Such parents will usually also want an adult child to take over financial decisions. This same person may be asked to validate the budgeting done for ongoing personal care. Investments can provide the income necessary to finance the new living arrangements. Someone - usually the person designated with trading authority on behalf of the parent - needs to work with the financial professional on the financial planning and on the oversight of the accounts. Whoever the fiduciary or family member, this person will need a formal power of attorney document, spelling out the scope of powers granted. This document should be validated by an attorney and witnessed by a notary.
These life transitions are challenging for everyone involved. It is important to involve professionals who can provide support, to make sounder decisions. These professionals can work as a team. Supporting professionals can include any doctors, but also potentially mental health professionals as well as your family lawyer and your parents' financial planner, and their tax professional.
Consider these red flags as you evaluate your parent's situation. You'll know it's time to help if you see any of these danger signs.
1) When handling their budget, your parent(s):
a) Seem organized and pay bills attentively.
b) Balance their own checkbook, live on a budget and save every month
c) Are clear and organized when meeting with tax professionals for tax filings
d) Are unable to live on what comes in.
2) When it comes to investments, your parent(s):
a) Never open their statements;
b) Open statements and review their investment income every month;
c) Haven't changed their investments in many years;
d) Don't know the difference between a certificate of deposit, a stock, bond or fund.
3) When it comes to their banking and investment relationships, your parent(s):
a) Call a call center for transactions;
b) Know a personal banker;
c) Rarely visit a bank or an investment professional;
d) Call neighbors and friends in to ask advice.
4) In their estate planning your parent(s):
a) Created a trust, and you know where it is kept;
b) Created a will, and you know where it is kept;
c) Named beneficiaries on our retirement plans and insurance policies;
d) Prefer to leave decisions to the probate court.
Red flags, 1= d; 2= a, c and d, 3 = a, c and d, 4 = d.