Outside the Box: How to help your parents organize their finances

Our parents were organized and realistic people who trusted us to act for them in increasingly significant ways as they moved from one stage to the next. Because of their recognition of what they could and couldn’t do, they were able to ease these transitions.

Below are five categories of steps they took, sometimes with our help. These steps protected their assets while they were alive and ensured that their assets were all accounted for after they died. Also, their actions ensured that, after their death, complications and potential family squabbles were minimized.

They each put in place key estate planning documents: a will, a revocable living trust with one of us as trustee, a financial durable power of attorney designating one of us to act on their behalf in business matters, and a living will and durable power of attorney for healthcare. With these as a foundation, they made sure that their accounts were titled properly, so they were held within the trust.

A word about revocable trusts: For most people, the main purpose of these trusts is to avoid the need for assets to go through probate. I haven’t been through the probate process, but attorneys say to avoid it as much as possible. I’ve been through the process of closing three parents’ estates with a trust in place and it went very smoothly. The counterargument: It costs something to put the trust in place and it can be challenging to retitle all assets, so they’re the property of the trust, or to designate the trust as beneficiary of insurance plans. Banks, in particular, can be a hassle to work with. Making it work requires a degree of organization and persistence.

What follows is a to-do list to review at each major transition point. Many of the steps below should be started when parents are fully independent. If they haven’t been addressed by the time the parents enter assisted living or the equivalent in-home care, the clock is ticking and it’s time to get them done.

Ready to get to work? First, there’s the asset inventory:

• This starts with a list of all assets, how they’re titled and where the records are kept. For example, where is the deed to the house and how is the home titled?

• Think broadly. Yes, a brokerage account is an asset. But so, too, are streams of monthly pension and annuity payments, as well as the benefits provided by Social Security, Medicare and employer-sponsored insurance plans.

• Know if there’s a safe-deposit box and what it contains. Have an adult child listed, so he or she can access the box. As the parents age, consider closing the safe-deposit box if other arrangements can be made for its contents. After my father-in-law died, we opened the safe-deposit box and found a book of leftover traveler’s checks. My wife’s parents hadn’t traveled in years. Fortunately, the banker accepted my wife’s signature as executor, so the money could be deposited into her mother’s account.

• How are the cars titled? A transfer-on-death title will keep them out of probate. Some states allow the transfer of title to a spouse by simply showing the death certificate.

• If the parents have a locked safe or filing cabinet, know where the key is or what the combination is.

• Know where to find passwords to access online accounts.

• Know who their insurance agent is for all types of insurance. They’ll need renter’s insurance if they move from a home to a retirement apartment or assisted living.

Second, there’s the inventory of liabilities:

• Prepare a list of all debts, including the amounts owed and the payment schedule.

• If your parents are struggling to stay on top of their finances, monitor payments to make sure they’re being made on time.

Third, investigate what steps need to be taken so you can act on your parents’ behalf:

• Review how bank and investment accounts are titled, including whether a child can be designated to transact business either as a joint owner or without being a joint owner. My wife’s father had her name added to bank and investment accounts when it became obvious that her mother wouldn’t be able to transact business if he died. After his death, this precautionary step proved invaluable.

• Get designated so you can transact business with Social Security. There are different levels of designation based on parents’ needs. My wife was designated to be able to do everything for her mother, including receiving her direct deposit, because her mother was deemed incompetent.

• Ditto for traditional Medicare, including any Medigap or Part D drug plans, or—if they’ve gone that route—their Medicare Advantage plan. Consider whether a drug discount card such as GoodRx offers better pricing than a Part D plan.

• Know where important papers are kept, including birth certificates, death certificates, marriage certificates, Social Security cards, passports, divorce decrees and adoption papers.

• Get designated to discuss employee benefits with former employers, and to transact business on pension and health insurance matters.

• Get named on HIPAA forms filed with all doctors and hospitals, so you can discuss your parents’ medical issues. To be safe, have your attorney prepare a blanket document in case a particular provider doesn’t ask for one or loses it.

• Each provider needs copies of the living will and durable power of attorney for healthcare. Make sure all siblings are on the same page about the parents’ wishes, as outlined in the living will.

• We eventually applied for credit cards in our name that we used to purchase our parents’ necessities. For example, when using a mail order pharmacy, a credit card is handy. The credit card bills made it easy to track our parents’ expenses.

• If you’re managing your parents’ bills, have all business mail routed to your home address. This avoids lost mail or unnecessary worrying on the part of the parent. After she entered assisted living, I received all my mother’s mail, except greeting cards and letters from friends and family.

• When your parents are no longer driving, surrender their driver’s license and get a state identification card. In Ohio, where we live, you need either a driver’s license or state ID to file your state income tax return.

Fourth, take steps to protect your parents’ assets:

• Cancel any unneeded credit or charge cards. What cards are lingering in their wallets that haven’t been used in years?

• If there’s no need for new credit, contact the credit bureaus to freeze their credit. This needs to be done individually for each person with the three major credit credit-rating firms. This reduces the risk of identity theft and scams before and after death.

• Review all automatic deductions from your parents’ bank accounts to make sure they’re all still relevant.

• If the parents are still managing their own accounts, consider getting electronic access to checking and credit card accounts, so you can monitor that they aren’t getting scammed.

• If you’re paying their bills and managing their checking account, set up a method to track the flow of funds. I used Quicken, which made it easy to document how money was being spent.

• Minimize who sees their Social Security number. Almost every patient information form for doctor’s offices or healthcare facilities asks for it. None of them need it. Leave it blank.

Finally, make sure you’re prepared for the period after your parents’ death:

• Know their expectations for funeral arrangements. Also, know who to call and where the records are kept for any prearrangements. Make sure all family members are on the same page. An attorney can prepare a document to designate who is responsible for funeral arrangements, what those arrangements should be and how they’re to be paid for.

• Review beneficiary designations for all employer benefits, retirement accounts and life insurance. Review them again after the first parent dies.

• My wife’s father took us to appointments with their lawyer and financial adviser for the sole purpose of meeting them in advance of needing them. This smoothed the way when we had to go alone.

• If there are multiple heirs, make a list of sentimental family items and who is to receive them. Better yet, distribute them as part of any downsizing.

This column originally appeared in Humble Dollar and was republished with permission.

Howard Rohleder, a former chief executive of a community hospital, retired early after more than 30 years in hospital administration. In retirement, he’s served on several nonprofit boards. In May 1994, he was featured—along with five others—on the cover of Kiplinger’s Personal Finance for an article titled “Secrets of My Investment Success.”