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As your parents grow older, they might find it more difficult to manage their bank accounts. The consequences can pile up quickly: unpaid bills, inactive account fees and steep overdraft charges.
Your parents might be reluctant to ask for assistance — after all, they're used to helping you out and not the other way around — so you'll probably have to initiate the conversation. Once you’ve convinced them you should be involved in their finances, shift your attention to the following tasks.
[ ] Get authorized as a durable power of attorney. [ ] Figure out how many bank accounts your parents have. [ ] Track down other banking products. [ ] Enroll in online bill pay and take advantage of other tech tools.
1. Set up a durable power of attorney
A durable power of attorney lets you make financial decisions on your parents' behalf. To get them on board, highlight how you're trying to make their lives a little easier. They'll still have access to their accounts, but so will you.
Unlike a standard power of attorney, a durable power of attorney remains valid even if one of your parents becomes incapacitated. Free durable power of attorney forms might be available on your state’s website or elsewhere online. Your state might require you to have them notarized. Some financial advisors recommend working with a lawyer, which could cost a few hundred dollars.
Complete this paperwork as soon as possible; a diagnosis of dementia, for example, could impair your mom or dad's ability to act on his or her own behalf, says Colleen Kavanaugh, a certified caregiving consultant.
“If an attorney sees that an individual is not fully cognizant, you will have to go through the lengthy and expensive process of establishing legal guardianship over them,” Kavanaugh says.
2. Identify bank accounts
“Look at previous tax returns to see what firms are listed that pay interest and dividends,” says Jim Ludwick, a certified financial planner. “The supporting statements might also be available to provide account numbers and contact information.”
Ludwick also recommends reviewing checking account statements to see where your parents have made payments or deposits.
“This may lead you to additional accounts or people to whom loans have been made and should be making repayments,” he says.
3. Look beyond basic accounts
Besides checking and savings accounts, your parents might have other bank-related products, such as certificates of deposit and safe deposit boxes. When it comes to the latter, Kavanaugh recommends adding your name to the box. You should know where the key is and what's inside.
Know the maturity date of any CDs. If you miss it, the bank might automatically renew the CD for the same term length. You'll owe early withdrawal fees if you access the money beforehand.
4. Embrace technology
Overseeing a new set of bank accounts requires some work, and you’ll want to make the job as easy as possible.
Start by downloading the mobile apps from your parents’ banks so you can monitor their account activity. Consider setting up text alerts to notify you of large deposits or withdrawals. Lastly, think about signing your parents up for online bill pay.
“Move all paper billing to electronic billing — to your email address,” Kavanaugh says.
Managing your parents’ bank accounts is a big step, but it doesn’t have to be an overwhelming one. Doing the necessary preparation will give you a solid overview of their finances and go a long way in ensuring that their money remains in good hands.