Aging can already be a touchy subject, and when it intersects with something as personal and private as finances, having a conversation about it can feel daunting. Parents may be hesitant, or even embarrassed, to ask for help in managing their financial situation as they get older. Meanwhile, their adult children may feel unsure about how to — or even whether to — insert themselves.
The reality is, putting off having these discussions does not do anyone any favors. Here are some tips for how to approach the topic.
Start the conversation sooner rather than later
“Even if your parents aren’t yet ready to cede control of their finances, the key is to start talking now,” said TIAA. Otherwise, you run the risk of waiting too long and ending up in a position with no system in place should an issue or emergency arise.
Starting sooner also allows you to gradually integrate yourself, as opposed to a sudden takeover. For example, “if you’ve taken on the responsibility of paying bills (or balancing their accounts), start by doing it together,” as “this kind of gradual, sensitive approach gives them (and you) some time to get comfortable with the new arrangements,” said Better Money Habits, Bank of America’s financial education platform.
Come from a place of understanding
“Lead with love, not logistics,” said Jessica Smith, a co-founder and an adviser at Vitality Wealth, to The New York Times. “Before getting into paperwork and bank accounts, ask your parents what they want and how you can support them.” Learn what their current routines are when it comes to financial tasks like paying bills and budgeting, as well as where their income is coming from.
Throughout the process, try to keep in mind how they may be feeling, both when it comes to this shift in their independence and in their longstanding financial habits and preferences. “All you can do is share information and offer to partner on the strategy they want to take,” said Charles Schwab.
Ensure account access of some form
Having some form of access to your parents’ financial accounts is important, both for monitoring and in case you need to step in if something were to happen to them. But that does not necessarily mean becoming a joint account owner. That status not only creates potential tax consequences, it also “means that your creditors or anyone suing you can tap those assets,” as “they legally become yours,” said Dinon Hughes, a partner at Nvest Financial, to the Times.
Instead of being a joint account owner, consider becoming an authorized user, which will still “allow you to deposit, withdraw and transfer funds; pay bills; and create a unique user ID and password to manage their accounts,” said Smith. Another option is to simply become a trusted contact on their accounts. In this case, “if a bank or investment company suspects an older client might be a victim of financial fraud, they can put a temporary hold on withdrawals and notify a trusted contact — usually a close relative — who can then reach out to the potential victim,” said TIAA.