People are living longer than ever before. The 2000 census counted more than 16.5 million people age 75 or older and, within that group, 4 million who were at least 85 years old. With advances in medical technology and the baby boomer generation quickly moving toward retirement age, these numbers will likely increase in the coming decades.

The unfortunate reality that comes with a growing population of the elderly is that many people do not age gracefully. For many in their 80s and 90s, even simple day-to-day living is a struggle. Cooking a meal, bathing, and even getting in and out of bed are beyond the physical abilities of many seniors. Sight and hearing often decline substantially, and seniors often face the prospect of declining mental abilities as well, ranging from minor memory loss to dementia.

Facing all of these challenges, seniors have to prioritize. And since the necessities of life have to take precedence, other tasks necessarily get pushed to the back burner. Unfortunately, keeping a close eye on personal finances is often one of the things seniors give up on when faced with other pressing difficulties. What's more, because the financial lives of seniors increasingly involve complicated matters that require significant attention to detail, the neglect that often results from age can be devastating.

As a child, you may be asked to step in when your mother or father needs help with handling finances. You may also find yourself needing to help a person other than your parent, such as a grandparent or family friend. The stakes are high. The responsibility of managing finances for another person is time-consuming and daunting. Yet the consequences of not helping are dire. And only you can decide whether it's appropriate to help and whether you are willing and able to face the task.

If you decide to get involved, you'll have a number of preliminary things to do. A previous article goes into detail about the need to arrange for powers of attorney, to investigate appropriate health-care options, and to make sure that an estate plan is in place that meets the person's needs and wishes. Knowing your game plan and having it ready to go when it's needed is only the first step in what may become a long and detailed process.

Knowing when it's time
Anyone who has worked with seniors is familiar with the dilemmas of dealing with the failing abilities of the elderly. Most people generally strive for independence and prefer not to give up responsibilities for taking care of things on their own, and seniors are no exception. Although many seniors are aware of the increasing difficulty of performing certain tasks on their own, they may be reluctant to admit their problems for fear they will be declared incompetent and lose complete control over their entire lives. In light of the ways in which seniors are often misunderstood and the number of financial scammers that prey on seniors, this reluctance is reasonable and easy to understand.

On the other hand, there are objective factors one can use to determine whether someone needs help managing financial matters. Even simple departures from past sound practices, such as no longer keeping a checkbook balanced when it has always been balanced before, can be early indicators of a reduction in a senior's capacity to attend to finances. Making late payments or forgetting to pay bills represent more serious concerns that can have huge consequences, especially if they lead to the discontinuation of essential services such as utilities or important financial coverage such as health or long-term-care insurance.

Other financial responsibilities, such as making sure to take required minimum distributions from retirement accounts and taking full advantage of Social Security and Medicare benefits, require regular attention and can lead to a loss of critical income if mishandled. If a senior is making uncharacteristically risky investments in things like options and commodity futures, that may indicate the involvement of a disreputable financial advisor or a scam artist. Just as it's best to get people to stop driving before an accident injures them or others, it's best to get seniors to accept help with their finances before they make a crucial error.

The best way to decide when it's time to start helping with financial matters is to get your parent to make the decision voluntarily. It's important for your parent to have trusted friends and advisors to help with the decision, since those people will help to calm fears about your motives. If you build a strong working relationship from the beginning, you will find it much easier to communicate with your parent and to get valuable feedback about the course of action you choose down the road.

Even though having a parent voluntarily hand off financial responsibility is the best situation, you may well find that you can no longer afford to wait. In these situations, the most important thing to remember is that your role is a fiduciary one, and you must therefore act in the best interests of your parent even if it is contrary to your own best interests. Well-drafted legal documents often specify the conditions that must be met before you can assume responsibility in these cases, and you should understand exactly what's involved in meeting each condition so that you're ready to proceed when the time comes. If no legal documents are in place, or if those documents fail to specify the conditions under which you are authorized to act, then you may have to go to court to seek formal appointment. Because doing so can be expensive and cause delays, the ideal situation is to avoid it by having good legal documents already prepared.

Once you do all of the preliminary work in taking over financial-management responsibilities, you face the challenge of learning what you need to know about the current state of your parent's finances. The next part of this article begins to discuss how you will need to work with various financial institutions to get that information and make any necessary changes.

Related links:

For more information, take a look at the Fool's "Estate Planning and the Fool" discussion board. Or try out the new Motley Fool GreenLight newsletter service free for 30 days.

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. The Fool has a disclosure policy.