6 Ways to Help Your Aging Parents With Their Investments

By James F. Royal, Ph.D., bankrate.com

Talking about finances is rarely easy, and it can be even more difficult when you need to have this conversation with your aging parents. Regardless of whether they’ve shown signs of mental decline, if you don’t know what they’ve done with their money, you won’t be able to help them manage their affairs when it’s needed. Like everything that causes seniors to lose their independence, this talk must be handled tactfully.

The earlier you initiate the conversation about your parent’s investments, the better, says Brent Neiser, a certified financial planner and host of What’s Next With Money, a YouTube program. “It’s helpful to know about money matters in case you need to harvest resources for your loved one’s care,” Neiser says.

You need to understand that ceding control of personal finances – even a little bit – can be a momentous step for individuals who have been managing their money for many years. Some parents may not have considered the issue, but others may be actively trying to avoid a conversation that forces them to even think about their own mortality. So it’s important to tread carefully.

Here are some steps you can take to successfully help your aging parents with their investments.

Preparing for the conversation

It’s important to set the right tone for the initial conversation. You’ll want to make your intentions clear, say why you’re starting this conversation and show how each of you stands to benefit.

Daughters and daughters-in-law are usually the prime movers in starting these conversations, says Carolyn Rosenblatt, an elder care attorney in San Rafael, California.

“Because women are the caregivers and nurturers, they almost always initiate talks about financial matters,” says Rosenblatt, who wrote “The Family Guide to Aging Parents: Answers to Your Legal, Financial, and Healthcare Questions.”

And setting the right tone is not only a question of what you say but also where you say it.

The conversation should occur in a place where parents feel comfortable, Rosenblatt says. Find a location that signifies comfort and peace and will put them in the right mood — their home, a park, a special restaurant.

Other experts recommend using a location that can create trust and that suggests not only the gravity of the situation but also that it’s all aboveboard.

“Find someone the elder trusts and respects to witness the conversation,” says Leonard Raskin, a certified financial planner and founder of consulting firm Raskin Global in Hunt Valley, Maryland. He suggests holding the dialogue at the senior parent’s attorney’s office, a doctor’s office or with a senior ombudsman present.

Even though your parent might forget the details of their investments, you must make a point to never treat them as a child.

“They accumulated this wealth and successfully got to this point in their lives,” Raskin says. “Right now, you should assist and not take over. The takeover will occur when it should.”

What to ask your parents about

As you broach this topic, you want to get concrete details and take an inventory of your parents’ financial lives. A comprehensive picture of their finances can help you make arrangements, and may show that it’s time to review their estate plans or begin creating them, including a trust.

Neiser recommends asking the following questions:

• What investments do they have?

• Where are those investments held?

• Who are the contacts for the investments?

• How are these investments titled (joint accounts, individual, etc.)?

• Is there a financial advisor in the picture?

“Ask your parents about IRAs (individual retirement accounts), credit union accounts, bank accounts and insurance policies,” Neiser says.

You’ll also want to check on pension and 401(k) accounts, which can easily be lost in the shuffle. In fact, it’s possible that your parent doesn’t even know about an employer-sponsored retirement account, and it may remain untouched and still invested.

The mail can be one of your best friends, Neiser says. It tells you which bills are coming in and also gives you clues about the parent’s investments. Normally, statements for taxes, trading and banking come in the mail. Look at those to get an idea of the condition of the senior’s finances.

“In addition to the mail, tax returns can also be a forensic tool,” Neiser says. “Look at returns from the past few years to see if they show interest or dividend income, indicating investments your loved one might have forgotten about.”

For these reasons, this conversation may extend into a longer and more in-depth discussion, as you assess your parent’s financial life and try to get a handle on what your options are.

How you can help your parents with their investments

You have quite a few options to help your aging parents shore up their finances, from doing the easily managed tasks to calling in experts when and where they’re needed.

1. GET STARTED NOW

Speaking with your parents about financial matters while they are mentally sharp and physically healthy is ideal, but sometimes mental decline makes it necessary for you to jump in quickly and either help or take over. So regardless of their mental acuity, it’s important to get started now.

“By the time a parent has memory loss, they’ve already suffered damage to their financial decision-making,” says Rosenblatt, the elder care attorney.

The sooner you make an action plan and ready things, the less their finances can degrade.

2. TIDY UP FINANCIAL ACCOUNTS

If your parent has a variety of financial accounts, especially unused ones, you may need to tidy up and consolidate them. For example, a brokerage account may be sitting idle with a minimal balance and offer little opportunity for future use. In this situation it could make sense to move the funds to another account that is being used, even if it’s just for simplicity.

It could also be valuable to add beneficiaries to financial accounts that you intend to keep. It’s easy to forget to add these to an account when it’s being opened and it may have sat decades without being addressed. A beneficiary helps clarify where the assets go on the owner’s death, and naming a beneficiary also helps avoid arguments later on and legal delays.

3. CHECK UP ON 401(K)S AND IRAS

Both 401(k) and IRA plans may need to be handled in special ways, such as required minimum distributions, depending on the owner’s age. If these accounts are not managed correctly, they can create more financial difficulties and needless expense, including severe bonus penalties.

It can be easy to run afoul of these rules, so they’re a good place to look to minimize expenses or maximize potential future gains. Here are a few things to consider:

• Does it make sense to roll over a 401(k) to an IRA? You have several options for a rollover and they may present various pros and cons.

• Does it make sense to convert a traditional IRA to a Roth IRA? New rules make a Roth IRA a little more attractive.

• Do you need to watch out for inherited IRAs? Inherited IRAs have their own special brand of complexity, so you need to know your options here.

These special retirement accounts create more potential issues than regular taxable accounts, so it’s wise to be fully sure of what you’re doing before you make any moves.

4. MAKE SURE INVESTMENTS ALIGN WITH YOUR PARENT’S GOALS

If your parents are not looking at their investments or haven’t looked at them in some time, now could be an excellent time to ensure that investments are aligned with their needs. For example, your parents may be retiring and have a portfolio full of stocks, an aggressive allocation that could expose their future income to serious disruption if the market declines.

On the other hand, they may have so much in bonds that they’re hurting their distant retirement. Their portfolio may be too conservative and adding more stocks may actually help them later.

Either way, it’s a good opportunity to make sure their portfolio is aligned with their needs. Mutual funds are one of the most popular ways to invest, and can help your parents diversify their portfolio. 

5. ESTABLISH A FINANCIAL POWER OF ATTORNEY

In the event of a parent’s incapacity, perhaps due to hospitalization, who’s going to manage the finances? In these situations, it can be useful to have a financial power of attorney that allows you to manage your parent’s affairs, pay bills and the like.

You can establish a financial power of attorney through a lawyer, though sites such as Freewill allow you to create one at no expense.

6. CALL IN AN EXPERT

All these issues are complex and come with a variety of potential snags, so it can be worthwhile to call in an expert to help. That may mean asking a certified financial planner for help adjusting investments to fit your parent’s needs and making an estate plan. Or it can involve more elaborate estate planning using a lawyer with expertise in the kind of plan you want to create.

Either way, if you get in over your head, these experts can help bail you out. But you want to call them before you make your moves, lest you run up further unnecessary costs.

Bottom line

It can be tough to discuss finances and investments with an aging parent, but it can save them substantial money to have their affairs in order so that a kind and caring relative can help them. By doing so, you can begin to get their investments in order, potentially minimizing their expenses and yours as the caregiver, too.

It can also be a good time to reflect on your own financial planning. Discuss your investments with your own children, where you’ve put your money and why. You’ll strengthen their ability to handle your finances when the time comes, and you may discover that a key part of your estate planning needs to be taken care of now while you’re able to make your wishes fully known.