As difficult as it may be, the time will inevitably come when adult children must have "the talk" with their aging parents. The talk concerns the elderly parents' finances, and both the children and their parents may be uncomfortable with this discussion. Too often, elderly people become incapable of handling their finances and paying their bills on time, or they may be vulnerable to scams or ID theft, requiring the protection and intervention of their children.
Timing Is Everything
Ideally, the talk takes place while the parents are healthy and mentally capable. Children should explain their desire to protect their parents and ask them to provide a list of all their financial resources, including bank and brokerage accounts and safety deposit boxes. They should also list any financial and tax advisers. Ask to see the parents' tax returns, bank and brokerage statements and credit reports.
Draft a Power of Attorney
A power of attorney names you as an agent to act for your parent if he becomes incapacitated and unable to handle his own affairs. The document can be written to cover a wide range of events, from selling a single piece of property to handling all financial transactions. A general POA goes into effect as soon as the parent signs it and remains in effect unless he becomes disabled; if your parent wants you to make decisions when he is disabled, the POA must spell that out. A durable POA goes into effect when the parent signs it, but stays as long as he lives unless he cancels it. The durable POA allows adult children to act in the parent's behalf even if the parent is capable; the parent remains in control and the child must respect his wishes. A "springing" power of attorney only goes into effect when a specified triggering event occurs.
Appointing a Conservator
Without a power of attorney, you might have to go to court to have yourself appointed as a conservator for your aging parent. A conservatorship gives someone the legal right to be responsible the finances and assets of someone who is partly or totally incapable of handling those matters. While procedures differ according to jurisdiction, a person seeking conservatorship generally must petition probate court in the jurisdiction where the incapacitated individual lives. As the petitioner, you would need to demonstrate that your parent has physical or mental difficulties that prevent him from handling his financial affairs. Your parent would be evaluated by a "guardian ad litem" who interviews you and your parent, and possibly your parent's health care providers, and reports to the court on your parent's condition. Your parent has the right to contest the appointment of a conservator, and a judge may rule on the petition. Obtaining a conservatorship can be time-consuming and expensive.
Know When to Take Over
Keep an eye on your parents' checking accounts and incoming mail. Repeated requests for payment and calls from creditors indicate that bills aren't being paid on time. Contact the landlord, municipal tax collector, condo association or other creditors to be sure that recurring payments for living quarters are up-to-date. Unusual quantities of new purchases, especially from TV or online, suggest that the elderly parent is spending beyond her means. A concerned child may need to take away the credit card. When possible, set up automatic payments of credit cards, mortgages and other recurring expenses.
If Parents Resist
While some parents may be relieved that financial chores are taken over by their children, others resist giving up control, particularly when drawing up a power of attorney seems to reverse the parent-child role. Children should assure their parents that the seniors can cancel a POA at any time and that they are not giving up the right to handle their own affairs, as long as they are legally competent. When you are the designated agent on a parent's POA, he should think of you as an assistant ready to step in if he needs help. Your parent can give you as many, or as few, powers as he wishes, including the authority to pay expenses, invest, file and pay his taxes, operate his business and transfer property.