Staying on top of your own money and the markets can sometimes feel like a second job—let alone adding on a lead role in managing your parents’ finances as they grow older. While overseeing their financial situation is a serious responsibility, taking it step-by-step and enlisting the help of trusted professionals can make the task feel less overwhelming.
Before you wade into their bank accounts, the first step is to broach the subject of finances with your parents—which is often easier said than done. A 2019 survey by home care technology company Mavencare found that while 59% of people age 40 and over are worried about their parents as they age, 54% have not discussed any aging plans with them.
Conversations around money can be challenging, says Jandy John, Director of Business Development at Wyth Trust, but parents and children need to start with the basics before competency becomes an issue. Here’s how to take a gradual approach to overseeing your older parents’ finances:
Seek out information
If you find yourself short on details about your parents’ financial situation, start by asking basic questions. Jandy recommends you, “Ask things such as where do they bank, do they have a power of attorney in place, who should you call if something happens, and how do you get in touch with their financial advisor or lawyer?” Write these answers down so you can refer back to them when the time comes.
Take stock of the situation
With your parents on board, it’s time for a holistic review of their finances. This will involve making sure their income matches their expenses and whether their investments and bank accounts are appropriate from a risk perspective. “You’ll also want to ensure their assets are in less volatile, cashable holdings as they enter their post-retirement years—such as in GICs and High Interest Savings Accounts,” Jandy explains.
Consider putting a power of attorney in place
If you’re looking to manage and stay up-to-date on your parents’ financial information without running into roadblocks, implementing a power of attorney is something your parents should discuss with a lawyer. A power of attorney is a legal document that gives someone else the right to make decisions on behalf of another person—even if they turn out to be ‘what if’ documents that you don’t end up using.
“That power of attorney document will give you more authority so you can see more and do more for your aging parents,” Jandy continues. “This includes the ability to go into the bank to access account information, tax documents, manage their money and pay bills.”
Review property and personal decisions
Power of attorney may extend further. In Ontario, for example, this may include a Continuing Power of Attorney for Property, which covers your parents’ financial affairs and allows you to make financial decisions for them even if they become mentally incapable. They may also consider a Power of Attorney for Personal Care, which covers their personal decisions, such as housing and healthcare.
Consult a lawyer to determine the right type of power of attorney for your parents’ situation.
Don’t forget the will
While setting up a power of attorney, it’s also a good idea to ensure your parents have current wills in place. Jandy recommends having this conversation around the same time. “They do go hand in hand. A will is very important because if you pass away without a will, then the administration is more complex and it takes longer,” she cautions.
“If you don’t make your will, you may lose control about who benefits and how your estate will be settled,” she adds.
Keep things separate
While adding your name to your parent’s bank account may sound like the simplest solution to helping them manage their finances, blending your money with theirs isn’t a good idea.
“From a tax planning and a social standpoint, there are a lot of disadvantages to putting your name joint on your parents’ accounts—it opens a whole can of worms,” Jandy warns. “For example, money in joint accounts is vulnerable in a bankruptcy. There could be liens against one of the parties that impact the other, along with challenges when it comes to reporting assets to the estate in the event of death.” Talk to your legal and tax advisors before changing ownership on any asset, even if in name only.
Seek out partners
While you’re taking care of the emotional side of managing your parents’ future, don’t hesitate to seek out the help of professionals, such as your Trust company, financial planner, lawyer or investment advisor. With the right advice on your side, you’ll ensure your parents’ financial situation is running smoothly.
Trust in the right advice
A Trust company, such as Wyth Trust, will be able to take on the role of “agent” if you’ve been assigned power of attorney—and that can relieve a lot of stress, especially when you may be grieving the loss of a parent at that time.
The Trust company can step into the shoes of that power of attorney and manage the financial affairs for the client—including dealing with the assets or investments wherever they may be. The Trust company can work with you to help sell property, file income tax and pay your parents’ bills as required. You gain the peace of mind having a professional to support you when you need it most.
While starting the conversation about your aging parents’ financial situation doesn’t sound like fun, you will thank yourself and them for having the chat. It will not only give you a solid direction on what to do when they can no longer handle their own finances, but it can help avoid family disputes, awkward moments and stressful decision-making down the road.
How Wyth can help
Wyth Trust is here to help you and your family navigate complex estate and trust needs
Whether you’re saving for the short-term or long-term, both of these investment options are CDIC-insured, giving you the confidence you need:
- As you consider managing your parents’ assets, consider a Wyth Financial High Interest Savings Account (HISA) as a liquid, secure and interest-bearing vehicle.
- If you want to lock in funds for a longer-term, consider a Wyth Financial Guaranteed Investment Certificates (GICs), as they have a guaranteed fixed rate.
The content of this article is provided for general information purposes only and is not intended to be investment or legal advice. While this article provides tips for you to consider, it does not reflect the multitude of factors that can contribute to your individual situation. Seek counsel from your trusted professionals when making any investment, legal and financial decisions. While we strive to offer help, we accept no liability for any loss or damages arising out of your use or reliance of the information in this article, including liability towards third parties.