Managing Finances for Elderly Parents

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The best time to create a plan about handling your parent’s financial accounts is early.

If you and your parents haven’t discussed finances before, it could be daunting. After all, these are your parents and you’re asking for some pretty personal information. But getting acquainted with their financial details and their plans is important because it will help you know how to support them when they need to lean on you. 

What we’ve put together here is a plan for a plan: Questions that could help you start a conversation about how you may be able to keep your parents’ finances in order and use their funds as they expected. 

Ask your parents about the plans they’ve already made

One way to ease into a conversation about your parents’ financial situation is to show that this isn’t about taking control of their money, because in most cases, it’s not. It’s about the plans your parents have, so ask about them. This could include subjects like living arrangements, any costs they may need (or expect) help with and who will handle accounts for them now or in the future. 

Ask your parents about where their money comes from

There are at least two benefits of digging into these details. One is empowerment: Discussing their financial situation is an opportunity to discuss boundaries (like who pays for what). Another benefit is that it puts you both in a position to set realistic expectations about the years ahead. 

The sources of income you may want to discuss could include:

  • Company pensions
  • Health Savings Accounts (HSAs)
  • Retirement accounts, such as 401(k)s; traditional, Roth and SEP IRAs
  • Investments and investment accounts including annuities 
  • Social Security benefits
  • Alimony and disability payments

You may also want to discuss how much money they have in savings and checking accounts.

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Ask about their expenses 

Knowing how much income your parents will rely on every year is just as important as knowing how much they expect to spend. 

Some things to ask about:

  • Everyday expenses like food, utilities, transportation and medication
  • Their current health conditions and medical costs 
  • How much Medicare and/or Veterans Affairs will cover for expenses like long-term care
  • Recurring expenses such as home or renter’s insurance, car insurance and health insurance
  • Discretionary expenses for things they enjoy like vacations and arts subscriptions
  • Property and other taxes
  • How your parents pay these bills, such as with automatic transfers or checks and the accounts they are paying these bill from

You may also want to reconcile these expenses with your parents’ anticipated income. If things match up, great. If not, plan on having an additional conversation about how to cover any gaps.

Additional discussions to have about their accounts

It could be helpful to talk about how much help your parents may want to manage their finances and the information they’re willing to share with you. It could be worth having this conversation a few times as their needs change. 

Some of the things you could discuss include putting together an inventory of their accounts that includes bank names account numbers and whose names are on the accounts. 

If you will be helping to pay their bills (or expect to), ask if they would be willing to add you to any or all of these accounts. If you are added, agree when you will begin using the accounts and when you’ll review transactions with them. 

Ask about wills and powers-of-attorney

There are two types of wills and both can empower your parents to have their financial and health issues handled as they see fit. This can also relieve caregivers of some of the stress that comes with both of these issues.

A last will and testament lays out how an individual would like their money, assets and things distributed after they have passed. 

A living will covers medical care and goes into effect when a person can’t communicate or is medically incapable of making decisions about their care. It can address things like life support, hospice care and organ donations. 

If your parents don’t have either of these types of wills, talk about getting them and finding attorneys who can provide guidance. Your parents may also want to discuss their living will with their physicians so it addresses their wishes and articulates them correctly – every state has different requirements. 

Powers of attorney give your parents control by designating a person to make decisions. In this case, it would be for a parent. They can be specific, such as allowing a person to pay bills. They can be broad, for example, giving one person the ability to make financial decisions. If you’d like to appoint a healthcare proxy – someone who can make decisions for you if you aren’t able to – you can set up a durable medical power of attorney. Also important: powers of attorney can be temporary.

Work with a professional to help your parents understand their options and how powers of attorney work; for example, in some states, they go into effect only if the person is incapacitated. In other states, they may into effect immediately.  

Ask for help

None of these are easy topics because they are based on things happening to people we love, making it even more complicated. So get help. See if your employer offers things like elder-care planning resources, check with respected local agencies and ask friends how they are navigating similar topics. Also reach out to professionals. And, of course, talk to your parents early and often. These conversations won’t happen in a day, and keeping an eye on things could make it easier to adapt to changes as they come along.

This article is for informational purposes only and is not a substitute for individualized professional advice. Individuals should consult their own tax advisor for matters specific to their own taxes and nothing communicated to you herein should be considered tax advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA does not provide any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.  Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.