What would happen if you suddenly needed to manage your ageing parents finances? When illness or incapacity strikes, someone has to take over paying bills and managing finances. This scenario is common in many families. Are you ready for it?
As our parents age, it is important to understand and ensure their financial well-being so that they are able to live comfortably and independently for as long as possible into their old age. There may come a day when they can no longer manage their own finances or cover their costs, and the earlier you can prepare for this, the better. Not only does this benefit them, it also means much less worry and stress for you in the longer term. However, it can be difficult to know when and how to approach this sensitive topic and get involved. Read on to learn more about this transition and what you should consider.
Why you need to plan for your ageing parents finances
In the modern world, people are increasingly having to help manage their ageing parents finances and provide financial support. There are several reasons for this.
Longer life expectancy
With growing life expectancy, our parents are living longer into old age, and their cognitive ability to handle complex financial tasks and planning will decline naturally, leading to the need for assistance from family or professional services. Increased life expectancy and certain modern lifestyle factors also puts them at increased risk of developing dementia. According to the NHS website, one in 14 people over the age of 65 have dementia, and the condition affects 1 in 6 people over 80; by 2025, estimates predict that there will be more than 1 million people living with dementia in the UK.
Complex financial systems and products
The financial world has become increasingly complex and digitalized, with a range of products and systems that can be difficult for elderly individuals to understand. With more and more banking activities taking place online, elderly individuals who are not familiar or confident with rapidly changing digital technology may struggle to manage their finances independently. This shift towards digital banking has also resulted in a decrease in the number of physical bank branches, making it harder for elderly individuals to access in-person support.
Increasing financial crime
Financial scams targeting the elderly are on the rise in the UK, with older people increasingly falling victim to sophisticated schemes. The perpetrators of these scams are becoming more adept at tricking their victims, leading to more frequent financial losses, sometimes with catastrophic consequences.
Decreased pension coverage and benefits
In recent years, the UK has seen a shift away from traditional defined benefit pension schemes to defined contribution schemes. This has resulted in a decrease in the level of pension coverage and benefits for many individuals, making it harder for them to make ends meet in their later years. Additionally, changes to the state pension age have also reduced the amount of time that individuals are eligible to receive state pension benefits.
Rising healthcare costs
As the NHS struggles to meet the growing demand for healthcare services, wait times for non-emergency procedures and treatments can be lengthy. This means you may need to resort to paying for private healthcare services in order to receive the treatment they need in a timely manner. In addition, certain services and modern treatments are not covered by the NHS and must be paid for out of pocket. Even if they have private health insurance, their premiums will also rise as they get older, especially if they start to develop chronic health conditions.
Decreased availability of long-term care services
The UK government has made significant cuts to the funding for long-term care services, which has led to a reduction in the number of available services and facilities. This is compounded by a shortage of qualified care staff and increasing demand and pressure from our ageing population.
Talking to your ageing parents about their finances
Conversations about money are always tricky. It’s a subject many people avoid due to its sensitive nature – the classic elephant in the room. The goal is to have open and ongoing discussions that bring peace of mind to both parties.
Start the conversation about finances with your ageing parents early and approach it slowly and gently, with sensitivity and respect. It is wise to consider planning ahead and speaking to your parents about helping them out with their finances and other decisions while they are still self-sufficient and have all their mental faculties. Having the conversation at this point also provides them with the opportunity to legally appoint a trusted person to manage their finances and make decisions on their behalf through a power of attorney, should they become unable to do so in the future.
A big part of the difficultly with these conversations is simply how to start them without coming across as awkward, meddling or sounding like you have an ulterior motive.
Here are a few ways you could weave in the conversation naturally and break the ice:
- Share your own legal and financial planning: Mention your own legal and financial planning objectives in regular conversations. If you’ve started working with a financial planner, for example, you can use that as a starting point to ask about your parents’ plans.
- Reference current events: News stories about the economy, health care, and politics can provide a jumping off point for talking about finances with your parents. Ask their opinion on related matters and how it may affect them financially.
- Reference other friends or family: The experiences of others can often serve as powerful persuasive examples. Relaying stories of friends or family members who have faced financial difficulties or crises due to a lack of open communication about finances can help emphasise the importance of these discussions. For example, perhaps you know of someone who had to sort through complex financial and legal issues after their parent passed, resulting in missed opportunities, mistakes and family disputes. Perhaps you know someone who became ill and unable to manage their finances alone, but had not granted power of attorney to their adult child.
Assessing your ageing parents finances
Below we’ve compiled a list of all the information about your ageing parents’ finances that you should try to find out. The more information you can garner the better. You probably need to have several conversations with them to get all the information you need.
Here’s what you need to know:
- Lasting Power of Attorney for finances: Have your parents appointed a Lasting Power of Attorney (LPA) to manage their financial affairs in case of incapacity? This is particularly important in the event of dementia or Alzheimer’s disease, as it can provide peace of mind that their financial affairs will be taken care of. Without an LPA in place, you may need to apply to the court to become a deputy for financial matters. It’s also worth asking about an LPA for health and welfare, but this may be a separate discussion.
- Financial record keeping: Where do your parents keep their financial records and money? It’s important to also know the location of any keys or combinations for safe deposit boxes or safes.
- Bank accounts and financial institutions: Obtain the details of all of your parents’ financial accounts, including the names of their banks, building societies, investment companies, and brokers.
- Annual income: Discover the sources of your parents’ annual income, including pensions, investment income, state benefits, and maintenance payments.
- Monthly outgoings: Gather information on your parents’ regular expenses such as mortgage payments, credit card debt, utility bills, and more.
- Bill payment method: Find out how your parents pay their bills – are there direct debits from a current account, do they use online banking, or do they write cheques?
- Estate planning: Make sure you find out if your parents have completed any estate planning, such as a will or trust. Find out where this information is kept.Top of Form Remember to be respectful of your parents’ privacy and independence and avoid asking sensitive questions like details of who is in their will.
- Professional advisors: Does your parent have a financial adviser, accountant, or solicitor? Make sure you have their contact details.
How can I help my ageing parents with their finances?
Once you have gathered all the information outlined above, you will have a better understanding of your ageing parents’ financial situation, where the gaps lie and what you need to address or support with to secure their current and future needs.
Here are a few examples of how you might help, depending on their situation:
- Estate planning: Make sure that your parents have updated their will, and encourage them to set up power of attorney, and any other relevant legal documents. Find and connect them to a good lawyer or company to help them do this.
- Professional financial advice: If your ageing parents are struggling to manage their finances, consider hiring a professional financial advisor to help them. They can provide advice on managing their money, making investments, and planning for the future.
- Budgeting and organizing bills: Offer to help them organise their bills and create a budget. This can help them to better understand their expenses and income, and to make informed decisions about their money. It can also be helpful to discuss their financial goals with them and help them to develop a plan to achieve those goals.
- Look into benefits and allowances: The UK government offers several benefits and allowances to help support those in need, including Pension Credit and Attendance Allowance. Make sure your parents are aware of the benefits they are eligible for and that they are receiving all the support they need.
- Plan for long-term care: Discuss the options available and how they would like to be cared for in the event that they can no longer live on their own or need assistance with daily activities, for example if they were to get dementia or suffer a stroke. Work out how this could be paid for if needed.
By taking these steps, you can help secure your ageing parents’ financial well-being and ensure that they are able to live comfortably and independently for as long as possible.
Identifying the signs to take control of your aging parent’s finances
It’s important to recognise when it might be time to take over your ageing parents’ finances.
Here are five signs to look out for:
- Struggles with paying bills or managing finances: If you notice that your ageing parent is having difficulty paying bills or managing their finances. This could be in the form of missed payments, bills going unpaid, or your parent expressing confusion about how to manage their money.
- Unwise purchases: If you notice your ageing parent making unwise purchases, such as buying things they don’t need or making impulsive purchases. This could be a sign that they are not fully understanding the financial consequences of their actions.
- Unexpected debt or depletion of savings: If you notice an unexpected increase in debt or a sudden depletion of savings. This could be due to overspending, fraud, or simply a lack of understanding of their finances.
- Lack of understanding of financial matters or inability to make decisions: If your ageing parent is struggling to understand financial matters or make decisions about their money. This could include confusion about investments, mortgages, or pensions, or a general lack of knowledge about managing finances.
- Noticeable changes in their health or ability to care for themselves: Changes in your parent’s health or ability to care for themselves may indicate that they are no longer able to manage their finances on their own. This could include physical limitations, memory loss, or difficulty making decisions.
By being aware of these signs, you can take proactive steps to prevent financial disaster, ensure their future well-being minimise stress for everyone involved.
How do I convince my parent to accept help with their finances?
Even if your parent is struggling to manage their own finances, it is understandable that they may resist the idea of giving up control, especially if they have always been independent. It is important to respect their autonomy, which can mean offering assistance and guidance rather than taking control of their finances entirely.
When approaching the topic with them, consider the following:
- Show empathy and understanding for their concerns
- Discuss your concerns for their well-being and future, not just their finances
- Offer to help in a way that still allows them to retain control and independence
- Present options for professional support, such as a financial advisor or legal expert, to provide them with peace of mind
- Remind them that planning for the future and ensuring their financial stability is a responsible and loving act that will benefit everyone in the long run
The decision of when and how to get involved in your parents finances is a personal one. It is important to consider the current state of their finances, their long-term financial goals, and their wishes for their assets. By approaching the situation with sensitivity and respect, you can help to ensure that your parents are able to live comfortably and independently for as long as possible as they age.
- Should I be on my elderly parent’s bank account?
While it can be convenient to have joint access to your elderly parent’s bank account, it’s important to weigh the pros and cons before making this decision. On the one hand, having access to the account can make it easier to manage your parent’s finances and pay bills on their behalf. On the other hand, if you’re added as a joint account holder, you may be held responsible for any overdrafts or other financial issues. It’s also worth considering the potential impact on your relationship with your parent and any siblings or other family members.
- How can I access my elderly parent’s bank account?
The easiest way to access your elderly parent’s bank account is if they grant you permission and provide you with the necessary login credentials, such as their online banking username and password. However, if your parent is no longer able to manage their finances or make decisions, you may need to pursue legal avenues to gain access. This could involve obtaining a power of attorney or going through the court system to establish guardianship.
- What is a Lasting Power of Attorney?
A Lasting Power of Attorney (LPA) is a legal document that allows a person (known as the attorney) to make decisions on behalf of another person (known as the donor). There are two types of LPA: one for health and welfare decisions, and one for financial decisions. The financial LPA is particularly relevant for those looking to take over an elderly parent’s finances. It allows the appointed attorney to make decisions about the donor’s finances and property, including managing their bank accounts, paying bills, and selling or buying property.
- Does my parent need Lasting Power of Attorney?
Whether or not your parent needs a Lasting Power of Attorney depends on their individual circumstances. If they’re still capable of making decisions and managing their own affairs, there may be no need for an LPA. However, if your parent has been diagnosed with an illness that may affect their mental capacity or if they’re showing signs of cognitive decline, it is worth considering an LPA to ensure their finances are managed properly and to avoid potential legal disputes down the line. It’s important to have open and honest conversations with your parent about their wishes and to consult with legal and financial experts before making any decisions.