Financial DOs and DON’Ts (Part 1 of a 2 Part Series)
/I’ve reached the point in life where aging relatives have needed my help in financial matters, so I’ve been involved in taking over and managing finances on several occasions. However, when our parents or other loved ones get to the age where they need help with their finances, we need to proceed with caution. There are some things that seem to make sense on the surface, but end up causing bigger, costlier problems in the future. Therefore, I’ve put together a list of some of the most common DOs and DON’Ts. In this article I’ll cover the DOs, and I’ll write about the DON’Ts in next quarter’s newsletter. (For simplicity, I’ll refer to parents going forward, but these can apply to anyone needing our help.)
First on the DO list is to help your parents protect their identity. This can be done by helping them check their free credit reports, which can be obtained at AnnualCreditReport.com. When reviewing credit reports, look for signs of identity theft, such as unfamiliar credit accounts and recent inquiries that they did not initiate. After that they can implement a credit freeze at each of the three credit bureaus, Equifax, Experian, and TransUnion. (You can find the direct links at our website under Resources then Identity Protection.) A credit freeze can prevent a thief from fraudulently opening credit accounts since the bureaus will not release information for new applications when a freeze is in place. When there is a legitimate need to apply for credit, freezes are lifted using login credentials and/or PINs created at the time of freezing. Be sure to keep that information in a safe place so it can be retrieved when needed.
Next, help your parents consolidate their bank and investment accounts. Close bank accounts that aren’t needed and select one bank for the banking relationship. Generally, investments can be consolidated at one firm. Individual stock certificates can be deposited in a brokerage account to make tracking splits and spin-offs easier. Your parents’ financial planner should be able to help with this process, although, make sure you are aware if changes will result in new commissions or fees.
Finally, help your parents review the beneficiary designations on all life insurance, retirement accounts, annuities, and pensions to verify they coordinate with their estate plan. Estate planning attorneys will usually provide the appropriate beneficiary designations, but quite often accounts or policies don’t get updated or new accounts get a designation that bypasses the estate plan. When in doubt, contact the estate planning attorney. In most cases, beneficiary designations trump a will, so it’s critical that beneficiaries are named according to the estate plan.
Accomplishing these three items will go a long way toward making sure your parents have their financial ducks in a row and make your job is easier if you have to act on their behalf.
- Juli Erhart-Graves, CFP®, Worley Erhart-Graves Financial Advisors
