This article was last updated on 1 August 2022.
Facing the reality that your parents are getting older can be difficult. It often means you need to carry extra responsibilities and initiate some challenging conversations, such as what kind of care they would like and who they want to take care of their finances.
Having these conversations can be uncomfortable, so being proactive and talking to your parents now can save a lot of difficulties further down the road.
In this article, we will be discussing financial planning and sharing the four things you should know when taking over your parents’ finances.
As your parent’s age, it can be difficult to know when it’s time to step in and provide financial support. You might be nervous about timing this decision poorly and causing offence. So, below we share the most common warning signs your parents might be in need of financial support from yourself or another family member.
If you’ve begun noticing one or more of these warning signs, it’s likely that you need to step in and provide financial support. If, however, your parents aren’t yet showing any warning signs, we still recommend you familiarise yourself with their finances as they age. This will help make it easier for you to take control of their finances when they reach retirement age, or earlier if they no longer have the mental capacity.
Now, let’s take a look at the four things you should know when taking over your parents’ finances.
First and foremost, if you are taking over your parents’ finances you need to know where they store all their important documents so that you can organise these in one location.
Knowing where to find their important documents will ensure you have all the information you need. What’s more, it will also help you find the information you need in an emergency.
Some examples of important financial documents include:
When you know the location of these important documents, you can more easily take control of your parents’ finances. So, whether they want to request their pension, invest their money in stocks and shares, or apply for a mortgage, you will have all the information you need to access the relevant accounts and start moving money around.
Of course, it’s all well and good finding the financial documents you need, but if you don’t have access to any of the accounts, you won’t be able to take any action. So, once you have located the relevant documents it’s important to request the account access information from your parents.
Most banks and financial institutions have very strict rules (and rightly so) over who can access their accounts. Therefore, it’s important that you are granted access to all accounts so that you can pay bills, make mortgage enquiries, open or close accounts, and make purchases on behalf of your parents.
This becomes especially important if you become responsible for financing your parent’s full-time care. If you don’t already have the funds available to pay for their care you might opt for a buy-to-let investment where the income (rent) from this property can provide the support needed to look after your parents long-term. The likelihood of your application being accepted can vary dramatically and will depend on numerous factors such as your employment status, financial situation, credit score and existing mortgage commitments. So, be sure to calculate the mortgage repayments in addition to your parents’ care in order to understand whether it’s a viable option for you.
Requesting access to your parents’ financial accounts requires forward planning. If you want this step to go as smoothly as possible, we recommend that you are in the same room as your parents as it will be easier to gain access to their accounts with their assistance. What’s more, you may need to phone the bank and have your parents request access on your behalf. This is all much easier if your parents are there to vouch for you.
When you take over your parent’s finances, you will be required to make a lot of decisions on their behalf. From paying their bills to managing their investments, taking control of someone else’s finances can feel like navigating a maze in the dark.
It can be hard to talk about money with your ageing parents. And, sadly, the subject can cause friction between family members, making it difficult to maintain healthy relationships.
If you want to avoid arguments about money, the best advice we can give you is to document everything. Keep receipts, copy every cheque you write, keep bank statements, take notes when meeting with a financial planner, and file letters from the bank.
It might sound tedious, but taking the time to document every financial decision you make on your parents’ behalf is a great way to trace your transactions and provide proof to your siblings or other family members that you are managing your parents’ finances responsibly.
As we mentioned at the beginning of this article, the topic of money can be difficult to discuss – especially with your parents. Many people want to remain financially independent for as long as they can and, as such, they are unwilling to give financial control over to a family member as this can feel like giving up or admitting defeat. This can make it very challenging for you to know how to provide the right financial support, let alone how to go about it. This is why it’s a good idea to hire a financial advisor.
A financial advisor will be able to sit down with you and your parents and answer any questions you may have, provide advice for managing their finances, and outline any relevant steps to help protect all your parents’ finances and assets as they age.
Hiring a financial advisor is a great way to open up the conversation of finances with your parents and reassure them that their wishes are being respected and their preferences are being carried out.
Taking over your parents’ finances is a huge responsibility and requires a lot of time and planning. However, we hope the tips in this article will help you feel more comfortable and prepared. Most importantly, we hope you know that there is no completely right way to take control of your parents’ finances.
The most important thing you can do is be proactive. Leaving big decisions like these for too long can make those all-important conversations harder to have. So, be proactive, be patient, listen, and be there for your parents as much as you can. It will make all the difference.
My names is Jessica and I am a writer on the UK Care Guide website.
My specialist is researching and then writing about a broad range of topics. I studied English Language and Literature at Manchester University, and a use my skills to produce articles, such as the one you are reading.