Pete the Planner: Here’s how to take over your parents’ finances

Dear Pete,

I think I need to take over my parents’ finances, but I don’t know where to start. My parents are in their 70s, and I get the sense they’re making increasingly poor decisions. They seem to have a bunch of credit card debt, I’m not sure how much they have in savings and investments, and I’m not sure what their life insurance and long-term care insurance looks like. I briefly mentioned my concerns to my dad, and he seemed agreeable to me taking a look at what they have. What’s the best way to tackle this?

—Renee, McCordsville

I wish people talked about this topic more, Renee. Unfortunately, the awkwardness of the topic lends itself to a brisk sweeping under the rug. But thanks to you shedding light on this issue, countless families will find peace of mind. I can’t promise your efforts will be painless, but in the end, I believe they will be fulfilling.

Before you dig in, if you have any siblings, be sure to be very transparent about what you’re doing. And as you dig deeper into your parents’ finances, consistently talk your parents through the process. It’s better to overshare then under share.

Start with a credit report. I know this doesn’t sound like the smartest place to start, but it will prevent so many headaches down the road. You’re looking for surreptitious credit lines and fraud. AnnualCreditReport.com is my favorite place to get free credit reports. Make sure your parents are with you when you do this, because they will know the info required to get into their accounts. If anyone has stolen your parents’ identities, it will likely show up here. If you don’t see anything shady, then you’ve earned your first exhale—a small one.

The credit report will also give you general insight to the type of credit balances your parents are carrying. For every reported balance you find, track down a monthly statement to verify the amount. Once you find all the liabilities, you need to find all the assets. This could take a while depending on how organized your parents are. In some instances, it will make sense to wipe out debts with the assets, and in some instances, it would be more prudent to keep the assets in place. When in doubt, talk to a financial adviser about this.

Speaking of credit, your next task is to freeze their credit. Transparently, this is an arduous task worth undertaking. You’ll need to create accounts for each of them at Equifax, Experian and TransUnion. I’ll do the math for you; that’s six different processes. Again, you should do this with your parents sitting right next to you. Freezing their credit will prevent anyone from fraudulently opening credit lines in their names. Don’t forget to write down usernames and passwords.

Now it’s time to find the income. Start with finding all the bank accounts and look for deposits into those accounts. You’re likely going to see Social Security income and might just find pension and/or annuity income, too. These income streams often tell most of the story about financial stability in retirement, especially when you match them up against your parents’ monthly obligations.

The insurance audit might be the trickiest part. Your goal is to find the pertinent details surrounding your parents’ life insurance and (hopefully) long-term care insurance. You’re trying to find coverage periods and benefit amounts. Since you’re already digging in that area, go ahead and find their estate planning docs (a will, trusts, power of attorney, etc.) too. If you get stuck here, just talk to your trusted insurance adviser to learn more.

I saved the most important piece of advice for last. Enter into this process with a calm mind and empathetic words. Assisting your parents with their finances is incredibly emotional. At any point in time, someone in the room is feeling scared, embarrassed, ashamed, nervous, incompetent or angry. You’re there to bring clarity to the situation, not judgment. If you find something unsettling, use phrases like “I’m noticing X. Can you tell me more about this from your perspective?” As opposed to “You haven’t paid your car insurance in three months?!?!” These lovely people have extended you boundless grace over the years. Keep this in the front of your mind throughout this entire process.•

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Dunn is CEO of Your Money Line powered by Pete the Planner, an employee-benefit organization focused on solving employees’ financial challenges.