Changing Roles: When Should the Parent Hand Financial Responsibility to a Son or Daughter?

As your parent ages, it can be a good idea for you to take over your parent’s finances, but when is the right time to do so? If you approach your parent too soon, you risk insulting them, and if you wait too long, you won’t be able to get the necessary signatures. In this article, Cleveland estate planning attorney Bart Leonardi offers some advice on how to determine when a parent should hand financial responsibility to a son or daughter.

FIRST AND FOREMOST: DON’T WAIT TOO LONG

If you wait until your parent is no longer able to handle his or her own financial affairs, you will not be able to help without court intervention. This can be a long and emotionally taxing process. So if you’re going to err, err on the side of taking over your parent’s financial responsibilities too soon.

Many of the ways you can take over your parent’s finances require your parent’s signature and capacity. Capacity is a legal term for a person’s ability to understand the nature and consequences of his or her acts. As your parent ages, they are more likely to suffer from a mental incapacity, such as dementia, or a physical incapacity, such as hospitalization for a coma.

For example, no doubt one of the means by which you will assume responsibility for your parent’s finances is through a power of attorney. A power of attorney requires contractual capacity. In Ohio, contractual capacity is defined as “a person’s ability to understand in a meaningful way, at the time the contract is executed, the nature, scope and effect of the contract.” If your parent is unable to satisfy this test—that is, he or she is unable to understand the nature, scope, or effect of the contract—the power of attorney he or she signed will be invalid.

Lack of capacity can also be an issue if your parent wants to change his or her bank account to a joint checking account with your name on it. This requires your parent to sign a new signature card, and he or she will need legal capacity to do so. While the bar for this type of action is lower than for a power of attorney, if your parent is in a coma or has dementia, they may not have the requisite capacity—not to mention that individual bank’s may have their own standards.

WATCH FOR SIGNS THAT YOUR PARENT IS UNABLE TO HANDLE DAY-TO-DAY TASKS

The next tip may seem obvious. If you can’t wait too long because your parent may be unable to transfer control over his or her financial assets, you should watch for signs that your parent is having a hard time handling day-to-day tasks like buying groceries or driving. Also watch for short-term memory loss, as this could also be sign of dementia.

FIND THE RIGHT TIME AND PLACE TO DISCUSS THE ISSUE WITH YOUR PARENT

If your parent has not already brought up the topic of transferring financial responsibility to you, you may have to approach your parent about the subject. This can be a difficult thing to do. Find a time when both you and your parents are relaxed. (This likely means avoid the holidays!) You should also have the conversation in a private setting that your parent is familiar with, such as their home or yours.

If your parent objects to the conversation, you may choose continue to voice your opinion, but do not become angry, do make threats, and do not attempt to force your parent to do anything. Ultimately, the decision belongs to your parent, and while you can express your concern about their situation, you cannot make the decision for them.

LET US WORK WITH YOUR FAMILY

Although discussing the topic is a family matter, the Cleveland estate planning and probate law firm of Bart Leonardi, LLC, can assist you in becoming more knowledgeable about your options and with preparing any necessary documents for shifting financial responsibility from your parent to you. Get the right legal advice on any estate planning matter with a free initial consultation.