Did you know the U.S. is experiencing a “silver tsunami"? Data released by AARP found that by 2034, adults over 65 and older will outnumber children under 18, meaning that more adults will have to play the role of family caregiver for aging parents.
Part of caring for aging parents is managing and protecting their financial documents, and in this guide, we’ll show you how to do this step-by-step.
Key Takeaways
Helping your parents manage their money ensures all payments are being made and the money is safe from scams.
It is recommended to get legal authority like a power of attorney to manage your parents' financial documents.
Use a secure platform like Trustworthy to store essential financial documents, so they’re easily accessible.
Why It’s Important to Help Aging Parents Manage Their Financial Documents
As your parents age, physical and mental challenges can impact how well they can manage their important financial documents. Medical diagnoses like dementia, strokes, cancer, and Alzheimer's can take away their ability to manage their finances completely and put them at risk.
Additionally, Steve Kibbel, certified financial planner and managing editor at International Money Transfer, notes: “Seniors are often targets of scams. Keeping an eye on their accounts can help catch any suspicious activity.”
In 2021, according to Psychology Today, over 90,000 older Americans over age 65 were victims of fraud.
The reason why there are so many scams specifically targeting elderly people is because they’re considered easy targets, and most of the time, the victims are too embarrassed to report the crime, so the cycle continues.
By managing your elderly parents' financial documents, you can protect them from scams and ensure all bills are paid on time.
Gather All of Your Parents' Essential Financial Documents
To manage your parents' finances, you must start by gathering all their essential financial documents and storing them in one secure location. If your parents suffer from memory loss or are incapacitated, you’ll have to play detective.
If you need to request copies of the documents from financial institutions, you will need legal authority. This means being named as a general power of attorney (POA) by your parents.
But what happens if your parents can no longer appoint a POA? If this is the case, a court will appoint a conservator.
Once you have the legal authority, you will need to gather these essential financial documents:
Wills and trusts.
Medical power of attorney.
Financial power of attorney.
Bank statements for proof of income and expenses.
Past tax returns and other tax documents.
Real estate documents.
Investment documents.
Documents that have your parents' Social Security numbers.
Property deeds
Insurance policies.
Medical information like bills.
List of all assets.
Financial account details like account numbers, usernames, log-in details, and contact information of the financial institution.
Other estate planning documents like advance healthcare directives.
Now that you’ve done all the hard work and gathered your parents' essential financial documents, store them somewhere secure where they’re still easily accessible. One of the best ways to do this is by using a secure online platform like Trustworthy. Trustworthy is a Family Operating System® where you can store all your financial documents in one secure location, making it easy to organize, access, and share with family members or estate planning attorneys.
How to Organize and Categorize Financial Documents
Gathering and storing all your parents' financial documents is only one part of managing their finances. You also need to organize and categorize their documents so that when the time comes to use them, you’re not hunting high and low for misplaced documents.
Organized and categorized documents can help when looking for unauthorized transactions or errors to correct.
Some ways to organize your financial documents:
Establish a systematic filing system: This could mean creating a folder for each tax year or for each type of document.
Categorize documents according to type: Store your documents in folders according to type, like receipts, invoices, bank statements, and financial reports.
Use clear and consistent naming techniques: You can choose to name all documents with date formatting, document abbreviations, invoice numbers, or even versions.
Using Digital Storage to Help Manage Your Parents' Financial Records
One of the best ways to organize your documents is by digitizing your storage system, and nowadays, you don’t need to be a tech wiz to do so. There are so many different and easy-to-use document management platforms to choose from, like Google Drive, Dropbox, Apple iCloud, and Microsoft OneDrive.
These platforms allow you to create different folders and share your documents easily with other people. You can also use a secure and intuitive system like Trustworthy. By using AI, Trustworthy streamlines organizing your documents by using features like document analysis, data autofiling, and filing recommendations.
The advanced security features like 256-bit AES encryption, two-factor authentication, and HIPAA and SOC 3 compliance keep your financial documents safe and secure. The collaboration features allow you to create a trusted network with whom to share your documents.
Understanding Power of Attorney for Financial Management
Having a general POA grants you the same rights as your parents.
Different types of power of attorney include:
Limited: This POA is only granted for a limited time or for a specific purpose.
General: This gives you the POA all the same rights and access that your parents have.
Durable: This remains in effect even if your parents are incapacitated.
Springing: Unlike a general POA, this does not go into effect until your parents are incapacitated.
Having a power of attorney means you can do the following things:
Access and manage your parents' bank accounts.
Ensure all bills and payments are made on time.
Manage all income and expenses.
Create a budget for your parents.
To gain access to certain confidential financial documents, you will need to present places like banks with a signed copy of your POA. Store your POA with Trustworthy to easily share it with attorneys and other legal professionals.
How to Keep Financial Documents Secure and Protected
There are several ways to effectively keep your documents safe and protected physically and digitally.
It’s important to keep original physical documents secure in a home safe. You can get safes that are both waterproof and fireproof to protect your original documents in case of fire and floods from natural disasters. Make sure you have sealed all documents in plastic bags or vacuum-sealed bags for added protection.
You can also keep copies of your documents in a safety deposit box at your local bank to spread out the locations where you store your documents.
In addition to keeping physical copies of your documents, you should store all your digital copies with a secure online platform like Trustworthy. Storing documents online with Trustworthy can help prevent physical damage and loss of paperwork. Trustworthy’s security features keep your financial papers safe from online risks like unauthorized access or data loss.
Helping Aging Parents Track Monthly Bills and Expenses
As your parents get older, it may become harder for them to keep track of what bills and expenses need to be paid. Missed payments can incur late payment penalties and interest.
Keeping track of your parents' monthly bills ensures things are paid on time, and creating a budget ensures there is always enough money to pay all bills and expenses.
Doing this is easy when using a financial management app that allows you to create budgets, set goals, and even highlight areas of concern. Some popular financial management apps include Trustworthy, Budgetpulse, PocketGuard, and NerdWallet.
How to Manage Your Parents' Investments and Retirement Accounts
When you begin managing your parents' investments and retirement accounts, you will need to have a conversation with them to learn what investments they have and where they’re held. These investments could include things like IRAs, 401(k), credit union accounts, insurance policies, and bank accounts.
But what happens if your parents are having a hard time remembering what exactly investments they have?
Brent Neiser, a certified financial planner and host of the YouTube show, What’s Next with Money, advises:
“In addition to the mail, tax returns can also be a forensic tool. 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.”
Once you uncover all of their investments and retirement accounts, it may be a good idea to tidy up the accounts by consolidating those with a minimal balance and little opportunity for the future into a portfolio of mutual bonds.
However, if you decide to manage your parents' investments, use Trustworthy’s finance tabs to keep their bank accounts, loans, and investments. The reminder feature prevents you from missing important payments, thus avoiding late fees and extra interest charges.
What to Do When Your Parents' Financial Documents Are Missing or Lost
Missing or lost financial documents can be a headache, but there are some ways to work around this.
If you have a POA, you can approach financial institutions like banks to request additional copies of important documents or approach your parents' former employers for the documents. Missing or lost tax documents can be found directly from the IRS, which can provide you with substitute forms during tax return season.
Make sure you store the new copies of the financial documents somewhere safe like Trustworthy.
Frequently Asked Questions
When should I step in to help manage my parents' finances?
You’ll know it’s time when they’re having a hard time keeping up with the things they’re normally able to do, like not remembering to include a date on a check.
How can I protect my parents from financial abuse by third parties, including other family members?
Strangers can carry out elderly financial abuse through scams and even family members who are using their parents' money without permission. Prevent this by having a POA appointed to oversee all the finances.
What should I do if my parents resist sharing their financial information?
It’s not uncommon for parents to resist sharing their financial information with their adult children, and while this is frustrating when you’re trying to help, getting angry is not the answer. Instead of pushing them, suggest they talk to a trusted financial advisor with whom you work.
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