If you ever have to make decisions for your elder during a medical emergency, or if your elder becomes unable to communicate, one of the most daunting challenges you may face is locating his/her important paperwork. Most adult children don't broach the subject of paperwork until a parent becomes incapacitated, either mentally or physically. At that point, the elder can't be of much help, and locating important documents can be a very difficult process.
To avoid such a circumstance, experts recommend that caregivers learn where to find personal documents, such as income tax returns, power of attorney, the will and living will, and health and life insurance policies. In addition, it is desirable for a caregiver to be familiar with an elder's financial resources and obligations, including bank accounts, pension plan, annuities, investments, and real estate. Organizing this information in advance can save time and frustration later.
Make a List for Emergencies
For starters, you may want to ask your elder if she/he has made a list of the important information you would need to know in case of an emergency. Your elder may want to keep such a list in his/her possession but tell you where to find it, or she/he may prefer to give it to you or a trusted third party, such as an attorney or accountant.
The listing might be a simple description of where to find important documents. For example, your elder might write, "There's a gray metal file box in my closet that contains my safe deposit box key, insurance policies, the deed of sale for my home, car title, listing of stock certificates, and receipt for my burial vault. My checkbook and current bills are located in the top right desk drawer. My attorney has copies of my will, living, and trust agreements. My accountant has copies of my income tax returns". Use the chart on the reverse as a guideline for your elder to provide information about the location of his/her important documents. Your elder also may want to include a list of friends and relatives who should be contacted in a serious emergency or upon his/her death.
Organizing the Information
Once you feel confident that you can locate key documents, should you need them, the next step is to try to become familiar with your elder's financial affairs without being intrusive. Caregiver assistance with recordkeeping can be vital, because some older people throw away important financial statements, and risk a reporting problem with the IRS. Reconstructing the information on 1099 forms, which are used to report interest and dividends, or K-1 forms from limited partnerships, is a tedious, and sometimes, inexact task.
Despite the advantages, gaining your elder's trust to assist with his/her financial affairs may be a challenge. You may want to try some of these strategies to help your elder organize and manage financial information:
Ask your elder to set up a simple filing system for his/her bills if one does not exist. Label a set of manila folders from A to Z, then place them in a large, collapsible manila file. When a bill is paid, ask your elder to file the statement in the appropriate folder, such as "E" for electricity, and "T" for telephone. At the end of the year, it will be much easier to match these statements with your elder's checkbook.
Ask your elder to keep his/her canceled checks and monthly checking account statements in the filing system. These are necessary to track direct deposits and some income tax deductions, such as charitable contributions.
At the end of the year, offer to help your elder make a list of all investments and sources of income: pension funds, stocks, bonds, annuities, rental property, etc. Each of these will generate financial information that must be reported on state and federal income tax forms. If you have a master list that is updated at the end of each year, you'll know what to look for the following year.
Set up a "tickler file" to remind your elder when a tax deadline is approaching. April 15 is the deadline for federal income taxes, but many seniors also must pay quarterly estimated taxes, which are due on April 15, June 15, September 15, and January 15. Ask your elder for permission to have his/her tax preparer send you a duplicate of your elder's Declaration of Estimated Tax.
Become knowledgeable about your elder's state income tax requirements – especially if you're a some exceptions. Check with your elder's state revenue department to verify which taxes must received a refund from state or local tax returns because these must be reported on the federal return.
If your elder wants to be left alone and refuses your efforts to help, one simple request can be a the month of January;except personal correspondence and checks to be deposited; and put it into a large envelope. At the end of the month, the envelope can be sent to his/her tax preparer for that person to go through. In many cases, this will avert losing 1099 forms. In fact, if your elder is comfortable stashing his/her January mail in an envelope, you might suggest s/he make it a monthly routine and allow you to sort through the junk mail. If that fails, you could ask to sit down with your elder once a month to review his/her bills, just to become familiar with the routine. You might say, "If you get sick and I have to we go through your bills just once a month, I'll be able to help if the need arises".
Conclusion
Although efforts to help your elder manage financial information may seem like an invasion of privacy, remember that having a handle on his/her affairs will make things easier for you or other family members in the event that your elder becomes incapacitated, short or long term. It's never too soon to be prepared!
Resources for Further Information
Anderson, Patricia. Affairs in Order: A Complete Resource Guide to Wills and Other Financial-Legal Plans. Macmillan, 1991, 256 p., $21.95. Call 1-800-223-2336 to order.
National Institute of Business Management. The Retirement Tax Guide: Tactics and Strategies for Slashing Your Retirement Tax Bill. National Institute of Business Management, 1995, $29.95. Call 1-800-762-4924 to order.
Weltman, Barbara. Your Parents' Financial Security. John Wiley and Sons, 1992, $10.95. Call 1-800-225-5945 to order. Adapted with permission from an article which appeared in the Parent Care Advisor newsletter, published by LRP Publications.
For more information or a list of other MFS Heritage Planning educational materials on helping your parents, contact your financial adviser.
© 1997 The Partnership Group, Inc.
MFS Fund Distributors, Inc.,
500 Boylston St., Boston, MA 02116
