Stepping in financially for an older relative in time of need

It’s an indisputable fact, whether you’re 20 years old or 80. No one wants to give up control of their lives. But what if you sense an older relative is slowing down? What if a serious illness is threatening the finances of any loved one? How do you fashion and execute a good plan to help them in their time of need?

An excellent first step is to get in touch with a financial planner. Engaging the services of a financial expert with the right experience can help you and your family resolve a tense situation. A qualified financial expert can help you create a system for locating key information that will enable you to make the necessary critical decisions. Of course, the best way to set up this type of system is to work with the relative before there’s a problem or during the very early stages of illness.

Here are some suggestions that can make the entire process much easier to navigate:

Understand the individual’s condition and strike a cooperative balance

The first step in helping someone in a crisis is not to talk about the money but, rather, to fully understand the crisis. Before talking about money issues, do everything possible to understand how the individual is feeling and, most importantly, how he or she wants to handle family, work and money issues at each stage of the illness. It’s not unreasonable for someone to want to keep control until the point when they really have to give up the reins. Get the individual to talk about what he or she believes will be triggers to give up control, and then find out how he or she would like to proceed and formulate a transition plan accordingly.

Talk about legal documents

Does this parent, relative or friend have a will and the necessary health directives in place? Health directives name a single individual to manage all key health decisions if a patient cannot make them. This includes a will, depending on the individual’s assets and lifestyle situation. For example, if there are kids to raise or a business to run, check to see what detailed legal instructions the individual has in place for managing finances or running the business should incapacitation happen. If those plans have not been made, they need to be made immediately with the help of a CFP professional and necessary tax and legal experts. An individual who is ill needs to designate people whom he or she trusts to handle health and personal finance decisions. If the individual has not planned for the future of the business, this is very detailed step that needs to be addressed in collaboration with other family members as well as key co-workers or executives.

Talk about long-term care provisions

According to the American Association of Retired Persons, the average nursing home stay is 2.5 years. Whether an individual chooses long-term care in the home or in a facility, it’s important to understand that while some direct medical expenses will be covered by private insurance, Medicare or Medicaid, most of the cost including daily living expenses, will not be covered.

Get a handle on bills and other key financial events

It’s not the most pleasant dinner table conversation, but if more people planned their affairs with the assumption that they could die or become permanently incapacitated tomorrow, survivors would have a much easier time running or settling matters in their absence. Such planning goes beyond having simple wills and powers of attorney in an easy-to-find location.

It makes good sense to establish the following:
Electronic transactions: Older relatives tend to trust traditional means of paying bills, but automatic bill pay is an extraordinary benefit for caregivers or relatives charged with managing someone else’s finances. By gathering all bills that need to be paid and programming in their payment dates, there’s little or no risk that any regular bills will be paid late. Automatic bill payment should be one of the first decisions made if an elderly relative establishes a joint checking account with a caregiver or whoever holds their financial power of attorney. In addition, if a relative wants to continue a regular savings or investment plan while they are incapacitated, those payments can be made as well. Most important – once those automatic transactions are set up, all the security codes and passwords must be kept in a safe place for both to access.

Set up a home maintenance schedule: If the relative is hoping to return to the home or if it must be sold at a later date to pay bills or to settle the estate, it must be maintained to assure its value at the time it needs to be reoccupied or sold.

Set up a correspondence system: In addition to the stress of helping someone who’s ill or incapacitated, the sheer amount of paperwork associated with a serious illness can shake the most unflappable person. Again, a CFP professional with special skills working with elderly clients can help you set up a system for collecting and sorting that information as well as non-medical financial correspondence. If the house is unoccupied, it’s also important that there is a way to keep mail secure to avoid identity theft – buy a shredder for all mailed materials that don’t need to be filed.

Pull credit reports: Get permission from your relative to pull the three annual credit reports he or she is entitled to during the year so you can confirm all accounts are current and that identity thieves haven’t targeted his or her accounts.

Without question, there are many important decisions to be made in order to get the right plan into place and running smoothly. The sooner you are willing to roll up your sleeves, the more successful you will be in stepping in financially for that loved one in their time of need.

Kevin Reardon, CFP is a financial planner and president of Shakespeare Wealth Management in Brookfield. He is also a member of the National Association of Personal Financial Advisors (NAPFA). He can be reached at (262)814-1600 or Kevin@ShakespeareWealthManagement.com.