Just as your parents took care of you when youwere growing up, there's a good chance that atsome point you'll need to help take care of themwhen they grow old. But you can avoid some of theemotional and financial stress associated with theirpotential care by taking the following precautionarysteps well in advance:
•Talk with your parents. This is the first—andprobably the most difficult—step. If you're going toassist your parents as they age, you'll need a generalidea of their wishes and what financial resources theyhave to see them through the rest of their lives.
What do they envision for their money? Have theyeven thought about it? Do they want to spend it allwhile they're alive or pass some of it on to familyheirs or charity? Answers to such questions have aprofound impact on financial decisions such as gifting,budgeting, and investing. Your parents may notwant to discuss their personal finances or issues associatedwith their mortality, or maybe you're reluctantto discuss such topics.
You might want to broach sensitive money subjectsby first discussing nonfinancial issues such as aliving will or funeral planning, and then get to thelarger financial areas. Involving all family membersmay make it easier, too.
•Discuss future living arrangements.Will yourparents be able to care for themselves where they livenow, perhaps with outside assistance? Would movingto a smaller home, retirement center, continuing carecommunity, or family member's home be a better idea,and if so, how soon? What if health problems forcethem out of their home and into an assisted living ornursing home? Would they want to stay in the areawhere they live now or move closer to family?
•Get durable powers of attorney. A durablepower of attorney designates a person to make certaindecisions on behalf of someone else if that personis unable to make decisions, usually due to sometype of incapacity. Having the power of attorney inadvance avoids the costly delay of going through thecourt system to obtain these powers.
You need two types of durable powers of attorney.A financial power of attorney, depending on how it'sdrafted, would allow you to step in for your parentsto pay their bills, make investment decisions, andeven sell their home. The health care power of attorney,sometimes called a health care proxy, wouldauthorize you to make medical decisions on behalf ofyour physically or mentally incapacitated parent.
•Put other legal documents in place. Be surethat your parents have an up-to-date will that reflectstheir wishes and is in line with current tax laws. Eachparent should also have a living will that expresseswhat life-sustaining medical treatment they want ordon't want should they become incapacitated.
•Know where they keep financial records.You need to know where they keep their records andhave access to them should you need to step in.
•Pay special attention to health-relatedinsurance. What medical insurance do your agingparents have? Besides Medicare, do they have anyretiree health care benefits or Medigap coverage? Dothey have long-term care (LTC) insurance? If theydon't have LTC insurance, would they still qualify forit based on their health and finances?
•Monitor their finances. Frankly, you have tobe nosy here. You need to watch for telltale signs thatyour parents are failing to properly manage theirfinances and that you or an outside service, such as aplanner or bill-paying service, need to step in. Forexample, are unpaid bills piling up? Are they sendingmoney to dubious contests or charitable requests?Are financial institutions selling them investmentproducts that are unwise for their financial circumstances?Fortunately, regulators have been after financialinstitutions for inappropriately selling variableannuities to the elderly.
This article has been produced by the Financial Planning Association (www.fpa
net.org), the membership organization for the financial planning community.