We've all heard the horror stories: adult children think their elderly parents are living comfortably on their retirement income only to discover in reality the bills are overdue and they're having a financial crisis. What happened? Sometimes it's a matter of parents being too proud to admit they don't have enough income to make ends meet, but often they have become victims of elderly fraud and may not realize their investments have been depleted until it's too late.
According to the North American Securities Administrators Association, over 75 percent of elder financial fraud cases come from three areas: third-party abuse or exploitation, account distributions, and a family member, trustee, or power of attorney. Only 12 percent are due to diminished capacity, so it's more a matter of trusting the wrong persons that not being financially savvy. Regardless of your own parents' situation, here are five ways you can help your parents manage their finances:
Open the Discussion
Perhaps the hardest part is beginning the conversation about finances. For some of us, our personal financial information is private, and the subject is taboo. Here are three ways you can broach the subject:
- Mention an article you have read on the subject
- Point out a stack of unopened mail or bills and offer to go through them
- Ask if they need any help, either financially or with money management
Get a Handle on the Situation
If your parents' financial holdings are modest this could be as simple as spending a few hours going through the paperwork. If they have more complex investments it may take a couple of months to analyze and in that case, you should consider using a professional financial advisor. Either way, you should get a firm idea of where their money is coming from as well as where it's going to make sure there is no fraud taking place.
Investments, income, property taxes, utility account numbers, and other financial paperwork should all be organized in one place. This will make it easy to keep track of what's been paid and what is due, so you can help with their finances with the minimum about of intrusion.
Set up a Schedule
Determine how much time is involved and make plans to spend the allocated hours needed to help. This may be sitting with your parents once a week or month to go over the bills and write checks, having them deposit a set amount into a joint account so you can pay their bills online, or make quarterly visits with them to go over their investments with their financial advisor.
Watch for Fraud
Often when we think of elder fraud we picture thousands of dollars disappearing at once but in fact, it may be more subtle. Look for higher than expected payments to caregivers and other service providers such as landscapers and repairmen. Repeated donations to obscure charities and unknown persons are another red flag, and you should check your parents' medical bills for irregularities as well. Talk with your parents about various types of elderly fraud so they know the most common scams and not to give their personal and account information to anonymous callers.