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What to look for and how to help
Your parents have spent a lifetime working to grow their wealth, and they want to ensure that their legacy is protected. However, as people age, their financial judgement can degrade well before their memory does, so it's important to start reviewing your aging parents' financial checklist with them now.
Talking about financial, health care and estate plans with your parents early will enable you to put the proper framework in place before signs of financial judgement impairment arise. Although these conversations may be difficult, you can enlist the help of a wealth advisor as a highly knowledgeable yet neutral third party to make these discussions easier.
According to Stat, a Boston Globe publication, "The first clinical markers of cognitive decline are found not in the brain but in the bank account. Impaired financial decision-making can appear decades before the emergence of other traditional signs or symptoms, like memory loss." Impaired financial decision-making shows up as the following:
- Poor decisions about savings and investments
- Impaired credit card management (unpaid or often late payments)
- Difficulty calculating tips
- Engaging in unnecessary spending
- Becoming victims of financial fraud
According to AARP, people with impaired financial judgement are more likely to become victims of financial fraud. Non-family fiduciaries — guardians, trustees or someone holding power of attorney — are the biggest culprits. Here's what you can do if you suspect that your parents may need more help managing their finances.
Assess your parents' financial judgment
If you're local, sit down with your parents in a low-stress environment and discuss their health and finances. Be subtle and conversational, so as to not trigger alarm. Ask innocuous questions such as, "How are your investments doing? What are you invested in? Mine are ... " Or, "I don't have my calculator. What's 20 percent of $1,600?" By observing body language, these straightforward questions can reveal a lot while also providing a great deal of information.
If you aren't local, reach out to a close friend, other family member or caregiver who lives nearby and request that they ask similar questions. If your aging parents currently exhibit any of the above warning signs, arrange a family meeting right away. If they don't, you have time but why wait until issues or a crisis emerges? Advance planning provides more options and greater peace of mind.
Work with a trusted advisor
Whether or not your parents have already put plans in place, discussing those plans in detail with them, your siblings and other affected family members will enable you to see if someone could hold inordinate power over your parents' assets or decision-making. You or your parents' wealth advisor can be the true driver. You can all work together to help protect your parents and their financial legacy by identifying and implementing protective measures.
A SVB Private wealth advisor can help navigate the complexities that accompany wealth and estate planning as well as discuss long-term care considerations. Working with an advisor provides a deep layer of oversight and accountability.
Your parents may not have such financial impairment issues. However, because this risk exists, it is important to have these discussions and to create a structured plan around your aging parents' financial checklist.
For more information, visit our full Parents Series page here.