Wealth Planning for Aging Parents: A Path to Peace of Mind

By Holly M. Knott, CFP®
Vice President and Senior Wealth Planning Officer

As our parents age, we want to do everything we can to help protect their health, safety, happiness, and wealth. Proper and proactive planning can bring peace of mind to both you and your parents.

Create a Wellness Plan

It is important to have conversations with your parents about their wishes as they age. Is it their goal to age in place? If they plan to stay in their home, there are many safety features that can be employed to make a home safer. Visiting nurses or in home health care can be vital to remaining independent and at home. Is assisted living an option they would consider? Interviewing and touring assisted living facilities, well before they are needed, is a good idea. Being actively involved in the decision gives a feeling of empowerment which may make the transition more palatable.

Being engaged socially and in the community is important for a senior’s mental health. Help your folks find activities that are stimulating and enjoyable. The local senior center, volunteering, support groups, or taking classes can all be rewarding and prevent isolation.

Staying active has both mental and physical benefits. Are they keeping busy and doing a little physical activity each day? There are great options for seniors at the YMCA, yoga studios, tai chi, etc. that cater to older clientele.

Utilizing Trusts

Trusts are invaluable tools for protecting assets and facilitating wealth transfer. Revocable living trusts can be used to manage and distribute assets during your parents' lifetimes and after their passing. Often, as people age, they don’t feel as confident managing their own finances and investments but they’re not ready to relinquish full control. Naming a corporate trustee as co-trustee or successor trustee can be a great way for them to be protected and remain involved.

A corporate trustee is a professional, competent fiduciary who is bound by law to act in accordance with your trust terms and in the best interests of your trust beneficiaries. (See “Why a Corporate Trustee Might Be Right for You.”) In the event of incapacity or diminished capacity (due to, for example, a stroke or early onset of a neurocognitive disorder such as Alzheimer’s), a corporate trustee can step in to pay bills and manage assets in the ordinary course, without the need to go to court.

Understanding Sources of Income

It is essential to have a comprehensive understanding of your aging parents' sources of income, including pensions, Social Security benefits, retirement accounts, investments, and any required minimum distributions (RMDs) to help them to plan for their financial needs. Also, it’s important that beneficiaries are updated and appropriate. It’s good to know where asset accounts are held and the contact they work with.

Identifying Advanced Directives, Power of Attorney, and Authorized Parties

It is vitally important that you have advanced directives, powers of attorney, and trustees in place while your parents are of sound mind.

• An advanced directive is an essential legal document that allows your parents to specify their medical treatment preferences and designate a healthcare proxy.
• A power of attorney, or POA, is one way to help ensure that no matter what happens down the road, your loved one’s wishes will be prioritized. There are several types of POAs—general versus limited and springing versus durable—so it’s important to review your parents’ needs and expectations. Note that if your parent were to become incapacitated without having a general durable power of attorney, you would likely have to go to court and have them declared incompetent before being able to take care of their affairs.
• Make sure you have designated co-signers and/or successor trustees on these accounts.

Organizing and Accessing Key Documents

As your parents age, it is crucial to have their financial and legal documents in order.

• Ensure they have updated wills, estate plans, power of attorney, healthcare directives, insurance policies, and any relevant trusts.
• Compile a complete list of their financial and legal accounts, usernames, and passwords in a secure location, including access to social media accounts, to prevent confusion in the event of incapacitation or death.

Protecting Your Assets

As you care for your parents, you may become aware of how easily hard-earned assets can be depleted due to unforeseen healthcare expenses or long-term care costs. If your parents safeguarded their assets with long-term care insurance (LTCI), it can be a huge relief. While it may be too late for your elderly parents to purchase long-term care insurance, you may want to consider it for yourself. (See “Addressing Healthcare in Retirement: Protecting Your Future.”) LTCI can be expensive and difficult to understand, so work with a trusted advisor to determine if it makes sense for you.

Washington Trust Wealth Management Can Help

Protecting your parents as they age can be physically, emotionally, and financially overwhelming. Careful, proactive planning can provide peace of mind to both you and your family. Your wealth advisors at Washington Trust Wealth Management are experienced at managing complex financial situations for aging seniors, serving as key points of contact during the planning process. From facilitating difficult family conversations to coordinating with tax and elder law attorneys, we are here to ensure your parents' financial goals align with their evolving needs as they age.