King & Wood, P.A.

How Do I Include Heirlooms in My Estate Plan?

“Splitting up money is easy. Splitting up an antique car or a vacation home isn't. Unless you plan ahead by answering these three questions, your family could be in for some strife.”

With baby boomers now starting one of the largest transfers of wealth in U.S. history, many people are looking at how to facilitate the flow of their assets to their children, grandchildren and great-grandchildren. It’s pretty straightforward to pass along liquid assets like stocks, bonds and cash. However, “hard” assets like property, art, and jewelry can present some problems. Most families don’t maintain a good inventory of these assets, the value of the assets may be outdated or unknown and family members may have different ideas of how to handle them.

To make matters worse, individuals are often reticent to discuss the issue with their heirs. Because of this, hard assets can be totally overlooked, despite discussions about their potential value. Similar to liquid assets, illiquid assets must have a formal plan that starts with a dialog between the family decision-makers, estate planning attorneys and perhaps an appraiser. To get the illiquid assets distribution discussion going, consider these three key questions:

What’s it worth? Begin with its fair market value, which is the first step for any plan. That’s because it attaches an actual, current dollar figure to an item that has probably changed in value over time.

When getting an appraisal for an asset, look for an experienced, certified appraiser—especially for artwork. The reason is that there’s a big financial risk of mispricing your assets. Don’t rely on online art price guides, advice from your brother who used to be a painter, or even the original seller (who may have a conflict of interest). The appraiser should be certified by one of the main accrediting bodies, like The Appraisers Association of America or the International Society of Appraisers. For a large collection, the cost of the appraisal is well worth it, so you will know its true value and how that value will impact your estate.

Which heir(s) want it? Along with the actual monetary value, consider the emotional or sentimental value of your hard assets. Your children may have strong attachments to specific assets. This should be taken into account.

If several heirs want the same asset, look at whether and how it can be divided. If it can’t be divided equally, think about how you can equitably divide other assets. If some, but not all, of your heirs want to keep the asset, look into an equitable buyout situation that transfers ownership to the heirs who’d like to keep it.

How do I pass on? There are several ways to pass on illiquid assets. Typically, it’s best to let an heir inherit the asset itself. Illiquid assets get a step-up in cost basis that reduces or eliminates the capital gains tax, even if the heirs decide to sell it. You can also place the asset in a trust, family partnership, or LLC and formalize the transfer of ownership in a tax-efficient way, at the same time saving on future estate taxes. Finally, if you don’t think your heirs understand the asset enough to sell it for a fair price, you can sell it yourself, pay the appropriate taxes and give them the cash.

While discussions about illiquid assets can be emotional, don’t delay talking about how certain items will be passed down.

Reference: Kiplinger (November 5, 2018) “Estate Planning Answers for 'Hard' Assets Like Art, Heirlooms”

 

When Do I Cash in My Savings Bonds?

“Whether you got them as a birthday gift from Grandma or bought them through a payroll deduction on your first job, you may own U.S. Savings Bonds that have stopped earning interest.”

The common variety of bonds that were first issued in 1980 are the Series EE Bonds. These bonds continue to be issued today. Series EE Bonds were designed to pay interest for up to 30 years. As a result, any bonds dated 1988 or earlier will stop paying by the end of 2018. Their value will then be frozen—there’s no reason to keep them. Cash them in and put the money to more productive use.

A recent Investopedia article asks “U.S. Savings Bonds: Time to Cash In?” According to the article, prior to the start of Series EE Bonds, a relative might have bought you a Series E Savings Bond. These bonds were issued from 1941 to 1980. They have also stopped earning interest.

Series I Bonds are more recent. First issued in 1998, these bonds pay a combined fixed and inflation-adjusted rate of interest. They’ll accumulate interest for 30 years. Thus, the earliest of them will stop gaining value in 2028.

To see the value of your old bonds, use the Savings Bond Calculator on the TreasuryDirect website. You only need the type of bond, its denomination and the issue date. You can also add your bond’s serial number, but you don’t need to do that to get a value. As an example, a $50 bond issued in August 1982 that cost $25 is now worth $146.90. A $100 bond from February 1984 is now worth $230.64.

If you think you own some old savings bonds, but have lost track of them, you can submit a claim with the Treasury, by filling out Fiscal Service Form 1048, Claim for Lost, Stolen, or Destroyed United States Savings Bonds. Get the form on the Treasury website.

You can also redeem your old paper bonds at most financial institutions.

Remember that your savings-bond interest is taxable by the federal government, but there’s no state or local tax. You can report it and pay tax every year that you hold the bond—or wait until the end and pay the tax all at once. That’s what most people do. When you redeem your bonds, you’ll get an IRS Form 1099-INT that shows your taxable gain.

In certain cases, there is an exception to the taxes. One is if you use the proceeds from bonds issued in 1990 or later to pay qualified higher-education expenses for you or your child. The rules, including income limits, are detailed in the Education Planning section of the TreasuryDirect site.

Reference:  Investopedia (February 21, 2018) “U.S. Savings Bonds: Time to Cash In?”

How Do I Draft an Advance Directive in Oregon?

“When it comes to estate planning and making preparations for the end of your life, you may benefit a great deal from creating an advance directive.”

An advance directive, also called an advance health care directive or a living will, is a legal document that states what health care decisions should be made on your behalf, if you are unable to make your own decisions. KRBK’s recent article, “How to Create an Advance Directive in Oregon,” offers some tips on creating this document for its citizens.

In serious or life-threatening medical situations, there are frequently many decisions to make. They include life-support and a feeding tube, if you’re unlikely to recover. An advance directive helps answer many of the medical questions, when physicians are unable to ask patients how they want to be treated.

Advance directives in the state of Oregon require you to complete a form provided by the Oregon state government (or a close substitute) to create an advance directive.

There are four primary parts to this form, and you can limit the scope of the document to a certain period of time. Otherwise, it will be effective, until either you revoke it in writing or you pass away.

The first section concerns the appointment of a health care representative, sometimes called a health care surrogate or a designated agent. By appointing an individual as your health care representative, you’re transferring decision-making power to her, in the event you cannot direct your own health care. The second part is the health care instructions. This section is the part that relates most closely to a conventional living will. Here, you can specify any unique wishes you want your healthcare providers to honor, if you become incapacitated.

You also need to state, if you want life support and/or tube feeding in four different circumstances:

• if you’re near death;
• if you’re permanently unconscious;
• if you have an advanced progressive illness; or
• if you’re under extraordinary suffering.

You can say yes to any and all of these, or you can also choose to leave those specific judgments up to your doctor.

The form’s third section is for your witnesses to sign. To be binding, you’ll need two different witnesses to sign the document with you. They need to either see you sign the document or see you acknowledge that you signed. By signing, your witnesses are stating that you are who you say you are, and that you’re of sound mind and not under duress. When selecting your witnesses, you can’t choose the person you named as your health care representative, and you also can’t choose your doctor. One of your witnesses also can’t be a spouse or a blood relative.

The last section is for your health care representative and your alternate representative (if you want to name one). Your representative, by signing, is saying that she’ll act in good faith on your behalf and acknowledges that you can revoke the directive at any time.

Advance directives are also sometimes known as living wills. This can make things confusing, especially with living trusts and last wills. All three can have to do with end-of-life situations, but each is different.

A living trust transfers control of assets to a trustee. This is different from a will, because it happens while you’re still alive. The trustee manages the assets for you and can continue to do so after you die. If you create a revocable trust, you’ll be able to transfer assets in and out if you want; but an irrevocable trust doesn’t allow you to do that. You can also say if or when you want the trustee to dissolve the trust and transfer assets to your beneficiaries.

A will, or a last will and testament, outlines what you would like done with your assets after your death. After you die, an executor will carry out your wishes through a court process called probate.

Contrast this to a living will: it doesn’t have anything to do with your estates or your assets. A living will relates to the way in which you want to receive or not receive medical care, once you can no longer make those decisions for yourself.

Preparing for end-of-life situations can be a difficult task, but it’s extremely important. You can eliminate ambiguity for your doctors and family by clarifying your wishes ahead of time. Work with an estate planning attorney for all of these documents.

Reference: KRBK (October 31, 2018) “How to Create an Advance Directive in Oregon”

What Do I Need to Know About an Inherited IRA?

“Make note of two important dates after inheriting an IRA: Dec. 31, when required minimum distributions must be taken by, and Sept. 30 of the year after death.”

U.S. News & World Report’s recent article, “What Day of the Dead Can Teach Us About Inherited IRAs,” says that understanding all the details of an inheritance can be overwhelming, especially during a difficult time. The article suggests that it may help to link an emotionally-fraught situation to a joyful one. The Day of the Dead is a joyful, life-affirming celebration. Let’s look at some important lessons Day of the Dead can teach us about inheriting an IRA.

Relationships are key. Day of the Dead honors those who’ve passed away, and with an inherited IRA, your relationship to the deceased is critical. If you’re the spouse, you have flexibility in what you can do with the funds. Spousal beneficiaries can take ownership of inherited IRA assets and treat them as their own.  However, non-spousal beneficiaries don’t have this choice—they’re required to retain inherited IRA assets in a separate account, where they can’t make contributions and must take required minimum distributions (RMDs) each year, based on the inherited IRA owner’s life expectancy. Both pre-tax and inherited Roth IRAs have RMDs. You can withdraw as much as you like from an inherited IRA in any given year without penalty., However, you’ll pay ordinary income taxes on withdrawals from pre-tax inherited IRAs. You have until December 31 of the year following the original owner’s death to begin taking RMDs.  However, there’s one exception: If the original owner was 70½ or older and didn’t take his RMD the year he died, an RMD must also be taken out by December 31 of the year of death.

A penalty-free loophole for spouses. Inherited IRA rules work in a spouse’s favor. IRS rules say you can’t access your own IRA assets, until you turn 59½ without incurring a 10% penalty. If you inherit an IRA from your spouse when you’re 55, you can put it in an inherited IRA, instead of combining it with your own. That way, you’ll be able to access the money in the inherited IRA without paying any penalty. If you decide you don’t need the funds from the inherited IRA, you can roll it into your own IRA to pause the RMDs until you reach 70½.

Watch your calendar. As you mark Day of the Dead on your calendar, there are two important dates to remember after inheriting an IRA. One is December 31. That’s the date by which RMDs must be taken. The other is September 30 of the year after death. IRS rules state that joint beneficiaries have until September 30 of the year after death to separate inherited IRA assets. If you fail to divide the inherited IRA by then, the RMDs default to the life expectancy of the oldest beneficiary. Splitting the IRA is even more critical, if your joint beneficiary is a trust or a charity. Non-human entities aren’t considered designated beneficiaries and have no life expectancy, so the inheritance defaults to the five-year rule.

The five-year rule says that beneficiaries must withdraw all assets from an inherited IRA by December 31 of the fifth year after the original owner’s death. This accelerated withdrawal rate will eliminate the after-tax amount you receive, so you should do whatever you can to avoid it.

Take some time. If you take a lump sum out of an IRA, you‘ll see a large tax bill and lose the benefit of tax-deferred growth. There are no taxes with inherited Roth IRAs, but you do lose the tax-free growth. If you don’t need the funds, leave as much of the money in the inherited IRA as you can. Or, in the case of spouses, roll it over into your own IRA to keep from incurring RMDs.

Tidy up. Day of the Dead celebrations include cleaning the deceased’s gravesites, sort of a big graveyard picnic with weed-pulling, songs, and food. You may feel that you need to hold onto your relative’s investments in honor of their memory, but there are better ways to remember a loved one—especially if those investments aren’t a good fit for your financial goals.

Plan. Day of the Dead is a celebration of the lives of the deceased, but it’s also a reminder that death is an inevitable and natural part of life.

Review your beneficiaries. Do this if you make a change, like leaving a job or getting married. You should also name contingent beneficiaries to whom the account will pass, if your primary beneficiary predeceases you. If you don’t do this, the IRA will go to your estate and default to the five-year rule.

Reference: U.S. News & World Report (October 29, 2018) “What Day of the Dead Can Teach Us About Inherited IRAs”

 

What Odd Things are Connected to Dementia?

“Dementia is an umbrella term used to describe diseases associated with memory loss, like Alzheimer's disease. There are several things that are commonly known to lead to it, such as high blood pressure or a traumatic brain injury. However, as fairly recent research has found, there are also some pretty unexpected things that are linked to dementia as well.”

The Alzheimer's Association found that 5.7 million Americans are living with the disease. Every 65 seconds, someone in the U.S. develops Alzheimer's or another type of dementia.

Bustle’s recent article, “7 Weird And Surprising Things Linked To Dementia” reports that Dr. Luqman Lawal, MD, remarked "Dementia occurs when once-healthy neurons in the brain stop working, which results in a loss of cognitive functioning. This lack of ability to problem solve and remember things that have happened to them, affects their everyday routine."

In addition to memory loss, those with some form of dementia may experience other symptoms like an inability to focus, an impaired sense of judgment and an inability to problem solve. Others may have issues with communication. There are several different studies that have examined possible causes. Here are some of the most surprising things that have been linked to dementia, according to recent research:

Hearing Loss. A long-term study released in early 2018 found a "strong link" between hearing loss and dementia in seniors. About 33% of participants who experienced hearing loss were found to be more likely to have other major health issues like depression, disability and dementia.

Herpes. A study from Frontiers in Aging Neuroscience found connections between herpes simplex virus type 1 (HSV-1), which often causes mouth sores, and Alzheimer’s disease. Those with the herpes virus were 2.5 times more likely to develop dementia, than those who didn’t. Researchers also discovered that people infected with HSV-1 carry a specific gene associated with Alzheimer’s disease, ApoE4—known to increase the risk for getting the disease.

Constantly Feeling Sleepy During The Day. A 2018 study found links between sleep disturbances and Alzheimer’s disease. Feeling excessively sleepy during the day is a common symptom of several sleep disorders, such as insomnia or sleep apnea. The study said that those who often felt sleepy during the day. were three times more likely to show signs of Alzheimer's disease in the brain.

Taking in Too Much Sugar. A 2018 study published in the journal Diabetologia looked at more than 5,100 adults over 10 years and found that those who had higher blood sugar levels had faster rates of cognitive decline than those with more normal levels.

Air Pollution. A 2017 study from the University of Southern California found connections between air pollution and dementia in older women. Tiny air pollution particles, which mostly come from power plants and cars, can get inside the body via the nose and then travel into the brain. Breathing in toxins can increase inflammation in the body. Research said that if a person had the Alzheimer's gene, excessive exposure over time to those toxic particles can "exacerbate and promote" the disease. The adverse effects were found to be much stronger in older women who had the gene. More research still needs to be performed. However, if it’s confirmed that air pollution causes dementia, it may the cause for over 20% of dementia cases.

Sense of Smell. A 2016 study found a connection between a person's sense of smell and Alzheimer’s disease. Participants who were unable to correctly identify certain odors like menthol, strawberry and lemon, were the people who were at risk for having the disease. Researchers believe that a person’s poor sense of smell can possibly be an early indicator of Alzheimer's disease.

Loneliness. A 2018 study published in the Journal of Gerontology: Psychological Sciences looked at data of over 12,000 people over 10 years. The researchers found that those who reported to having greater feelings of loneliness, were 40% more likely to get dementia. While there's no one clear explanation as to why, researchers believe some people may cope with feelings of loneliness by behaving in ways that can damage the brain, like binge drinking or being sedentary.

Again, these studies show possible links to dementia—it doesn't mean these things can cause it.

Dr. Lawal says, there are several actions you can take to limit your risk. "Don't smoke, protect yourself against concussions when participating in high-impact activities, don't over-consume alcohol, stay active and eat a balanced diet," he says.

Try to live a healthy lifestyle, to the best of your ability.

Reference: Bustle (November 5, 2018) “7 Weird And Surprising Things Linked To Dementia”

What Should I Know About Buying a Vacation Home on the Beach?

What Should I Know About Buying a Vacation Home on the Beach?

“Buying a beach house can bring an excellent return on investment (ROI), a reliable income stream and access to a delightful vacation spot.”

There are many beach house investors, who purchase homes they will rent out during peak tourism times. A Florida beach house owner might open her home to rent from October through March, when residents from up north want to see the sun. Beach house investors say that, in many cases, their rental income for this period takes care of their expenses for the entire year. This lets them live in the house for free, during the non-peak season.

Investopedia’s recent article, “Economics of Buying a Beach House: Read Before You Buy,” cautions that before taking the beach house plunge, it is critical to understand the underlying economics involved, like high borrowing costs, high insurance rates, bills, plus the standard issues with property management.

Real Estate Costs and Financing. These properties are substantially more expensive than similar homes located inland. Mortgage interest rates for vacation properties are also higher than those for primary homes. This can really add up.

Insurance. The homeowner’s insurance on your beach house may be several times more expensive than that of your primary home. This is primarily because of the mandatory flood insurance. That coverage has skyrocketed in recent years, especially on the East Coast with all of the hurricane damage. Note that an annual premium of $10,000 or more for flood insurance isn’t uncommon for a Florida beach house. Other East Coast states have more reasonably-priced premiums. There is also California with somewhat lower insurance prices, but higher real estate prices.

Regular Expenses. Renting a beach house means bill-paying, in addition to the mortgage, utility, and cable. Your tax bill is likely to be high with the value of beach houses. If your beach house is an income property, you’ll typically pay for marketing and advertising, and hiring an agent to show your property.

Property Management. This involves much more than signing lease agreements and collecting rent. If the AC breaks, you’re responsible for the repairs. There is also the cost of landscaping, painting, roof maintenance and pest control.

You’re going to want to hire a full-time property manager to deal with all of these daily tasks, market your property in tourist season, get the leases signed and handle the tenants. A reliable property manager won’t be inexpensive. They can charge 6% to 12% of collected rent, which can quickly reduce into your profit margin.

Reference: Investopedia (October 18, 2018) “Economics of Buying a Beach House: Read Before You Buy”

 

Am I Required to Pay My Dead Spouse’s Medical Bills?

Am I Required to Pay My Dead Spouse’s Medical Bills?

“Be careful what papers you sign, if you bring a sick spouse for medical care.”

When a person passes away, his or her spouse may be responsible for some of the decedent’s outstanding medical bills.

Generally, there are some items that a spouse might be required to pay, and others for which the spouse isn’t responsible.

nj.com’s recent article asks, “Do I have to pay my dead spouse's medical bills?” As you might imagine, it all depends on the specifics of the circumstances.

Spouses typically aren’t responsible for each other's debts, unless they sign paperwork agreeing to pay, like a guarantor.

 For medical bills, use caution with all of the forms required to be signed upon admission to a hospital. This can be an issue in the case of an emergency, when a spouse will hastily sign the paperwork admitting the ill spouse. Nonetheless, care should be taken to read these papers prior to signing.

The estate of the deceased spouse is generally responsible. The estate will usually pay reasonable medical and hospital expenses related to the deceased’s last illness.

If there are assets that pass to the surviving spouse, the executor is responsible to pay those medical bills from those assets. The executor must coordinate the assets of the estate and pay the deceased person’s debts, including credit card debt, before assets are distributed to the beneficiaries.

The executor’s duties usually include finding all of the deceased spouse's assets. The executor is also responsible for maintaining these assets in safe condition, until they can be properly distributed to those named in the will or to creditors.

Reference: nj.com (October 23, 2018) “Do I have to pay my dead spouse's medical bills?”

 

Why Would I Need to Create a Special Needs Trust?

Why Would I Need to Create a Special Needs Trust?

“You may want to see if any of these five common reasons for establishing a special needs trust apply to your family.”

WTOP’s recent article, “5 reasons to consider a special needs trust,” explains that a special needs trust (also called a supplemental needs trust) is created to hold and protect financial assets for the benefit of a disabled beneficiary.

A trust is a legal structure that’s used to collect and manage assets and can receive contributions, such as assets gifted from family members during their lifetime. A special needs trust can be created to receive assets from a legal settlement, when the recipient is a minor.

Other special needs trusts are part of an estate plan, when family members want to provide assets or life insurance proceeds at their own death as an inheritance for someone with special needs. If you’re not clear about a need for a special needs trust, talk with an elder care or trusts attorney to review your specific situation. In the meantime, here are some common uses:

Reserving assets for support during your life or at your death. Trusts are typically intended to provide a legal way to title and hold assets to be used to help beneficiaries. This trust is used to benefit someone who has physical or mental disabilities. A special needs trust can be used to provide for a variety of needs and the initial trust language specifies the donor’s intended use of the funds.

Designating a trustee. A major benefit of a trust is the ability to appoint a trustee to manage investment decisions and oversee the distribution of the trust assets. With a beneficiary who’s unable to manage finances independently, the trustee can safeguard the assets and administer spending decisions. The trustee must also ensure that the trust assets are used pursuant to the initial intentions.

Maintaining a disabled person’s aid from a government program. It’s not uncommon for a well-meaning family member to err and name the disabled family member as a beneficiary in their will. This could actually disadvantage the individual, by disrupting the aid they receive from the government. Many government programs have income requirements that cannot be exceeded. To protect the beneficiary, grantors can direct the intended inheritance or life insurance benefits to the special needs trust. This won’t jeopardize government income or other services that may be their sole source of support.

Preserving family wealth. This trust structure can create a way to provide assets, while limiting their use. A special needs trust also helps ensure that wealth is allocated properly.

If any of these situations apply to your family, think about creating a special needs trust during your lifetime. You can also wait to change your estate plan to establish the trust upon your death.

Be sure to work with a qualified trust attorney to properly handle the related tax and estate planning consequences and to be certain the trust stands up to legal scrutiny.

Reference: WTOP (October 25, 2018) “5 reasons to consider a special needs trust”

How Do I Qualify for Medicaid?

How Do I Qualify for Medicaid?

“It is often very difficult to qualify for Medicaid.  However, the following steps can help determine if you are eligible and improve your odds of obtaining coverage.”

If you’re in need of long-term care and can’t afford to pay for either the actual care you need or any insurance or annuity protection, you’ll need to apply for coverage under Medicaid. It’s designed to provide managed care to people who are disabled or age 65 or older and have income and assets that fall below certain federal and state thresholds.

Investopedia’s recent article, “How to Qualify for Medicaid: Tips and Eligibility Requirements,” explains that while Medicaid is federally funded, it’s administered at the state level. Each state also has its own set of rules and regulations for the program. If you’re single, you typically can’t have more than $2,000 worth of cash or other assets outside of your personal residence, vehicle, and other necessary items. If you’re married and your spouse is still able to live independently (known as a “community spouse”), he or she is allowed to keep up to 50% of your joint assets. Your single or joint income usually can’t exceed 133% of the federal poverty level, but several states have thresholds above this.

You’ll also have to prove medically you’re disabled in most cases, although certain exceptions apply. And you must also be either a U.S. citizen or have a green card and prove your residency within the state. However, if your assets or income exceed the state thresholds, you’ll need to reduce your estate. This is known as “spending down.” You might also be able to create a spend-down trust.  However, this is non-enforceable by you—and you may lose assets permanently, if the party you gift them to gets into financial trouble.

A frequent reason for people to be denied Medicaid coverage, is incomplete information on the application. Before you start, collect these documents to submit:

• Birth certificate or driver license (to prove your age);
• Proof of citizenship;
• Assets and income documentation;
• Copies of your mortgage, lease, rent payment receipts, utility bills, or other documents that prove where you live;
• Medical records showing your disability; and
• Information about any other health insurance coverage you may have.

You state may require different or additional documentation.

You cannot simply gift your assets or belongings to your children or a reliable friend to use them on your behalf. Before or during the Medicaid application process, consider consulting with attorney who specializes in elder law and thoroughly understands the Medicaid laws in your state. He or she can help you with creating a Medicaid trust or other legal gifting moves that you may be able to make.

Qualifying for Medicaid is not an easy process. Get all of the help you can from a qualified elder law attorney, before you start this process to maximize your chances of acceptance.  You should also be ready to drastically decrease the size of your acceptable estate, through a gifting or donation program to meet the eligibility thresholds for your state.

Reference: Investopedia (October 6, 2018) “How to Qualify for Medicaid: Tips and Eligibility Requirements”

How Do I Help My Elderly Parent Manage His Money?

How Do I Help My Elderly Parent Manage His Money?

“It’s a common issue as investors live longer and hold portfolios amassed over a lifetime.”

Experts say that children need to approach financial discussions with their parents with a soft touch. Everyone slows down as they age, and it can be catastrophic for seniors who choose overly risky holdings, forget to monitor their portfolio or fall victim to schemers.

U.S. News & World Report’s recent article, “How to Help Aging Parents Manage Portfolios,” says that, at some point, adult children may believe it's time to help with responses from the subtle (just a few suggestions) to the intermediate (monitoring accounts) to the extreme (gaining control from their parents).  However, how do you know when it's the right time?

These are delicate subjects, and it can be a hard to speak with aging parents about their money and their potential to be the targets of scams. Loneliness and depression raise the odds of financial exploitation. Changes in social circumstances, like the loss of a spouse, can greatly increase risk and vulnerability.

Right after losing the ability to drive, the biggest loss of independence a senior citizen experiences is the ability to handle their own finances. Just a few mistakes, can wreck a portfolio's ability to cover the parents' remaining expenses or provide the bequests they'd hoped to leave to family.

While control issues make many uncomfortable, hurt feelings and hassles are in many cases much worse, if problems are left to fester. The first step is to be aware of signs of mental decline—don’t jump to conclusions each time a senior struggles for a word. It’s not good to have your parent feel like she’s under a microscope and being constantly monitored.

If there are past-due notices all about, or if there’s a lot of charity mail, it might be a sign of a problem handling finances or dealing with day-to-day financial matters.

Start that discussion gently, by talking about your own finances to help put the parent at ease. Make it casual, not a confrontation with a formal sit-down. Do it one-on-one.

If the first steps raise concerns, the child can simply offer some suggestions to make things run more smoothly, like setting up automatic cash transfers from the parent's investment accounts to a bank account, and automatic bill payments from the bank. Assisting with the parent's tax return, can also ease the parent's burdens and allow the child to keep on top of things. In addition, the child can register with the bank to get copies of bank and investment statements, so that he can monitor if there are any suspicious withdrawals or failures to pay monthly expenses.

If the parent is showing distinct signs of weakened abilities, it might be time to go further and ask for access to the parent's accounts. Make this an offer to help, not a takeover. That way the child can monitor financial accounts.

You can also have your parent designate you as their agent in a durable power of attorney, which allows you to transact business on their behalf.

At some point, an elderly person may not be competent to handle financial affairs at all. Poorly-advised investments or susceptibility to scams are a definite sign of vulnerability. The adult child can petition a judge to make the child the parent's conservator or guardian to take charge of finances and other matters involving the parent's welfare. It is an adversarial and complex proceeding with attorneys and medical experts.

Don't wait until something has happened. Being proactive is a better approach for all concerned.

Reference: U.S. News & World Report (October 22, 2018) “How to Help Aging Parents Manage Portfolios”