10 ways to prepare to help your parents manage their finances

It's common for aging parents to reach a point at which they need help with their personal finances, though they may not initially recognize it. Cognitive decline typically begins in our 60s and can be gradual—so gradual that until problems arise, it may not be obvious that their finances are in disarray.

To help your parents avoid future issues with managing their finances, it's a good idea to start planning now.

Here are 10 ways you can prepare to help your parents manage their finances.

1. Start a conversation

This is your parents' money you're talking about, after all, and if your goal is to make their later years simpler and less stressful, say that as you try to open the lines of communication about their finances. Asking questions about their long-term plans and what they've done to prepare for them will give you a better sense of how you can assist them.

However, your parents need to be ready to be transparent with you. "It's critically important for parents to share all of their financial information with their children so that an action plan can be put in place. It's very difficult, and perhaps detrimental, to implement strategies with half-truths or limited insights in information," says Ivan Watanabe, managing partner with Opus Private Client, LLC.

2. Review their records

To get a sense of where your parents are financially, and to be able to make informed suggestions going forward, ask if they will share their records and account information with you.

Knowing what they have and where it is located is a great start. Then, if problems arise, you'll at least know where to start looking for anything that may be missing or questionable.

3. Ask for introductions to their advisers

If your parents have existing relationships with advisers, such as attorneys, accountants, brokers, and/or financial advisers, ask if you can meet them to better understand the services they're currently providing.

"It is always a good idea for the parent to introduce their adult children to their team of professionals, especially the financial adviser," says Arvind Ven, CEO and founder of the Capital V Group.

4. Hire a financial planner

If your parents don't have advisers, start by retaining a financial planner. A professional wealth manager can advise on who else your parents may want to bring into their circle of advisers to address their particular situation.

5. Set up a durable power of attorney

To allow adult children to make legal decisions on their parents' behalf, consider having a power of attorney be granted, advises Watanabe.

"It's important to put these documents in place while the parents are in good mental capacity," he says.

"The durable power of attorney allows someone to act as your agent if you are unable to handle your financial and personal affairs yourself," says Matthew Erskine, managing partner at Erskine & Erskine.

6. Get a healthcare proxy signed

Having parents sign a healthcare proxy or healthcare power of attorney is important, says Erskine, "so that people can speak with your medical professionals without violating HIPPA regulations."

7. Make sure they have set up a trust or last will

Your parents should have a trust or a will to spell out what happens to their assets when they pass away. They should talk to an attorney to find out whether a trust or a will is right for them.

8. Switch to online accounts

Setting up online banking makes oversight from afar much easier and immediate, but "the one online account everyone should set up is Social Security," says Clare Toth, JD, MLT, CFP, and managing principal of Peapack Private Wealth Management. "Once the account is there, an adult child can assist the parent with basic tasks, such as changing the bank into which payments get deposited."

You may also want to consolidate accounts for simpler monitoring.

9. Automate payments

To reduce the number of paper bills coming to their home, recommend that they set up automated payments for expenses like their mortgage, phone, and utilities. That will help ensure the bills are paid in a timely manner, with less effort on your parents' part.

10. Learn about any concerns they may have

Knowing what keeps your parents up at night can put you in a position to help them better manage their money. For example, are they planning a major expenditure soon? Are their investments too aggressive for their current stage of life? Do they have a budget? Should they buy long-term care insurance? Find out what concerns them and brainstorm how to reduce that worry.