The fear of speaking to your parents about financial topics is real. However it’s also holding back your relationship. Your connection with your loved one can strengthen and improve.
The truth is that relationships that confront reality and grow together through challenging times get stronger. Family members and loved ones that work together go further.
I know you want the best for your loved one and financial security and flexibility is a big part of what you hope for them. You want to know that no matter what occurs they will be secure and have access to the right experts when they need them.
Often what prevents us from ensuring this type of financial security is not a lack of money or even the absence of the right experts. Instead it’s the fear of speaking up and starting the dialogue about money before there is a crisis. It’s the hesitation or continuous delay of having the conversation you know you need to have.
Don’t forget that you have this skill already. You know how to walk into the fray of a challenging situation and address the big elephant in the room. It may be at work that you display this skill, or with friends or possibly in your marriage. We just need to transfer that existing skill to your relationship with your loved one.
A high value area to begin this dialogue is legal power of attorney for financial matters.
Transformative Power of Legal Power of Attorney
Personal finance writer J.D. Roth calls legal power of attorney the “flaming sword of justice.” Legal power of attorney is one of the rare examples of a financial tool that moves mountains. I strongly recommend looking into it for your family.
Legal power of attorney can have a massive impact not only on your loved one but also on the family more broadly. Below are three changes you will see if you take the time to set up a legal power of attorney.
1. Ultimate Protection – Legal power of attorney enables you to move your loved one’s assets in an emergency. You can access savings in a checking account, liquidate retirement assets or even use their credit card if needed.
Imagine if God forbid your loved one has a stroke or takes a bad fall. This will enable you to access their finances to help cover the financial costs of doctor’s bills and tests.
2. Dignified Monitoring – You can watch over your parent’s accounts and make sure they’re not victims of fraud. You can also monitor their activity without robbing them of their dignity if their mental cognition is beginning to suffer. This will enable you to feel more at ease.
Imagine if your loved one faces some memory issues and they forget if they have paid the electricity bill. You will be able to log into their checking account and see if the money has moved.
3. Full Financial Partnership – There may come a time where you need to more actively manage your parent’s finances. A legal power of attorney will make that transition smooth and easy. It will enable you to partner with your loved one fully.
Imagine if minor memory difficulties for your loved one turns into more prolonged dementia. Because you have legal power of attorney you will be able to take over their finances seamlessly and focus more of your attention on spending time with them.
Relationships strengthen and grow when two parties openly discuss their fears and address them together. Your parents getting older and needing your help is a scary topic. But your relationship growth depends upon your ability to discuss it.
An open dialogue about finances will make it clear how you can help them and how you both can move through this next phase of life together. You will understand each other’s fears and know exactly what steps to take together to increase security.
Setting up a legal power of attorney is a great step to increasing security and strengthening your relationship. Not only will you have a healthy dialogue about money but your bond will be stronger because you will know that you both have protection setup in an emergency.
Below are the key components to set up a legal power of attorney.
#1: Review The Actions You Will Be Able To Take (5 min)
With a legal power of attorney you will have the ability to move and distribute your parent’s assets. For example you can:
– Pay bills
– Pay for healthcare costs
– Move money from one account to another
– Adjust retirement investments
– Pay for medications
#2: Identify The Legal Power Of Attorney Form (30 min)
Here is an example of the New York state form. The forms differ by state. They are 3 to 5 pages in length and explain that you will be able to move certain assets and pay bills for your loved one. Find the document for your state here.
You may want to speak to a lawyer to get a custom form for your situation. They can also review the principles of the document with you and your loved one.
Once created the document needs to be signed by a notary public. I recommend walking over to a local bank with your loved one. The notary services are free at most banks.
#3: Review That The Contract Can Always Be Reversed
One key thing your parents should know is that the legal power of attorney can always be reversed. At any point they can make the decision to cancel it or amend it.
This can be helpful to keep your relationship strong. You will both know that even as things change you can amend the legal arrangement to fit your situation. For example, after a few years a sibling may want to step in and help your parent with managing her finances. You can easily make the adjustment.
#4 Distribute The Form To Financial Institutions
The legal responsibility to ensure that the appropriate people are accessing funds in a bank account or retirement vehicle lies with the financial institution. That’s why the bank confirms your identity before any funds are moved or investments are liquidated.
Consequently you need to share the legal power of attorney document with them. They may have some additional minor documentation for you to complete. The thing to know is that until they receive a signed and notarized legal power of attorney you will not be able to actively change your parent’s finances.
Did you like this article? Sign up for the mailing list below to get more great information on caring for your loved one.
April 23, 2015
By: JP Adams