Paying Bills for Elderly Parents
As parents age, they often need to rely on children to handle financial matters. Hopefully, they have an Estate Plan that will ease this transition.
Verify You Have Authority To Act On Your Parent's Behalf
The first item on your to-do list should be to review their Estate Planning documents to determine who is authorized to pay bills. This authority will be contained within the Power of Attorney for Finances. Additionally, if they have a Trust, there may be sections for bill paying by a Trustee. Often, but not always, this will be the same person. You will need copies of these documents to show to the financial institutions to prove your authority and gain access to finances.
Some Powers of Attorney need to be “activated” whereas others do not. This process varies, but the Power of Attorney document should contain language about how this “activation” occurs.
Work With Your Parent's Financial Advisor
If your parents have a financial advisor, contact them to understand their investments. They can be a valuable resource in deciding which money should be used to pay bills. Additionally, it is important to know if they have life insurance, which may lapse if the premiums are not paid.
Consider Long-Term Care Costs
If your parents are paying expensive nursing home or assisted living facility costs, it is not too late to protect funds. This surprises most people but there is still much planning that can be done to reduce their liability. Contact us immediately to schedule an appointment if you are concerned that their savings are at risk.
Avoid Scrutiny with Good Record Keeping
Keep receipts for their expenses and, to the extent possible, use their accounts to pay for their needs rather than reimburse yourself after spending your own money. You do not want the scrutiny of explaining all your reimbursements, particularly if they need to apply for assistance in paying for care.
Above all, it is important to remember that the money is not yours. You have a duty to your parents to manage it in their best interest. They put you in charge because they trust you to make good decisions for them.
Common Errors When Helping Aging Parents with Finances
|What You Are Probably Doing||What You Should Be Doing||Why it Matters|
|Using a joint account with your parents to pay bills and manage expenses.||Using a Power of Attorney document to act as Agent rather than owner on an account.||Being a co-owner with your parents subjects their money to your liabilities. The account also becomes solely yours at their death, i.e., it does not go by the loved one's Estate Plan.|
|Your parent has one or all accounts Payable on Death (POD) designated to you, so you can pay final expenses and costs of administration.||Using an Estate Plan after death to gather assets, pay bills, and then distribute the remainder to named beneficiaries.||Passing money to beneficiaries without going through administration first puts you in a position of asking for contributions from the other beneficiaries to pay any outstanding bills and or debt, rather than using what you need to clear up their estate and sharing any remainder.|
|Accepting gifts from your parents of money and/or assets in order to ensure your parents feel they have been able to pass some sort of inheritance despite any need for care and to ensure they do not run out of money entirely by gifting some to you for safekeeping.||Work with an experienced Elder Law Attorney to create a plan to protect assets, afford care, and maintain control.||Outright gifting results in a loss of control over their money and endangers their ability to get help when they need it. Also, ownership of their assets brings potential liability if anything happens to you. Your parents can preserve some assets to ensure both their ability to afford good care and protect their legacy.|
|Discovering your parents have transferred their home (or, maybe the cabin) into your name or used a Life Estate Deed to protect property.||Work with an experienced Elder Law Attorney to protect the value of their home while keeping control of it and preserving tax benefits.||Transferring property outright or with a Life Estate Deed may trigger unnecessary taxes, can create a loss of control, and may not result in the protection you had expected.|
|Parents are avoiding any discussion of money, health, or expectations with family.||Sit down with your parents and go through financial document/account whereabouts, health situation and concerns, and end-of-life decisions.||Not having the discussion early means any unidentified issues will be discovered at the worst time, and healthcare decisions are so much easier on the person voicing them if they have had that personal conversation.|
|Forging your parents' signature or calling/logging in as them to manage assets.||Make sure there is an updated Power of Attorney in place that allows you to sign documents, use online accounts, and manage their assets legally.||Having an updated Power of Attorney ensures you have legal authority to act. This protects you from potential liability and allows you to continue acting for them if they lose capacity.|
|Allowing your parents to ignore planning or plan reviews and instead, unintentionally, place a future burden on you.||Ask your parents the important questions. Keep asking. Then ask them again. Be persistent. Then, verify they have had their plan reviewed recently by an experienced Elder Law Attorney, and, if possible, attend the review meeting with them.||Accumulating unpaid bills becomes overwhelming for them. It may also cause problems with creditors.|
|Watching bills pile up unpaid and waiting to be asked to help, rather than insisting on helping.||Be proactive and make sure you are authorized to help legally.||If you do not have their plan reviewed, you will have no way of knowing whether or not it meets their current or future needs.|
|Assuming your parents have all their affairs in order.||Ask them to see their plan. Have an experienced Elder Law Attorney review it to identify gaps in planning or outdated language.||Your parents will leave a legacy. Make sure it is the one they intended. No one means to be the source of the horror stories told about problems or complications with a need for care or the division of their estate. Help your parents leave a legacy they can be proud of that brings their family together during a difficult time. The power is in their hands and in yours.|