As your parent gets older, there may come a time when you have to figure out how to manage your elderly parent’s finances for them. This is not uncommon since many seniors struggle to manage complex finances or may start to experience healthcare problems that keep them from being able to do this. However, you have to keep in mind that there are legal requirements for managing your parent’s finances on their behalf. In this article, we will be discussing these legal requirements and the elements you need to focus on when assisting with your parent’s finances.
How to Legally Assist with a Parent’s Finances
When it comes to how to manage an elderly parent’s finances, you can’t simply start to take over everything. There are specific laws in place in Michigan that protect individuals so that they are not taken advantage of. Because of this, you will have to follow the correct legal avenues when managing finances for your elderly parent. Additionally, taking the proper steps while your parent still has the capacity to understand this process is critical.
Before you begin this process, it is highly recommended that you first get the assistance of an elder law and estate planning attorney who will have experience in this area. An elder law attorney will be familiar with Michigan laws surrounding this and can help your parent figure out what steps to take to allow you or whomever they choose to manage their affairs.
Arrange Power of Attorney
Before you begin managing your elderly parent’s finances, you need to get legal permission. To do this, your parent must agree to give you this permission via a financial power of attorney, or POA. A POA is a legally binding document that authorizes a primary agent who will act on your parent’s behalf. This gives the agent the permission he or she needs to make financial decisions for your parent if they become unable to do this themselves.
The primary agent under a POA will have the ability to do things like deposit checks, manage property and investments, and pay bills. Many people choose to go this route as it gives you many of the benefits of being appointed as your parent’s guardian without the extensive court process of doing so. Keep in mind that there are different types of power of attorney, so you will need to carefully consider the needs of your parent according to the type of POA.
Go Over Wills and Trusts
We can’t discuss how to manage your elderly parent’s money without also mentioning the importance of estate planning. Part of your responsibility when you assume management of your elderly parent’s finances is ensuring you have prepared for their future. However, before you start this process, you should gather any wills or revocable living trusts that they may already have.
It is very beneficial if your parent already has an estate plan; just keep in mind that it may need to be updated depending on when it was created. You will need to ensure they have the correct documents regarding the administration of their estate, beneficiaries, a list of their assets, and their last wishes. Doing this exercise will give you a clear idea of the type of finances you will need to manage on behalf of your parent, such as real and personal property, bank accounts, or investments.
This is a good time to speak with your parent(s) about their wishes for the future, such as their healthcare preferences and a budget for long-term care.
Make sure you get the help of an experienced estate planning attorney in Michigan who can help you navigate creating an estate plan for your parent or updating their present plan.
Organize Financial Documents
When you manage your elderly parent’s finances, part of your responsibility as their power of attorney is to keep their financial documents organized. If you are lucky, your parent may already have these documents organized and in a safe location. However, if that isn’t the case, you will need to collect these documents, organize them, and keep them in a safe and easy-to-locate place.
Information that you need to look for includes:
- Accounts
- Account numbers
- User names
- Passwords
- Social Security payments
- Safe deposit boxes
- Insurance policies
- Pension records
- Bank and brokerage statements
You may need to contact banks and other financial institutions regarding how you can access your parent’s accounts. Even if you have a power of attorney, these institutions often have strict requirements of their own that you will need to follow to get access.
Manage Money and Expenses
Depending on your parent’s situation, when you manage your elderly parent’s finances, you may need to locate the streams of income they have coming in. This may look like a pension, dividends from investments, disability money, government benefits, etc. You also need to follow the same system of categorizing all of your parent’s expenses and monthly bills.
Important Tips When Managing Finances For an Aging Parent
Taking over the finances of your elderly parent can often come with pitfalls since the legal requirements around this are very strict. Even if you are granted power of attorney, there are certain things you should do to protect yourself and to show that you are acting in the best interest of your parent. Here are some tips to follow while managing your parent’s finances:
- Understand your responsibilities as your parent’s agent, such as needing to pay your parent’s bills and manage their income.
- Keep your money separate from your parent’s money to protect yourself from any accusations of financial abuse.
- Maintain clear records of how you are using your parent’s finances and where all of the money is going.
- Consolidate financial responsibilities such as loans and credit card accounts.
- Automate bill payments to ensure everything is paid on time.
- Regularly update critical legal documents, including your parent’s estate plan.
- Maintain clear communication regarding how you are using your parent’s finances with them as well as other family members.
- Hire an elder law and estate planning attorney to help you navigate legal requirements and complex financial issues.
Hire an Experienced Elder Law Attorney Today at Warren & Schairbaum PLLC
Are you ready to begin the process of managing your parent’s finances? If so, our attorneys at Warren & Schairbaum PLLC have extensive experience in elder law and estate planning, ensuring our clients get the legal guidance they need. Contact us today at 734-769-9300 or send us an email to discuss the details of your case with an elder law attorney.