For many years you may have turned to your parents for financial support or guidance. But as they get older you might find that you need to help them manage their finances. Your parents might have asked for help, or a situation might have taken place where you need to step in quickly. Regardless of the circumstances it can be challenging to know where to start when managing your parent’s money. Huw Wedlock, Director of our Singapore office, explains what you might need to consider.
Helping one or both of your parents with their finances might not have been something you expected to have to take on. But with life expectancy rates increasing, it’s likely that you may need to help and support your parents with their money in later life. They might need help for many reasons; they may be starting to experience the effects of conditions such as dementia which impact their ability to make informed choices or physical issues could be making face-to-face, or even online meetings more difficult. Or they might simply need extra support if they are starting to feel more confused or overwhelmed about making financial decisions for themselves.
It might be that you only need to offer some assistance, such as signposting them to the right information, or get involved with more regular tasks, which might then require you to need additional power over their finances.
In the first instance, it might be that your parents simply want to chat through some aspects of their finances with you. They might want to discuss their retirement plans, update their Will to include any new grandchildren, or share their wishes for what they’d like to happen with the family home, or other assets, in later years. They might even begin to make regular financial gifts to you and your children to help avoid Inheritance Tax down the line. At this stage it can be useful to help them ensure they have the right plans in place – encouraging them to work with a good financial adviser, make regular reviews of their Will and establish some sensible Inheritance Tax and estate planning.
More regular support
In time, it might be that you need to begin helping your parents with more regular tasks such as paying bills or dealing with their banking or other investments. This may mean you’ll need their online account details and passwords, or a third party mandate which gives you permission to access their funds. It might even be sensible to set up a joint bank account, which you can both access. Do remember that you’d then have responsibility for the funds in the joint account when it comes to Income and Inheritance Tax, and, on the flip side, any debts which your parent may incur.
Power of attorney
If and when your parents become unable to manage their finances themselves, you’ll need to have ensured that they have a valid Power of Attorney in place. This allows them to give someone else the ability to deal with third parties on their behalf. It’s possible to have more than one ‘attorney’ in place, so you might be able to share the responsibility with a sibling or other close family member.
If you’re in England or Wales, a Lasting Power of Attorney can ensure your parent’s affairs can be managed even if they have lost their mental capacity. There are two types of Lasting Power of Attorney covering property and financial affairs and health and welfare decisions. If you’re in Ireland or Scotland, different types of Powers of Attorney apply, but they generally enable the same type of support. Any document will need to be put in place while your parents are still mentally capable of setting one up so it’s good practice to plan ahead in good time.
Over the years we’ve supported some families over three or more generations, so are on hand to help you and your parents when and if the time comes. To discuss any aspects of your family’s financial situation, or wider estate plans, please get in touch with your nearest office.