In honor of my new book, How to Help Your Parents As They Age: A Financial Planner’s Guide to Caregiving, being released on Monday, September 14, I’m offering you a sneak peek into it.
Below is a complete chapter from the book called “80% of What You Need to Do.” My hope is that you’ll order and read the entire book, but for those who want a few steps that might make the most impact, it talks about what I would do first.
Bonus Offer: As an extra incentive to purchase the book when it’s released, for those who are subscribed to my newsletter, purchase the book in the first week, and send me proof of purchase, I’ll email an “in case of emergency” binder downloadable template. These are often sold online for between $10 and $40.
If you aren’t already subscribed to my newsletter, you can sign up here: https://kindnessfp.com/newsletter. I will be sending an email when the book is released with a link to purchase. If you don’t want to subscribe, please check Amazon on Monday, September 14 to purchase.
Here is the book excerpt:
As a caregiver, I know you are short on time. You may not have time to do everything in this book. In fact, I don’t expect you’ll be able to do everything over the course of a year. My hope is that you’ll be able to chip away at different actions depending on your priorities and what is already done.
In this chapter, I’m going to offer a few actions that will hopefully get you about 80% of the way there in protecting your parents. These actions will lay the groundwork for helping in emergencies and to prevent fraudsters and scam artists.
Create or Update Estate Plan
There is an entire chapter dedicated to creating or updating your parents’ estate plan because of how important it is for them and you, so we’ll just do a quick review here and when you need more detail, go to that chapter.
Without an estate plan, you won’t be able to help your parents well. The Financial Durable Power of Attorney is what will allow you to help them with finances, even if they are incapacitated or have cognitive impairment. The Medical Durable Power of Attorney is what will allow you to make healthcare decisions for them if they are unable. The Will allows you to become executor and carry out their wishes after they die.
It may seem small, but those pieces of paper allow you to interact with the world on your parents’ behalf. Without them, trying to do things for your parents is going to be extra difficult and may end up costing you court and attorney fees. Everybody has a default estate plan, which is your state’s laws. But most people don’t want the default plan — nor is it the easiest to work with.
One of the top problems people encounter is analysis paralysis because they aren’t sure who to name or how to distribute assets, and so they take no action. Unfortunately for many, an estate plan, even if it’s not perfect, is better than no estate plan.
If your parents already have an estate plan, read it carefully! You may even want to consult the attorney who drafted it or go to a new attorney to walk you through it. It’s important to understand what powers the documents give and if there are any gaps. It may be missing key elements or your parents’ lives may have changed, but the document doesn’t reflect it.
Check Titling and Beneficiaries of Accounts
Another huge mistake people make is not checking the titling of accounts or the beneficiaries. You can think of titling of the accounts as who is named on the account and legally owns it. For example, it could be an individual account, a joint account, a joint account with rights of survivorship, a community property account, or a trust account. I frequently see parents add an adult child as a joint account owner to help with paying bills and provide easy access. For many people, this can be a huge problem!
If that account is titled as joint tenants with rights of survivorship, the account may pass automatically to the adult child on the account. If you have other siblings who are not on the account, they are not entitled to any of it. The parent may think that the adult child will gift the money to their siblings after death, but there is no requirement. Also, when the adult child is added, it could be considered a gift, which may require a gift tax return. When a child is added to a parents’ account, it also introduces new liabilities for the parents because that asset could be brought into a lawsuit from creditors or a divorce.
Titling assets is incredibly important, and people gloss over it without thinking through the consequences. You should consult with your attorney about how the titling should be for each asset.
Check the IRA, Roth IRA, life insurance, annuity, and any other accounts with beneficiaries. Are the right people named? Do they have primary and contingent beneficiaries? Are they aware that the beneficiary form will dictate who receives the money and not the Will?
If there are specific gifts made in the Will, is there actually enough money to make those gifts? I see people create well-thought-out Wills, but then add a beneficiary to every account, including bank accounts, and then no money passes through the Will to be able to make those end-of-life gifts.
If your parents created a trust, did they put every asset the attorney told them to into the trust? If they opened financial accounts after the trust was created, did they open them in the name of the trust and not their individual names? I often see people not put bank accounts in the trust, or open new bank accounts but not title them in the name of the trust.
Triple checking account titling and beneficiaries is crucial because at best, it’s expensive and time consuming to fix after death. At worst, it’s impossible to fix and the wrong people receive assets. It’s worth spending the money consulting an attorney and getting the account titling and beneficiaries correct instead of heirs paying an attorney later if it’s not set up properly.
Freeze Credit
Freezing your credit is one of the best investments of your time to help prevent fraud. You should do it for yourself if you haven’t.
You should freeze your parents’ credit at each of the three main credit bureaus: Equifax, Experian, and TransUnion. Assuming you can walk your parents through how to do it online, it shouldn’t take more than about 15 minutes per credit bureau, which means you can do this task in under an hour. If you are unable to do it online, you can do it by phone or by mail, but I recommend doing it online because it’s easy to unfreeze or “thaw” your credit once the online account is set up.
Freezing your credit can help prevent fraud because if your parents’ credit is frozen and a fraudster applies for credit in their name, such as a home equity line of credit, car loan, or credit card, the loan officer will be notified that the credit file is frozen, which should stop the loan application. Given the amount of personal information available online due to data breaches, including a data breach at a credit bureau, it’s safe to assume your parents’ information is easily found online. A credit freeze helps lock the door against new debt in their name.
Plus, a credit freeze can help as they face cognitive decline. It’s not uncommon for people with cognitive impairment to try to open new debt that they don’t need. It might be a solicitation for a new credit card or a reverse mortgage. If their memory is declining, freezing their credit can provide an added layer of protection. If they don’t remember how to unfreeze it, they may be less likely to open new lines of credit or take on debt that could jeopardize their financial stability.
Get Access to Accounts
Another key step is for you to get access to their accounts. This includes bank, investment, mortgage, credit card, and any other account tied to money. If you can, get authorization to view utility accounts, cell phone providers, cable, and any other account that requires a regular payment.
When I say added to an account, I don’t mean as a joint account holder. I’ll go into more detail in the estate planning chapter about why that isn’t a good idea for most people, but in the meantime, know the ideal setup tends to be as a Durable Power of Attorney (DPOA).
If you can’t be added as a DPOA, which is one of the best ways to gain access, many financial institutions are allowing people to be added with “View Only” authorization. This would give you the ability to login and see the account, but not take any action on the account. I prefer as people age that they have a DPOA on the account because you never know when they will need help paying a bill, moving money around, or have to call the financial institution for help. The DPOA allows the person you name to easily step in and help as needed. If it’s not set up, it can be a scramble and a lengthy process to get added.
View-only authorization is not bad because it at least gives you the ability to see your parents’ transactions. If you notice a large purchase that is out of the ordinary or a significant withdrawal, you may be unable to stop it, but you can know to start the conversation with your parents and hopefully prevent future suspicious withdrawals.
If you get access and don’t want to regularly log in, you can use the tools with the financial institution to be notified of transactions above a certain dollar limit. If their financial institution doesn’t have that feature, you could consider setting up a budgeting application because they usually have alerts to notify you of large deposits, withdrawals, or other transactions that meet the criteria you set. Again, it won’t catch and stop it in real time, but it allows you to be informed and play defense.
It’s important to gain access to accounts because an unfortunate reality is that as people age, they tend to start making poor financial decisions. It could be as simple as donating more than they can afford to charity or more detrimental actions, such as trading aggressively in investment accounts or sending money to people who take advantage of them.
People have sent entire bank and investment accounts to scammers in love scams, and I often think about how if parents allowed their kids to be added to their accounts as a DPOA or with view-only authorization, much of that could have been stopped.
Finally, if you can’t get your parents to agree to any of these access options, ask them to add you as a trusted contact on financial accounts. Financial institutions allow account holders to add a trusted contact that they can contact if they suspect fraud or abuse. It’s not the best option because it doesn’t allow you to do anything or view the account, but it could mean the difference between being alerted to a major problem or not knowing anything about it.
Summary and Action Steps
If you stop here, you will have laid a great foundation to help your parents as they age. These actions won’t completely protect your parents — nothing will — but they will make your life easier when things go wrong. I hope you don’t stop here because there is more to learn.
Action Steps:
- Ask your parents if they have an estate plan that includes a Will or Trust, DPOA for Finances, POA for Healthcare, and Advanced Directives. If they do, ask where they store it in case you need to access it in an emergency. Tell them where yours is, and if you don’t have one, start working on it.
- Ask your parents when they last reviewed their beneficiaries on all financial accounts and the titling. Explain why it is important and mention that if something is incorrectly done, it could mean more of their money going to taxes. People tend to hate money ending up with the government instead of their heirs.
- Ask your parents if their credit is frozen at the three main credit bureaus. If they are unsure or it’s not, ask if you could spend 30 minutes with them helping freeze it. Explain the benefits and why you’ve personally done it. And if you haven’t done it yet, go do it!
- Ask your parents to add you as a trusted contact to any financial institutions where they have accounts. If that goes well, consider asking for view-only authorization or to be added as a DPOA. This will depend on your parents’ age, trust in you, and ability.
