of financial situations.  If the Power of Attorney document is made durable, it will remain in effect even if the agent becomes incompetent.  The key here is to make sure the appointed agent is trustworthy and has the parent’s best interests at heart.  If the agent is not trustworthy, it’s like “a license to steal” says Mark Lachs, MD in his article about cognitive problems and elder abuse.
  3. Ask the parent to prepare legal documents to communicate their end of life wishes.  In addition to a Will, which helps survivors distribute the parent’s assets after death, everyone should have a Living Will, which communicates end of life health care wishes.  Getting these directions in writing allows them to communicate their wishes, even if they are incapacitated, and can ease stressful decision making for family members.
  4. Most importantly, stay in touch.  You don’t have to treat your parents like kids, but if their financial health and general well-being are important to you, get involved and stay involved so you can help if things start to go wrong.  The sooner you know about a problem, the sooner you can help.

To get started, check out our Power of Attorney form or find a lawyer in your area for expert help.

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