Senior Finances

Every day, you provide money management services for your clients. They depend on you to help with paying bills, filing and tracking health insurance claims, and preparing budgets.

In the senior market your client may be the senior directly or via adult children. If adult children are in the mix initially or later there are certain dynamics that it is helpful to recognize. Dealing with adult children and their parents can be complex for daily money managers at many levels. It is important to establish who is the primary client and what information, if any, you may share with the adult children or others involved in the senior's care.

Sharon A. Burns, Ph.D., CPA, provided some guidance on helping with this difficult challenge at AADMM's May 3, 2004 meeting in Phoenix, Arizona, when she talked about "Intergenerational Financial Management."
Her presentation, based on her recent book "How to Care for Your Parents' Money While Caring for Your Parents: The Complete Guide to Managing Your Older Parents' Finances and Planning for their Future," provided information on how to handle this often-difficult task.
Remember, this can be a daunting and emotional responsibility for the seniors as well as their adult children. You can play a key role in making this a smooth transition.

When Do Seniors Need Help With Their Finances

You can help adult children by providing guidance on how they will know when their parents cannot-or should not-continue to manage their finances by themselves. Dr. Burns suggests that parents may need help if one or both of them are dealing with ongoing illness. And if one parent dies, the remaining parent likely will need help with finances.

The adult children may pick up on other signals. Perhaps their parents have started complaining that they don't have enough funds. Maybe they are neglecting to pay their regular bills. As a result, they get late notices, have overdrafts, their utilities are cut off, or they have credit card problems. Maybe they have credit balances as a result of paying some bills twice.

Or maybe they notice that their parents have started making large, unplanned withdrawals or new automatic payments to charities or other unknown organizations. They also may pick up on the fact that their parents suddenly have new "friends," or newly rekindled family ties, that overstep boundaries.

Paving the Way

The adult children have decided that their parents do need help with their finances. You can make some suggestions for smoothing the way for their parents to accept guidance. It is, of course, important that all of them feel as comfortable as possible.
Remember: it can be extraordinarily difficult and even traumatic for seniors to relinquish such an important part of their independence!

According to Dr. Burns:
• The most important thing is to maintain clear and open communications
• Then, start small
• Respect their values throughout the process
• Set clear boundaries
• To the extent possible, bring the whole family into the process

What's involved in good communications while helping seniors? Perhaps the most important thing, suggests Dr. Burns, is to listen, really listen, to respect their approach to money-most important-to recognize it will be different than the approach of the adult children.

Talk about "we," rather than saying "you," and "I." Don't dictate what they need to do. Instead, suggest options. Follow through on any agreements you make with your client.
And it's critically important that you remember who is your client. Keep your client informed - even if they say they don't want to know what's happening. And remember to respect your clients rights to have their information kept private.

Where To Start

After some discussion, their parents have given the initial go-ahead. Where do they start? It's important for you to recognize that the emotional connection makes it really important, yet very difficult, for the adult children step back and remain objective.
There are many topics they may need to cover with their parents, including:
• Financial statements
• Budgeting
• Investments
• Credit problems
• Taxes
• Life insurance
• Medicare, including supplemental plans, Medicaid, and longterm care insurance
• Estate planning and settlement

Looking at Income and Expenses

Dr. Burns suggests that you start by looking at how to handle income and expenses. With regard to income, your client should consider whether their income includes only employment, pension, and/or Social Security, or whether it also includes a Defined Benefit Plan and IRA withdrawals.

Also look at whether it involves withdrawals from non-qualified investments and savings vehicles. Then review with your client how to handle expenses, as well as investment gains and losses. Next, they'll then need to look at a balance sheet, considering investment assets to net worth ratio. You can help your clients understand that this ratio can be a key indicator of financial strength among the elderly. Consider how long existing investment assets will last given current spending, and remember that assets tie closely to estate planning.


Once they've gotten an overview of the situation, your client may want to look at budgeting. Goals for the elderly are significantly different than those for younger people, and so it's important to make sure they set realistic goals. Even though adult children already know it, it's important that they acknowledge that they aren't likely to change their parents' fundamental living patterns at this stage in their lives.


If your client is an adult child, they will also need to understand their parents' perception and tolerance as the first step in working on their investments.

Often, according to Dr. Burns, the time horizons won't be as short as the adult children anticipate. It's important to develop asset allocation strategies, but recognize that withdrawals will complicate readjustments.
Finally, they may need to work together to develop annuity strategies. Your clients may need your help dealing with these complex issues. If you are not expert in these issues you can assist your client by providing referral resources.

Recognizing and Dealing With Credit Problems

Dr. Burns reminds us that today's elderly grew up with very different values related to debt. That makes it especially important to talk with them about their credit.

First, you will want to reassure them that they aren't alone or unique in having credit problems. Then, work with them to overcome any feelings of failure they have about their credit situation. The seniors may say, "I've worked my whole life only to come to this." Give them encouragement by assuring them that debt problems can be solved. Then you can work with them on the specifics.

Source: American Association of Daily Money Managers (AADMM)


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