One day you may find yourself taking care of an elderly parent who is in declining physical or mental health. This can be stressful, both emotionally and financially. On the financial side, there are steps you can take to prepare for this situation.
- Talk to your parents about their financial affairs. Parents may be reluctant to discuss their finances, but someone needs to know the names of their lawyer and accountant. Someone needs to know where their important financial papers are located. If they are still fit, encourage your parents to make a detailed financial list for you, including information about bank accounts, investments, insurance policies, retirement plans, location of safe deposit boxes, etc. Getting familiar with important information now will be much easier than trying to find this information after a parent becomes physically or mentally impaired.
- Review your parents’ financial picture together. Do your parents have enough retirement income and savings to provide for their needs? Should steps be taken to help stretch their assets over their life expectancies? What if they eventually need nursing home care? Assess whether long-term care insurance makes sense for them.
- Consider these important documents. A durable power of attorney allows another person to make financial decisions on a parent’s behalf if he or she becomes incapacitated. A medical directive or living will is a document stating a parent’s wishes about medical treatment in case he or she becomes too ill to communicate these wishes.
- Help put your parents’ estates in order. Does each parent have a will, and if so, where are the wills stored? When were their wills last updated? The 2001 Tax Act made major changes to the estate and gift tax rules. Have their estate plans taken these changes into account? Encourage your parents to review their beneficiary designations on insurance policies, annuities, and retirement plans to make sure their choices are still suitable.
Talking finances with your parents now can make caring for your parents in the future much easier. For assistance, give us a call.