Four Things to Know About Managing a Loved One’s Finances

Figuring out when it’s time and knowing how to talk about it are just the start. You also need info about estate plans, insurance and health care decisions.

An adult son helps his father with his finances while sitting at the dining room table.
(Image credit: Getty Images)

Taking over as the caregiver for a loved one can be stressful for many different reasons, and it comes with a lot of unanswered questions. When should I take over? What needs to be taken care of? What would make them happy? However, as you begin planning to take over medical or life decisions for your loved one, have you also considered what to do with their finances?

While this can be a difficult topic to broach, it’s important. You have to be open and honest with family members and tackle it head on. At some point, many of us will be in charge of our parents’ or elderly relatives’ caregiving and finances. We should be preparing our strategies now so we are ready when it happens.

1. When is it time to help?

Have you been considering taking over as a caregiver for a loved one, but you’re not sure if they are ready? There are a few simple things you can do to determine if it’s time. When you visit, check for unopened mail or undeposited checks lying around. These both become very common. This could be a sign that they are no longer able to go to the bank or may not understand why they should. Are everyday activities becoming difficult for them?

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If they start mentioning that they don’t have any money or are asking for money, this might be a good time to start these conversations. It may be a daunting task at first, but it’s important.

2. How to get the conversation started.

No matter when these discussions happen, they’re going to be difficult. But avoiding them altogether can lead to major problems down the road for you and your loved one. Start by coming up with a strategy — don’t go into this conversation without a plan. You don’t want to upset your loved one or make them uncomfortable.

For many of us, discussing money is a very private issue. Reassure your loved one that this isn’t about taking over their finances, it’s to help set them up for future success.

Think about who you want to be included in this conversation. Other family members? Any friends? It might be beneficial to have an outside perspective to help ease any tension or give any pieces of professional advice. If you can get help from a financial adviser or an attorney who can lead you in the right direction, that is a great start.

3. Where to begin?

After you have these conversations, it is now time to take a closer look at your aging loved one’s financial situation. This includes annual income, credit card debt and how much they receive in Social Security.

Make sure you have an understanding of their monthly expenses, how much money is coming in and how much is going out. How are they paying their bills? Are they automatic? Being paid online? Or are they using paper checks?

They might have a life insurance policy that you don’t know about, and you don’t want them to lose those benefits because it stops being funded. Gathering all of these documents and putting them somewhere secure is key.

4. Important questions to ask.

Does your loved one have an estate plan? If not, they should. Many people think you have to be wealthy to have one, and that is not the case. Whether they are a multimillionaire or they have only a few bucks in the bank, they need an estate plan. I always recommend my clients find a good elder law attorney. They can collect the correct documents for you and your loved one, ensuring you are making the decisions, rather than the state, should they pass away.

You also want to choose a healthcare power of attorney. This is something you would ideally want to do before it’s too late so your loved one can pick that person on their own. This will ensure that you, or another family member, is legally empowered to view their medical records and decide where and how they are treated.

This is a critical part of an overall financial plan. You don't want something to happen to a loved one and be unable to legally decide for them even though you know their wishes.

Assessing the financial needs of a loved one will be easier with a good plan. Working with a financial adviser can help identify what needs to be done for your loved one and help reduce your out-of-pocket costs as a caregiver.

Drake & Associates is an independent investment advisory firm registered with the U.S. Securities & Exchange Commission. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may view this report. Neither the information nor any opinion expressed is to be construed as solicitation to buy or sell a security of personalized investment, tax, or legal advice. The information cited is believed to be from reliable sources, Drake & Associates assumes no obligation to update this information, or to advise on further development relating to it. Past performance is not indicative of future results. Registration as an investment adviser does not imply a certain level of skill or training.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Tony Drake, CFP®, Investment Advisor Representative
Founder & CEO, Drake and Associates

Tony Drake is a CERTIFIED FINANCIAL PLANNER™and the founder and CEO of Drake & Associates in Waukesha, Wis. Tony is an Investment Adviser Representative and has helped clients prepare for retirement for more than a decade. He hosts The Retirement Ready Radio Show on WTMJ Radio each week and is featured regularly on TV stations in Milwaukee. Tony is passionate about building strong relationships with his clients so he can help them build a strong plan for their retirement.