A few weeks ago, I wrote a post detailing a framework you can use if you are looking after elderly parents and need to help them stay on top of their financial situation. For this week’s post, I want to provide a bit more detail in the form of a checklist you can use to organize their finances. The checklist has four general categories: expenses and income, assets, taxes, insurance and legal documents.

checklist to help organize parent's finances

Here is what to look for in each category:

Expenses and Income

  • An existing budget – if a budget already exists and your parent is sticking to it, you’re ahead of the game. If that’s not the case, you’ll need to construct a budget using the items listed below.
  • Copies of bank statements and credit card statements – when you gather these statements in looking after elderly parents, try to identify which accounts are being used to cover expenses.
  • Bills and invoices – match bills and invoices to the statements above to confirm that they are being paid, and keep an eye out for any past-due notices.
  • Cash disbursements – hopefully, cash disbursements aren’t a large part of what is being spent, but regardless, try to determine how cash is being spent if it is a portion of the budget.
  • Social Security income – if it isn’t clear from the bank statement what is being received from Social Security, you can verify benefits by setting up an account for your parent here.
  • Pension and other income – as with Social Security, you should be able to verify this on a bank statement. If that’s not the case, you may find a statement confirming pension income or check the prior year’s tax return to confirm income. As for amounts transferred periodically from brokerage accounts, you can confirm those amounts on the brokerage statement or look for the notices that brokers are required to send annually confirming periodic transfers.

Assets

  • Account statements – account statements provide a good bit of information, including how the account is titled, what assets are held in the account and, for some brokerage accounts, the cost basis for the assets.
  • Required Minimum Distributions – the IRS requires owners of retirement accounts to take disbursements once they reach a certain age, and the penalties for not doing so are steep. If your parent has an IRA or other type of retirement account (other than a Roth), check to see if distributions are required and if so, make sure they are taken.
  • Stock certificates – years ago, it wasn’t uncommon to hold stocks directly, as opposed to holding the stock in a brokerage account. In this case, there may not be any sort of statement for the stock. If you find stock certificates for stocks that are still held directly, as part of the process of organizing your parent’s finances, consider transferring the stock to a brokerage account.
  • Titling – check the titling on an account to make sure it is still correct. For example, if an account is a joint account but one of the joint account holders has died, the name of the deceased account holder should be removed.
  • Beneficiaries – retirement accounts, insurance contracts and annuities all have designated beneficiaries. If the owner of the account or contract passes away, the account is distributed to the beneficiary and NOT according to the will. If there is no beneficiary listed, the asset will typically go to the estate, but in some instances, that can lead to unfavorable tax treatment. Given the foregoing, it is important to make sure beneficiary designations are up-to-date.
  • Cost basis – if cost basis is missing or incorrect, it can lead to paying more in capital gains tax than you should. Check to make sure cost basis for stocks and bonds is correct, particularly if your parent is planning on selling securities in taxable accounts.

Taxes

  • Tax returns – track down tax returns to make sure they have been filed. The return can also be useful in double checking your findings regarding your parent’s income, and in some cases, the assets your parent has.
  • Property tax – check to make sure property tax has been paid, and also to confirm that your parent has applied for any homestead exemption that is applicable. Many counties and municipalities post property tax bills and their paid status on-line, so you can check there first.

Insurance

  • Declaration pages – look for declaration pages for all existing insurance policies. The types of insurance may include life insurance, long-term care insurance, Medicare supplement coverage and homeowners, auto and umbrella insurance.
  • Premium invoices – in looking after elderly parents, check to make sure any and all premiums have been paid on those policies your parent plans on maintaining.
  • Review coverages – review the coverages to ensure both that they are adequate and the particular policies are still needed. Given the complexities surrounding insurance, an agent can be helpful here.
  • Beneficiary designations – for any life insurance policies when looking after elderly parents, make sure beneficiary designations are up-to-date

Legal Documents

  • Will – once you’ve tracked down a copy of the existing will, review it with your parent to make sure it is up-to-date in that it reflects their wishes, and anyone named in the will is still living and, if they are acting in a particular capacity like executor or trustee, they are able to do so. If there is no will in place, work with an attorney to put a will in place.
  • Powers-of-attorney – the process here is similar to that of the will. Make sure any healthcare or financial power-of-attorney are reflective of your parent’s current wishes and anyone named as a power-of-attorney is capable of acting in that capacity.

In looking after elderly parents, as you pull together the information above, you may find that your parent’s financial situation is fine and they need little assistance in keeping things on track. If that’s not the case, consider implementing a framework you can use  to help them on an ongoing basis.