Small Business Taxes & Management
Your Parents' Finances
Small Business Taxes & ManagementTM--Copyright 2011, A/N Group, Inc.
Medical care isn't the only problem facing many elderly individuals. They may need support in many other areas. While some 90-year olds are sharp enough to handle their own finances, it's not unusual for much younger retirees to need assistance. Requirements can range from help in completing medical forms to the basic functions of money management, including writing checks. If you're taking responsibility for your parents or other relatives, here are some considerations:
- Watch for signs that they're having problems. Forgetting payments, ignoring bills, bounced checks, memory lapses, utilities being shut off, complaints about not having any money, etc. may be telltale signs. A sudden change in life can trigger problems too. For example, leaving a hospital or nursing home, losing a relative, especially a spouse.
- If your relative has only minor problems, you might just act as a backup or check on what he or she is doing. Review their checkbook to insure they've paid their taxes, insurance, other bills, etc. and that they're making deposits and not bouncing checks. A quick monthly review may be all that's necessary. Consider having some bills that don't require review (such as a phone bill) paid by automatic withdrawal.
- Monitor their investments to insure that any bonds or CDs that are maturing are dealt with properly. Make sure they they're not talked into any speculative investments. Check their brokerage statements regularly.
- Most insurance companies and many other businesses (e.g., utility companies) have a provision for third-party notification. The primary insurance bill will be sent to your relative, with a copy to you.
- Check to make sure funds in the checking account are kept to a bare minimum. Most retired individuals need only one checking account. Eliminate check writing privileges on investment accounts. These steps will make it more difficult for someone trying to take money directly out of their accounts, or even for a scam artist to get them to write a check for a large amount.
- Keep it simple. Reduce the number of other accounts so it's easier to keep track of any activity. Check the bank or other financial institution. You may be able to get e-mail or text alerts to unusual activity in the account.
- Consider reducing credit cards to an absolute minimum. More than likely they can get away with having only one, general purpose, bank card. Reduce any line of credit to the minimum required.
- If the problems are more serious, consider writing all checks yourself and just having your relative sign them. Similarly, make all deposits yourself. In general, take over all financial functions.
- Consider a durable power of attorney. That would allow you to sign the checks and perform all financial transactions directly. Be careful how you broach the subject with your relative. This can be a touchy topic.
- If you use an outside party, you should consider reviewing the work periodically to be sure the individual or firm is honest. That should include reviewing the payees of checks (looking for unusual payees or larger than normal amounts), checking bank transfers, insuring deposits are made and bills timely paid. Such a review needn't be done in detail, nor is it needed frequently. Spot checks should keep the party honest.
- Check credit reports regularly. Be alert for any sign of activity. Alternatively, put a lock on the individual's credit with all three services.
- If you cannot perform the functions directly, there are alternatives. There are organizations that provide money management, either for free or for a fee. A local CPA may be able to assist.
- Outside services that are for profit can range from $30 to $60 an hour or more. When evaluating fees, consider who's providing the service. If it's a CPA (or someone on his staff), the higher fee may be justifiable. Match the job with the person's qualifications; don't hire more talent than you need.
- The most important advice is not to wait too long. Your relative could waste his or her assets on poor investments, scams, or simply poor money management. Worse yet, if it becomes necessary to take over all the relative's money matters after he or she becomes incompetent, you'll have to be appointed guardian or conservator. That involves court action, and is both costly and time consuming. Get a power of attorney early, while you can.
- If you're not the only child or close relative, discuss your actions with other relatives. You don't want to stir up animosity. Good relations could be important later in avoiding a challenge to the will. Someone who feels slighted may be inclined to sue.
- Document your activities. You may have to pay bills that could be construed for your benefit. For example, work on your mother's car. Fully document any reimbursements you make to yourself for your out-of-pocket costs. That trip to the grocery store when you paid cash and wrote yourself a check from your mother's account. Your activities could be questioned by a relative, a third party, such as a creditor, Medicaid, etc. Good documentation could prevent a problem.
- If you're unsure of what to do or you have to make a decision that could be questioned such as significant financial decision, get professional help from a CPA, attorney, or financial advisor with credentials. If your decision is later challenged, you can show you relied on a professional.
- Be tactful when dealing with the person you're helping. Rarely does "Mom you're too old to handle that" work out well. While you may be lucky enough to have the person realize on their own they need help, that's not usually the case. Many see it as a loss of freedom and independence. And that can be hard to take. If you begin early enough, helping little by little may avoid problems.
Copyright 2011 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536
--Last Update 05/06/11