Why Your Parents' Finances Are Your Business
A colleague at work, whom I will call Beverly, recently lost her father, and the family is struggling mightily to handle her parents’ financial affairs. Beverly has a terrible story to tell.
Beverly’s parents, both in their eighties, lived independently in their longtime home, and various family members periodically stayed with them as well. Beverly’s mother showed signs of dementia, and her father was wheelchair bound, but they insisted that they would not leave their beloved home. Moreover, her father was a strong-minded and private man and shared no information about his finances with his children, who never felt comfortable pressing him for it.
One day, an absent-minded visitor left a pan on a burner that was set on high and walked away. The result was a devastating fire. Beverly’s mother and the visitor escaped, but her father fell down and was not rescued until he was severely burned. He died of his wounds a few weeks later, never regaining full consciousness.
The day after the fire, Beverly and her siblings went to look at her parents’ home. What was left was little more than ashes. All paperwork had burned, and the computer had melted. There was no documentation concerning insurance policies, bank accounts, or any property. Beverly’s mother, whose trauma and grief exacerbated her dementia, could provide no helpful information. The adult children would somehow have to figure out everything about their parents’ assets, finances, and resources. Months later, they have made some progress, but matters are far from settled.
Like Beverly, you may feel uncomfortable asking your parents or other loved ones in your care about their finances. But you are doing them no favors if nobody but them knows the information.
Over 5 million Americans suffer from Alzheimer’s disease and many more suffer from other forms of dementia. Still others, like Beverly’s Dad, suffer serious injuries that render them unable to make decisions for themselves permanently or temporarily. No one can ignore the possibility of losing cognitive capacity, and everyone should prepare for this development just in case.
To that end, you should make sure that those in your care have several essential legal documents. Of course, you too should have these documents no matter how old you are. Most people know about wills, though over 40% of baby boomers have neglected to prepare them. Likewise, many people are aware of organ donation and support it, though relatively few fill out an anatomical gift form indicating that they wish to become donors.
The more complicated and perhaps less familiar documents that you should also discuss with your loved ones are the following:
Durable Power of Attorney for Property and Finances
The power of attorney names another individual to make decisions about money and assets if you become unable to make your own financial decisions. It is a good idea also to name a substitute decision-maker in case the primary person becomes unavailable or unwilling to serve. Powers of attorney generally give the agent (the person taking over) authority to receive, deposit, and write checks; pay bills, manage bank accounts and investments, and sell property. You can specify what your agent can and cannot do. For example, do you want the agent to be able to make large gifts?
Durable Power of Attorney for Health Care
This document names an agent (also called a proxy) who will serve as your decision-maker for medical matters anytime you are unable to make decisions for yourself. Here too it is useful to name one or more alternative agents who will assume responsibility if the original proxy becomes unavailable. Naming a proxy who is your clear choice to serve as decision-maker can avoid discord within families and uncertainty on the part of doctors. Even if family members feel somewhat differently about how to proceed with your medical care, there will be no disagreement as to whose word is final.
Living wills allow individuals to specify the kinds of treatment they would wish to have in a limited set of circumstances: if they become terminally ill or permanently unconscious or are in a vegetative state. Terminal illnesses are typically defined to include irreversible or incurable diseases or injuries leading to death. You can specify whether you would want everything to be done to prolong your life or whether you would want certain treatments, such as a ventilator or artificial nutrition and hydration, withheld. It is always advisable to consult an attorney about legal documents to ensure that they are well-tailored to your needs and circumstances. However, if you cannot visit an attorney, forms can be downloaded from legal websites such as LegalZoom or USLegal.
Most importantly, if you are the health care or financial proxy, you should talk to your loved one frequently about his or her wishes and resources. Make sure that you understand what your loved one wants and that you are willing to carry out these wishes. For example, if she wants certain treatments withheld at the end of life, would you be comfortable conveying those instructions to her physicians? And yes, you need to ask a lot of questions about finances. Where are financial documents kept? If they are in the home, perhaps they should be moved to a safe deposit box (and you should have a key), or you should have a copy. Is there a financial advisor who can assist if your loved one becomes incapacitated? What are all of your loved one’s significant assets? Keep a list of insurance policies, retirement plans, properties, bank and investment accounts, etc. Be sure to have as much detail as possible about each asset on your list, including policy number, phone number to call, beneficiaries, etc. You don’t want to have to do research or dig around for information in the midst of an emergency.
You should even raise the topic of funerals with your loved ones. How does your parent or relative want to be buried and what should be done at the funeral? You will surely appreciate clear guidance at a time that is chaotic and traumatic, and having such instructions will help you avoid family strife when you are not emotionally well-equipped to handle it.
Even if your loved one is a bit reluctant to talk, press him or her gently to do so. Beverly would have suffered a tragedy no matter what when her father was burned, hospitalized, and died. However, its aftermath and her ability to care for her frail mother would have been greatly eased if she had the information and documents she needed.
Sharona Hoffman is a Professor of Law and Bioethics at Case Western Reserve University School of Law. She is the author of “Aging with a Plan: How a Little Thought Today Can Vastly Improve Your Tomorrow."