6 Financial Planning Tips for Your Aging Parents

Many of us have aging parents. My dad just turned 86 years old. Unfortunately, his health is declining. And this isn't something that just happened yesterday, he's been slowly declining for many years.  When he turned 80, I made the difficult decision to approach mom and dad and insist that we take a closer look at their finances. He was reluctant at first - he had taken care of the finances for his entire marriage. But as parents age, there are some financial planning activities that we need to take care of while they are still physically and cognitively able. I'm glad for the work that was started 6 years ago - it has made this last year much less difficult.

Step #1 - Hire a lawyer and create a will

No one likes to talk about dying.  It's an uncomfortable thought and causes many people to put off this important step of creating a will. If your parents have not created a will, it's time to have that difficult conversation. There are several ways to approach the topic in a loving, but firm way. Ask questions rather than being forceful or directive. 

• "Dad, have you thought about getting a will in place?"
• "Mom, are there specific obstacles that are holding you back from getting a will in place?"

The answers to these questions may help you strategize on how to address their concerns - maybe they are concerned the process will cost a lot of money and they can't afford it. Maybe they don't know a good lawyer and they don't trust just anyone off the street. Once you understand the obstacles they are facing, you can begin brainstorming solutions to address their concerns. 

Step #2 - Define your beneficiaries

The main advantage of listing a beneficiary for an asset like investments or a bank account is being able to avoid probate court. The probate process can be lengthy and could yield some unexpected results for the family. 

For investment accounts, you will assign the primary beneficiary, and contingent beneficiaries if the primary is no longer living when the account holder passes away. The brokerage firm should allow you to allocate the assets to the contingent beneficiaries to the agreed allocation. If a revocable trust is the primary beneficiary, then contingent beneficiaries will likely not be required. 

For bank accounts, the Transfer on Death (TOD) information needs to be updated and works similarly to the designated beneficiaries. You will assign a primary beneficiary upon the death of the account holder, which includes a trust.

For life insurance, there are always three people defined in a policy - the policyholder, the insured, and the beneficiary.  If no beneficiary has been assigned, then this would need to be corrected so the insurance company would know who to distribute the funds upon the death of the insured.

Step #3 - Create a redundant financial manager

Six years ago I began teaching my mom how to budget their money and pay the bills. It was a foreign language to her since dad had always managed the family finances. But this was an important step. As my dad's memory and health slowly fade, my mom is thankful that she knows how to run the daily finances and keep a budget. This has also allowed her to focus on the matters at hand with his health and not have to worry about trying to learn how to manage the finances during these hard times.

This redundancy doesn't always have to be the other spouse. In some cases, a son or daughter may prefer to be the backup in case the need arises.  Regardless, it is wise to have a backup plan when the time comes and they are unable to run their finances anymore.

Step #4 - Downsize while in good health

The worst time to downsize is when you are forced to. Not only is downsizing and moving physically exhausting, the process can take an emotional toll on an elderly person as well.  I learned this as we began the downsizing process three years ago with my parents. Begin the
process while your parents are still in good health. They will be physically in better shape to make a move, decision-making will be more informed, and they will have the time and space to grieve the change and accept a new beginning as they continue to age.

Step #5 - Educate yourself on local services and facilities

Maybe this step doesn't need to involve your parents - but it can if they show interest. When my dad was recently hospitalized, we felt very flat-footed regarding what facility would be good for dad as a next step. We were given a list of facilities, and the hospital asked us to decide in less than 24 hours. While you never know what the future holds, or what type of facilities you might need, do some pre-work and educate yourself on facilities in your parent's local area. It will certainly help when it comes time to make a decision.

Step #6 - Re-evaluate your care strategy regularly

As your parents age, their situation can grow more and more volatile with every passing day. So it is a good idea to re-evaluate their living situation on a regular basis and don't fear making a decision to change. If they are living independently, is it time to move into a senior assisted living facility? If they are in assisted living, is it time to move into memory care? Do they need additional help at home because your work schedule prevents you from being able to help as much as you would like? Ask the questions and don't be afraid to take action.

Paul exhorted Timothy on the importance of providing for our families (I Tim. 5:8) and there is no greater blessing than being able to carry some of the burden to help your aging parents navigate these times. They need you now more than ever.