Dementia is a progressive condition that impairs clear thinking over time. If your parent is diagnosed with dementia, early planning is essential.
Organizing financial documents supports future care, prevents financial mismanagement, and reduces stress. To help you get started, we’ve put together some practical steps.
Key Takeaways
Stay organized: Keeping financial documents in order helps prevent mismanagement, abuse, and interruptions in care while covering future expenses.
Secure permissions: You’ll need legal permissions like a power of attorney or bank authorizations to access essential financial records.
Use digital tools: Consider an online platform like Trustworthy to securely manage documents, automate payments, and keep family and caregivers informed.
Why Organizing Financial Documents Is Essential
David P. Fritch, a CPA and the owner of Fritch Law Office in Jasper, Indiana, advises: “Organizing financial documents immediately after a dementia diagnosis is critical for maintaining control over a loved one's assets and ensuring their wellbeing.
"In managing finances for dementia patients, I've often seen families struggle with gaining access to necessary financial accounts and benefits. Collating essential documents like estate plans, wills, and asset lists can streamline access and prevent panic situations.”
During the early stages of dementia, your parent may wish to have some control over their finances. Still, as the disease progresses, their mental and physical cognitive skills will decline, and having organized financial documents prepared is key for a few reasons:
Preventing financial mismanagement: Dementia patients will eventually lose the ability to keep track of payments and often make irresponsible decisions when it comes to money. Organized financial documents can protect your parent from being a victim of financial abuse, as you or caregivers can monitor their accounts.
Ensuring payments are made on time: Organized documents can help avoid missed or late payments that can cause interruptions in medical care, insurance, and utilities.
Preparing for future care costs and legal requirements: Being organized can help prepare for long-term care expenses, emergencies, and legal costs for estate planning, like creating a power of attorney or health care proxy.
Fritch emphasizes the importance of being prepared, saying: “One example from my practice involved a family that struggled to access their father’s investment accounts because they hadn’t updated their estate documents.
"By organizing and reviewing documents routinely, families can avoid such roadblocks and ensure funds are available for essential care. Document maintenance is crucial for avoiding legal tangles that can compound an already stressful situation.”
Key Financial Documents to Gather
The purpose of gathering financial documents is to get a comprehensive overview of your parent’s finances, so you should collect all documents with key financial information.
Banking and Investment Accounts
This includes documents for savings, checking and investment account statements, and account login details for easy access.
Income Sources
To best manage your parent’s finances, you’ll need an idea of how much income they receive and where it comes from. Social Security benefits, annuities, pensions, and rental income are common sources.
Debts and Liabilities
Be aware of your parent's continuing financial obligations by gathering documents like credit card accounts, outstanding loans, mortgages, or rental agreements.
Tax Records
If you manage your parent’s taxes, you will need their tax returns from the past three years and any other obligations you may need to ensure are paid.
Insurance Policies
If your parent has insurance policies, you’ll need those documents. Different policies may include life, health, homeowners, renters, and auto insurance policies.
Property Records
Collect all documents related to real estate or vehicles they own, such as titles and deeds.
Legal and Estate Planning Documents
You will also need to gather all legal and estate planning documents like power of attorney, wills, trusts, healthcare proxies, and advance directives for decision-making.
Establishing Access and Authority
To effectively manage your parent’s financial documents, you will need legal access most of the time to make decisions on their behalf.
Here are the top things you will need:
Power of attorney for finances: This allows you to make all financial decisions on your parent’s behalf, including how their money is spent.
Bank authorizations: This has less power than a POA, but banks will offer joint accounts or account access arrangements that allow you to monitor your parent’s accounts without being an owner.
Access to a power of attorney can be difficult if your parent is hesitant. Pamela D. Wilson, a caregiving expert and advocate, suggests: “The best advice I can give you is to prepare to practice and plan for it not to go the way you expect. Then you keep coming back to have that conversation over and over again.”
CPA David Fritch adds:
“Power of attorney is vital in granting decision-making authority to a trusted individual. It's crucial to set this up early to ensure that the designated person can immediately handle financial matters if the loved one becomes incapacitated. In my 40 years of helping families, I've seen how a proactive POA setup can prevent disputes and ensure that financial decisions are made smoothly, safeguarding the individual's estate and wellbeing.”
With so many different documents to gather, it’s crucial to store them somewhere secure but still accessible, like Trustworthy. Trustworthy's Family Operating System® allows you to store all gathered financial records for your parent in an online vault with advanced security measures. Collaboration features and user permissions make sharing these documents easy, and the advanced filing features make keeping the documents organized headache-free.
Setting Up a Physical and Digital Organization System
After you gather financial documents from various places, set up a physical or digital organization system. This makes searching for specific documents faster, especially during emergencies.
To physically file your documents, choose a system that works for you, like folders, binders, and filing systems. To help navigate documents, sort them into categories like medical expenses, income, insurance policies, etc. You can use brightly colored tabs to mark their location. Consider storing your documents somewhere secure, like a fireproof safe or lockbox at the bank.
Going digital adds an extra level of security and makes accessing documents faster and simpler. Choose an encrypted storage solution like Trustworthy's.
Trustworthy makes the organization process intuitive, with filing features powered by AI. The Autopilot feature makes suggestions for file names and where to store them. There is even a feature that arranges your information into organized categories without you needing to start from scratch. Document summaries make locating and sharing documents quick and seamless.
Managing Monthly and Recurring Expenses
Managing your parent’s financial documents also involves ensuring there is money for recurring expenses and no payments are missed.
To do this effectively, you need an overview of what you’re working with. Make a list of recurring bills and subscriptions. You should also track all medical expenses for tax deductions or insurance claims.
Trustworthy includes automatic reminders that help members avoid missed or late payments that could result in interrupted or delayed treatment. Members can use the finance tab to set up payment reminders, create and track monthly budgets, and store all account details somewhere safe.
Planning for Care Costs
Dementia may require long-term care expenses like home care, assisted living, or nursing homes. Start planning for these future costs as soon as your parent is diagnosed.
A good place to start is by reviewing their insurance policies to determine whether they cover costs associated with long-term care and what expenses you will pay out-of-pocket. Consider changing or moving insurance policies for better future care if applicable.
You should also take the time to research whether your parent is eligible for financial assistance programs like government-backed Medicaid, which covers services like home care and assisted living for people with dementia. Other assistance programs include Veterans' Benefits and Medicare. To apply for any of these programs, you must gather all relevant financial documents, which will be easy if you store and organize them with Trustworthy.
Protecting Against Fraud and Financial Exploitation
The Federal Trade Commission estimates that elderly consumers lose as much as $48.4 billion annually from the improper use of their funds.
One of the best ways to protect your parent from fraud and financial exploitation is to ensure they know what to look out for if they’re still able to. If not, then you should be aware of the signs to look out for.
These include unusual activity in the bank account and large withdrawals from inactive accounts.
Some prevention methods include:
Regular monitoring of credit reports.
Setting up alert systems for unusual transactions.
If you suspect your parent is a victim of fraud, you should:
Freeze their credit to prevent any new accounts or loans from being taken out in their name.
Alert all relevant professionals like the Internal Revenue Service (IRS) and the Social Security Administration.
If you know the suspect, report the scam to your local police and share evidence.
Involving the Family in Financial Management
It’s not uncommon for family conflicts to arise around the management of an elderly parent's finances, especially among siblings. Avoid these conflicts by involving the family in financial management and maintaining open communication about family members' financial responsibilities. Consider holding a family meeting to discuss these roles and create a financial plan.
For example, assign different roles to family members. One sibling could be in charge of paying bills, while another could oversee investments. Outline these roles in writing to refer back to in case of any misunderstandings, and store the document with Trustworthy.
Trustworthy’s collaboration features allow you to instantly share all financial documents with family members and caregivers. Keep track of who has access and share real-time updates for open communication.
Regularly Reviewing and Updating Financial Documents
Proper management of financial documents means regularly reviewing and updating documents to reflect any changes. As dementia progresses, so will the care needs, including costs associated with care.
Keep track of changes in financial obligations by conducting reviews every six months or annually. Remember to add new accounts or policies and remove any that are outdated or no longer in use.
Frequently Asked Questions
How do I handle financial records if I suspect a family member misuses my parent's money?
Unfortunately, this is a common problem. If you suspect a family member is abusing your parent’s funds, you should gather all financial records and evidence and involve a neutral third party, such as a lawyer, to assess the situation.
What should I consider if my parent has financial assets or properties in another country?
First, you’ll need to review inheritance laws and other laws relating to power of attorney to see what is required. Speaking to an estate attorney familiar with multi-state or international properties is best.
Are there nonprofit or government resources that offer guidance for caregivers in charge of financial management for dementia patients?
The process of managing your parent’s financial documents can seem overwhelming, but there are organizations like the Alzheimer’s Association, the National Institute on Aging, and the Administration for Community Living that offer counseling and assistance for managing financial documents.
We’d love to hear from you! Feel free to email us with any questions, comments, or suggestions for future article topics.
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