What You Need to Know About Your Parents' Finances

For some people it’s difficult to talk about finances.  Most people, especially elders, believe that it’s nobody’s business but their own.  This can lead to a difficult conversation, but one that needs to be conducted with any aging relative whom you may need to care for. 

  • Have they named someone to have a durable power of attorney to manage their finances? 

The first step is to find out if they have named a Durable Power of Attorney (POA). Without a POA in place, you'll have to go to court to get guardianship of your parent in order to access accounts on their behalf. 

The difference between a power of attorney and a durable power of attorney is a simple, but extremely important one.  A power of attorney becomes ineffective when your elderly parent becomes incapacitated or loses competency to make their own decisions, usually due to a stroke, Alzheimer’s disease, or other health related complications.  A durable power of attorney becomes effective when your elderly parent becomes incapacitated.  If you need to know which you have or need one drafted, please consult a qualified Elder Law attorney. 

  • Where do they keep their financial records? 

Whether they keep their money and documents in a bank, a safe, or under the mattress, you need to know where to find records when you need them. You will also need codes and keys to any safes or other places they may keep their records and assets. 

  • What are their bank account numbers and names of their financial institutions?

In addition to knowing where they keep their money, you need specifics on all account numbers. You will also need to know: what banks they use, their mortgage company, the names of any investment firms they use, as well as information about retirement and pension accounts (IRAs, 401k, etc.)

  • What are your parent's monthly expenses?

Gather information on their mortgage, car payment, credit card debt, electric bills and other household expenses.

  • How do they pay their bills?

If there are automatic deductions being taken out of a checking account then you need to know about them as well. You will need to know if they bank and pay bills online or by personal check. 

  • How much is their annual income and where does it come from? 

You will need to know about any alimony, disability benefits, Veteran’s Assistance, investment dividends, rents, pension check, and any other sources of income. 

  • Do they receive Medicare, Medicaid, or Social Security?

If your parent becomes incapacitated, you may have to investigate the status and eligibility of government assistance.  Eligibility in these programs are largely dependent upon meeting a means test based on assets and income.  Please speak to a qualified Elder Law attorney about planning for and apply to these programs.  It is better to plan sooner rather than later. 

  • What kind of medical health insurance do they have in addition to Medicare?

You will need to know if they have health insurance provided by an employer, if health benefits included as part of a pension, and if they are receiving VA benefits. 

  • Do they have long-term care insurance? 

A "regular" health insurance plan does not cover the cost of assisted living or a nursing home. You will need to know if they purchased a long-term care insurance policy to cover the cost of those residences.  This is usually referred to as a “Medigap.”  If not, and they can no longer live on their own, you need to know what you or they can afford in terms of housing.

  • Do they have an accountant or financial planner? 

Who is it and how do you contact them? Have they done any estate planning?

The National Council on Aging suggests that planning for this situation should begin in your parent's early 60s with a family council meeting. But for many, that time has passed without that meeting and it is up to family caregivers to provide the best safety net they can.