As the first part of this article discussed, figuring out when you should start taking over the finances of a parent involves tough decisions. Even after everyone agrees that it's time, however, it sometimes takes some work to get everyone to recognize your authority.
Introducing yourself to financial institutions
If your parent has planned well, you will probably have good legal documents available that explicitly establish your authority to act on behalf of your parent. In an ideal world, just handing these documents to a bank teller, broker, or other representative of the financial institutions working with your parent would suffice to let you take immediate action. Even some lawyers, lacking a full appreciation of the realities of using these legal documents, assure their clients that all transitions will go smoothly.
Unfortunately, when it comes to recognizing legal documents such as durable powers of attorney, the world is far from ideal. In a sense, this is understandable. Many employees of financial institutions who are charged with managing direct client contact are among the lowest paid within the organization and lack the training and authority to make decisions about customized legal documents. Some financial institutions simply fail to take the necessary steps to ensure that they give good service to their clients and instead choose simply to deny the request or argue that they need hours or days to consult with supervisors. This delay can be a significant hardship for some children charged with a parent's financial responsibility, especially if the child lives elsewhere and visits his or her parent infrequently.
Because of these practical challenges, you should strongly consider taking some additional steps that may not legally be necessary but may make it easier for you to accomplish your goal. First, visit the financial institution you need to deal with in person. Make an appointment if you can. Ask to begin with someone at a supervisory level, so you can be sure you are dealing with someone with the authority and experience to understand what you are trying to do. Second, if your parent's condition allows it, bring that parent with you to the meeting. Many financial institutions are justifiably suspicious of children who try to take over a parent's finances; they fear potential liability if one child takes control and other children later challenge the actions of the financial institution in allowing their parent to give up control. Financial institutions will generally feel much more comfortable if they can make their own independent determination of your parent's capacity to make financial decisions.
Ironically, your parent's confidence in you may carry weight with an institution despite the reality that you may be asserting your parent's lack of competence to make such decisions. Nevertheless, your parent's presence is often invaluable in getting the wheels rolling.
If your parent hasn't voluntarily given up control or is unable to go with you, an alternative is to have your parent's attorney available by phone to confirm that what you're doing is in accordance with the legal documents the attorney drafted for your parent.
Reviewing your parent's finances
Once you have gotten yourself established with the financial institutions with which your parent has accounts, you need to make a thorough review of your parent's various assets and liabilities. Remember that as a fiduciary, you are essentially stepping into your parent's shoes, so you need to know your parent's current situation, as well as any financial planning for the future that your parent may have done. Your parent is obviously the best source of this information, so if your parent is willing to talk about financial matters, take full advantage of the opportunity. However, talking about money is incredibly difficult for many families, so don't be surprised if your parent isn't comfortable giving you all of the details.
How you conduct this investment review depends a lot on how your parent handled financial matters. If your parent took care of family finances independently without advice from financial professionals, then finding out the details from your parent is the best course of action. If your parent can't or won't help you, then you should look at the parent's account history over the past several years and try to find patterns in activity. A transaction history showing regular sales of assets and distributions to bank accounts probably indicates that the account served as a source of spending money for your parent. Accounts with fewer transactions, on the other hand, may indicate long-term investment accounts that your parent thought didn't require as much attention.
For instance, your parent may have an account that contains mostly blue-chip income-producing stocks like Johnson & Johnson
After you've had a chance to look closely at these accounts, you should organize your findings in writing, either on paper or in electronic format. By creating what amounts to a report on your parent's finances, you are making a verifiable record of the actions you took to assume responsibility. Furthermore, the information you compile is valuable not only to you but also to professionals working with your parent. In addition, if you have family members who want to stay informed about your parent's situation, your report may make it easy to distribute information to them without having to worry whether you've given everyone exactly the same information.
For parents who managed their financial affairs independently, performing this initial investment review can be fairly easy. You are more likely to find detailed financial records within your parent's files, and if your parent regularly used a computer, then Internet account access often can fill in gaps in information without much hassle. If your parent depended on outside financial advice, however, you may not find much information on your own. The next part of this article discusses how to work with your parent's financial advisors.
- Managing Mom's Money
- Managing Mom's Money: Part 3
- Managing Mom's Money: Part 4
- Managing Mom's Money: Part 5
Fool contributor Dan Caplinger wants to assure all of his readers that he's not a sexist, but he does like alliterative headlines. Dan is an estate-planning attorney, independent financial consultant, and licensed CFP professional. He owns none of the stocks mentioned in this series of articles. Johnson & Johnson is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.