People feel ‘overwhelmed’ at idea of taking on an elderly loved one’s finances

Nearly half of middle-aged people worry about handling their parents’ money when they can no longer handle it, a cross-generational study finds.

About a third of 35-59 year olds say they have no idea what their parents’ inheritance plans entail, while two in five say they have some idea but don’t know all the details.

The reluctance many feel to discuss money matters with family is exposed by the study by Schroders Personal Wealth, which surveyed a cohort of 1,000 midlife adults and an equally large group of people over 60 with at least one child.

This showed a lack of candor on the part of many of the older generation, a fifth of whom said they had never discussed their finances with their children.

About 37 percent said their reluctance was because they want their children to be financially independent, 28 percent felt it was none of their children’s business, and 23 percent thought the conversation would be awkward and overwhelming.

We have previously looked at how the elderly can prepare for a time when they can no longer manage their own affairs by issuing a power of attorney in advance. We also looked at how you approach making a will here.

But the Schroders Personal Wealth study shows that the younger generation needs help preparing for the sad reality of their parents’ aging and dying, especially if they’ve received little or no guidance to date.

Scroll down for expert tips on what to do if a family member is no longer able to make ends meet and how to manage their estate after their death.

Schroders found that 32 percent of people between the ages of 35 and 59 don’t know who their parents appointed as executors.

Some 44 percent of the younger age group say they worry about having to manage their parents’ money in the future.

Of those who expressed concern, 52 percent admitted to feeling overwhelmed by the prospect, and 50 percent feared doing something wrong.

Some 23 percent said they know nothing about finances so wouldn’t know where to start, and 34 percent were worried about making decisions that could cost them money.

“Not knowing or understanding family finances can cause sleepless nights and feelings of being overwhelmed,” says Ben Waterhouse, chief client officer at Schroders Personal Wealth.

“Here, we truly believe that breaking the taboo of talking about money with your family is a key factor in mental well-being.

“Often these conversations come too late or not at all.”

What you need to know about managing the finances of elderly relatives and estates of the deceased

Sean McCann, chartered financial planner at NFU Mutual, offers the following tips.

Elderly relatives help

– Recognize that interest in and ability to manage personal finances may decline with age.

– Many of the same principles of managing your own finances will apply.

– Review utility and insurance bills to make sure they’re getting a competitive deal.

– Check bank statements to identify subscriptions or other services that are no longer needed.

– Look at cash accounts and investments to make sure they’re getting a competitive deal.

– Make sure all life insurance policies are written in confidence. Not only does this speed up payment on death (proceeds can be paid out without waiting for inheritance tax), it can also protect the proceeds from inheritance tax.

– If they have a pension, make sure their provider has an up-to-date ‘letter of wishes’ stating who they want to be paid in the event of their death. The pension provider will take this into account when determining to whom any death benefits will be paid.

– If they want to leave the pension invested upon their death, so that the beneficiaries can continue to take it, check whether the pension provider offers this option, as many older pensions do not.

– Make sure wills are present – if not, the laws of heredity will apply which may not suit their wishes. Having a will reduces the risk of family conflict and makes it much easier to deal with the estate upon death.

– Keep records of all gifts made.

– Keep records of income and expenditure, so that it is easier to prove that periodic donations from income immediately qualify for exemption from inheritance tax.

– Plan estate taxes while your elderly relative still has mental capacity. Those who have power of attorney are limited in the gifts they can make on behalf of their family member.

Administration of the estate of a deceased relative

– Any assets owned by the deceased as ‘Joint Tenants’ with another person will automatically pass to the surviving owner. This can include bank accounts, investments and real estate.

– Collect all the details of the deceased’s assets. Often bank statements can help with this, income from stock dividends or foreign investments can help you identify the investments from which they were paid.

– Similarly, bank statements can be a good starting point when identifying donations made in previous years.

– Complete the The government’s “Tell us once” formThis allows the necessary measures to be taken with regard to the state pension or benefits to which the deceased was entitled.

– Notify life insurance and pension companies of the death. Consider seeking financial advice on pension payment options, which can make a significant difference to the amount of inheritance tax payable on a surviving partner’s estate.

– Inheritance tax is based on the value of the estate on the date of death and is normally payable within six months of death. If the executors sell the property at a lower price within four years, they can reclaim the excess inheritance tax. Similarly, they can make a chargeback if they sell stocks or other eligible investments at a lower price within 12 months of death.