Tips to Help Aging Parents Manage Financial Decisions

This article was originally published in full on Tacoma’s The News Tribune on June 3, 2024. Gary Brooks was a contributing author for the paper from 2008 to 2024 and is a Partner and Senior Wealth Advisor at Mission Wealth in Gig Harbor, WA.

As the U.S. population ages, the percentage of those over 65 has risen significantly. With more people living longer than ever, family dynamics have shifted, particularly in financial management. Many individuals now face the challenge of helping their aging parents navigate complex financial decisions, often while contending with the onset of cognitive decline.

Given the increasing scams and fraud targeting seniors, this topic is more pressing than ever. Helping parents manage their finances requires proactive, compassionate planning that considers their overall well-being while protecting their financial security. Here are some steps to manage these sensitive family conversations effectively.

The Impact of Cognitive Decline on Financial Decision-Making

Cognitive decline doesn’t follow a predictable pattern. While some seniors may maintain their mental sharpness for years, others may experience memory lapses, confusion, or impaired decision-making. Recognizing when to step in is often difficult, as emotions surrounding independence and privacy can complicate matters.

Starting conversations early and being observant of subtle changes in behavior—such as forgetfulness or unusual spending patterns—can help identify the right moment to help. Look for signs like confusion around everyday transactions, unexpected investment decisions, or reacting impulsively to financial news.

Initiating Open Communication About Finances

Starting a conversation with your parents about finances can feel uncomfortable, but it’s a critical step toward ensuring their long-term financial health. Encourage open communication about their financial situation, health, and future preferences. Establishing trust early on can create a strong foundation for collaborative decision-making.

You may not need to take immediate action, but simply opening the door to these conversations allows for the gradual sharing of information. This way, if cognitive decline or other challenges arise, you’ll already have a clear understanding of their financial landscape.

Key Areas to Focus On: Financial, Insurance, and Legal Matters

Managing your parents’ finances often requires understanding several critical areas: their financial accounts, insurance policies, and legal arrangements. Here’s how you can break down each area to ensure nothing is overlooked:

1. Financial Health

Familiarize yourself with your parents’ income sources, such as Social Security, pensions, or investment accounts. Determine if their income is sufficient to cover current and future expenses. Understand their investment strategies and assess whether adjustments are needed for their stage of life. Be mindful of the tax implications, such as making quarterly tax payments if necessary. Consider your own financial situation as well. Are you or your siblings able to contribute financially if needed? Establishing clear expectations now can prevent financial strain later.

2. Insurance Coverage

Understanding your parents’ health coverage is essential, particularly as they navigate Medicare and supplemental insurance. Investigate whether they have long-term care or life insurance policies that may assist with future expenses. Additionally, assess the feasibility of their current living situation and discuss the potential need for care options that reduce isolation, which can exacerbate cognitive decline.

3. Legal Arrangements

Ensure your parents have established the necessary legal documents, such as wills, trusts, and powers of attorney for healthcare and financial matters. These documents provide clear instructions for managing their affairs if they cannot do so themselves. It’s also essential to understand the location of these documents and whether additional bank or investment-specific power of attorney forms are required.

Proactive estate planning is crucial if any wealth is expected to outlive your parents. By discussing these matters now, your family can avoid complicated legal issues after they pass.

Collaborating With Trusted Professionals

Sometimes, addressing these questions may require you to join your parents for a meeting with their financial advisor, accountant, or attorney. Having these professionals involved can bring objectivity and ensure that all critical areas are covered. At these meetings, ask for your parents’ permission to have the financial professionals share details or concerns with you. They may be among the first to notice cognitive decline via repeated questions, redundant emails or phone calls, hyper-focus on single issues, or continual reference to past events.

Proactive Planning Avoids Stress Later

While managing aging parents’ finances may seem overwhelming, taking these proactive steps can provide peace of mind for everyone involved. Establishing a transparent and supportive process ensures that your parents are cared for while maintaining financial security and legacy planning.

If you’re navigating financial decisions for your aging parents and need expert guidance, don’t hesitate to contact one of our experienced financial advisors. At Mission Wealth, we offer comprehensive support tailored to your family’s unique needs. Schedule a consultation today to start planning for a secure financial future.