7 ways to help aging parents with financial and estate planning

Having financial, health and estate planning conversations with your aging parents now can help set the stage for your family's peace of mind and security for the long term.

Open and honest discussions about their futures can help you understand the kind of support they may need, who should be involved in decision-making and what steps will help ensure their wishes are honored.

It helps you to help your parents

It pays to start discussions early with your parents to see that their plans are up to date and well documented. In addition to the security provided by thorough financial planning for aging parents, you and your family can experience other advantages like:

• A greater understanding of your parents' physical and mental capabilities
• The confidence of having a trusted team of professionals in place when needed
• Fewer potential conflicts surrounding your family's roles and responsibilities
• Up-to-date account information, care plans and beneficiary designations

Start with a constructive family conversation

If you live nearby, try sitting down with your parents in a relaxed setting to talk about their health and finances. Keep the tone light and conversational—so you don't cause alarm. Ask open-ended questions about how they handle bills or manage their investments. Observing body language and responses can reveal a lot about their current state of mind.

If you aren't local, ask a close friend, other family member or caregiver nearby to check in. If they notice warning signs, arrange a family meeting as soon as possible. If not, take the opportunity to plan ahead—starting early gives everyone more options and greater peace of mind.

Once you've broached the subjects of health and finances, here are seven practical steps to help your parents protect their well-being.

Step 1: Watch for signs that your parents need help with their finances

According to a study funded by the National Institute on Aging, "Financial challenges such as missed credit card and mortgage payments may indicate early stages of dementia long before a formal diagnosis."

For example, when First Citizens sends notice of unusual financial activity on a credit card or checking or savings account, it's often the first sign to family members of aging parents that their parents may need additional financial help or oversight.

When assessing your parents' financial capabilities, look for the following signs of impaired decision-making, such as:

• Poor decisions with savings and investments
• Unpaid or frequently overdue bills
• Difficulty calculating basic math, like tipping
• Unnecessary or impulsive spending
• Becoming a victim of financial fraud

Step 2: Build a trusted financial and care support team

Whether or not your parents already have plans in place, it's important to talk through the details with them, your siblings and any other family members who may be involved. Candid conversations may reveal whether anyone holds unreasonable power over your parents' finances or decision-making.

If concerns arise, consider employing the help of a neutral third party—such as your parents' financial advisor—to help address the concerns objectively. An advisor can help navigate these sensitive topics and work to implement protective measures.

Key professional advisors to include

Having a trustworthy team of professionals is critical when it comes to the care of aging parents. Consider these core roles.

• Financial advisor: This professional organizes your parents' finances, analyzes their investments and recommends strategies that align with their goals. Financial advisors can also coordinate your parents' broader planning needs and assemble any remaining resources.
• Estate planning attorney: This specialist ensures that asset distribution plans after death are carried out efficiently—reducing taxes, minimizing costs and avoiding prolonged probate proceedings. A well-designed estate plan can also address incapacity due to illness or disability.
• Geriatric care manager or visiting nurse: This type of healthcare provider gives objective advice and helps arrange safe care solutions, especially when independent living becomes difficult.

Step 3: Create a fair and flexible caregiving plan among family members

When it comes to caregiving, clear communication among family members will help facilitate harmony. Discuss who can shoulder specific responsibilities—with a willingness to set aside assumptions based on gender, birth order or proximity.

For example, can the person who lives closest reasonably handle day-to-day responsibilities, or will additional resources be needed? If an arrangement becomes unsustainable, could you rotate duties, hire caretakers or compensate the family member who takes on more of the daily work? Staying flexible will help support your parents' needs as well as your own.

Step 4: Know the essential legal documents in an estate plan

If your parents already have estate planning documents in place, reviewing them together can help ensure they include necessary information and capture your parents' current wishes. To ensure there are no gaps in legal records, revisit these documents annually. A typical estate plan includes the following key elements.

• Last will and testament: This specifies how property and assets should be distributed after death and names an executor or personal representative—the person responsible for carrying out the terms of the will and managing the estate through the settlement process.
• Revocable or irrevocable trust: This establishes a separate legal entity to hold or manage assets during life or after death. Depending on the type and structure of the trust, it can enable the distribution of assets, plan for disability, minimize estate taxes and avoid probate—the legal process for settling an estate.
• Durable power of attorney: This authorizes an attorney-in-fact to act on the grantor's behalf in financial and legal matters, even if the grantor becomes incapacitated.
• Healthcare proxy or healthcare power of attorney: This authorizes someone to make medical decisions if the individual becomes incapacitated and unable to make decisions for themselves.
• Advance directive: This outlines wishes about medical treatment and interventions. For example, a living will offers detailed guidance on which treatments or measures should be used if the person can't communicate.

Step 5: Designate beneficiaries to avoid probate

Certain financial accounts and death benefits can bypass probate when they have a designated beneficiary. Probate can take months to resolve, so enabling assets to transfer directly to named recipients can save considerable time and money.

Common accounts with beneficiary designations include:

• Individual retirement accounts, or IRAs
• 401(k) and 403(b) plans
• Life insurance policies
• Executive deferred compensation plans
• Annuities
• Certain types of bank accounts

Because there may be many accounts and large sums involved, confirming that each one lists the correct individuals can be a simple and effective estate planning strategy. Many financial institutions even allow online updates.

Step 6: Organize and simplify financial information

If your parents have many accounts, tracking may be difficult. Creating a single, secure inventory of all assets—including account numbers, passwords and key documents—can make it easier for your parents to manage their finances and ensures family members can access information if needed.

Options for organizing accounts include:

• Using a digital inventory tool, recordkeeping kit (PDF) or secure document system
• Having a financial advisor keep an inventory and share copies with designated individuals as needed
• Keeping insurance policies, estate plans and other key documents in one accessible, safe place—like a personal safe or bank safe deposit box

Step 7: Clarify who will serve in key fiduciary roles

Once you've established your parents' care team and reviewed and organized their financial documentation, agreeing on who will be appointed to fiduciary roles is critical. For example, are potential appointees geographically close? Are they willing to take on the responsibility? It's important to designate willing participants who have the capabilities and understanding needed for each position.

To better manage your parents' financial well-being, agree who will take on each of the following responsibilities.

• Executor: Fulfills your parents final wishes and manages their estate after their death
• Trustee: Manages, invests, keeps records and distributes assets held within a trust
• Attorney-in-fact: Acts on behalf of your parents for legal, financial or medical decisions; this person doesn't need to be a lawyer
• Healthcare surrogate: Makes authorized medical decisions when your parents can't make them for themselves
• Social Security advance designee: Manages your parents' Social Security benefits if they're unable to manage the benefits for themselves

Looking forward: Review and update estate planning documents regularly

Once you've confirmed your parents' beneficiary designations and organized their accounts, make it a habit to review them periodically. Major life events—such as marriage, divorce, birth and death—can all affect how your parents want their assets to be managed and distributed.

For example, a parent who named an adult child as the sole beneficiary years ago may later want to include grandchildren or remove an ex-spouse after a divorce. Reviewing these documents annually—or after any major change—helps prevent confusion and conflict.

Remind your parents that beneficiary forms typically take precedence over instructions in a will, so even if a will is updated, outdated beneficiary designations could still determine who receives certain assets.

The bottom line

Financial planning for aging parents requires collaboration. By starting these conversations early and working together, your family can create an approach that respects your parents' wishes while easing the administrative and emotional burden for everyone involved.

From recognizing when to step in to keeping information current, each move strengthens your parents' financial security—and brings added peace of mind to your entire family. For help supporting their financial well-being and planning, reach out to a First Citizens Wealth consultant today.