Find out how planning now can help you and your parents navigate financial waters later
USAA Magazine Winter 2008-2009
On his 70th birthday, USAA member Leonard Ratzman didn’t have a will or any kind of estate plan. “I suddenly realized that the worst thing I could do as a father is to pass away and leave my only heir, my daughter, without a list of things to do, people to contact and so forth,” the now-75-year-old recalls.
He created “The Turnover” document, a two-inch-plus binder that contains a whopping 60 sections of detailed information to help her manage his estate after his death. While not everyone will go to such lengths, learning what’s in Ratzman’s guide can help you think about information parentscan compile and organize to help their grown children manage their affairs, not just after they die but as they age and require assistance.
Follow these tips to make managing their affairs easier for them — and for you.
ALL IN THE FAMILY
It may not be easy to ask your parents if they need your assistance with day-to-day fi nances. “Money is the last bastion of privacy for many people,” says Sharon Burns, co-author of How to Care for Your Parents’ Money While Caring for Your Parents. “There are all sorts of control and trust issues involved.”
In the end, helping older parents manage their money may be a necessity and can serve as a gratifying way to give back. Start the money conversation. The death of a fi rst parent or a serious medical condition, such as a broken hip, often spurs the discussion. Stay tuned
in to signals that you may need to get involved:
■ unpaid bills that generate late fees, second notices and utility cutoffs
■ noticeable changes in spending habits
■ checking account problems, such as bounced checks
■ credit card problems, such as late payment charges
■ confusion about what bills have been paid or about a particular charge
If you spot one of these red flags, schedule a frank talk.
Get the full financial picture. If your parents welcome your involvement, ask them to share key legal and fi nancial papers. They should have in place several essential documents, including a will, living will and separate durable Powers of Attorney for health care and fi nancial decision-making. Compile other critical papers, such as deeds, insurance policies, investment accounts, bank accounts, income statements, retirement accounts, all outstanding loan documents and current bills. Decide who should manage your parents’ money. In big families, think about who lives nearby and who has the know-how. One sibling might be a financial whiz, but make sure he’s ready to take on the responsibility. “This isn’t fun work,” Burns says. “You’re dealing with not only the fi nancial paperwork, but at times all consuming, emotional handholding.”
For only children, the burden can seem heavy. Don’t hesitate to get help from your own spouse, a knowledgeable friend or even a professional financial advisor. USAA has CERTIFIED FINANCIAL PLANNER™ practitioners and trust services team members at USAA Federal Savings Bank who can help.
Understand their budget. Get a handle on monthly income and expenditures and make sure a usable budget is in place. Streamline accounts. Consolidate redundant bank accounts and consider canceling unused credit cards. Next, consider combining current credit card accounts and transferring outstanding balances to a lower-interest card. Introduce online banking. If your parents are comfortable transacting business on their computer, online banking with automatic bill pay is probably the easiest way to help with daily finances, particularly from a distance. Arrange for direct deposit for income and set up automatic bill pay from your parents’ checking account. You can also request that dividends and interest payments be reinvested automatically or deposited directly into the checking account.
If computer use isn’t part of the picture, develop a bill-paying calendar and remind your parents to write the checks, Burns advises. Or, you can suggest taking over the task yourself. Hire a pro. If your parents refuse to let you get involved with their finances, or if managing their money gets too complicated, consider hiring a financial advisor.
USAA has Certified Financial Planner™ practitioners ready to help. If a bill-payer is all that’s required, check out the American Association of Daily Money Managers, at aadmm.com.
Depending on your parents’ situation, you may also need to hire an elder care attorney to help with estate planning and the health care insurance system. The National Academy of Elder Law Attorneys, at naela.org, can point you to local experts in the field.
Remember the details. Ratzman’s “Turnover” document contains the essentials, including a will, a living will, durable Power of Attorney and a Health Care Power of Attorney. But it goes way beyond the basics, revealing details in a sequential order, beginning with a priority list of contact data for insurance companies and funeral arrangements.
There’s a list of important passwords; a list of friends and business contacts; and scans of all the active keys he carries for his home, cars and the safe-deposit box. The document provides a list of all credit card numbers, utilities accounts, savings and checking accounts, investment accounts, insurance policy numbers, user IDs and so forth. His daughter will even have instructions on how to care for his hanging plants.
Ratzman also tips off his daughter to the potential value of some of his possessions, including a vintage Hawaiian shirt that might be a collector’s item. “She would never know that,” he says. And he supplies the name of a trusted car dealer to call if she wants to sell his ’72 Corvette.
Ratzman continually updates the document. “My daughter was grateful when I told her about it, but didn’t want to know the details,” he says with a laugh. “It’ll be there when she needs it most, safely stored in a safe-deposit box.”
Such letters of instruction also can be stored in a fire-proof safe at home. Make sure your loved ones have the code to open it, or that they’re named on a safe-deposit box so they can access it.