Time to take away the financial keys?

For nearly 10 years, her mother was crumbling "like a block of Swiss cheese," recalls Phyllis Cerys, an education consultant with Cerys Consulting Consortium in Melrose, Massachusetts.

She had macular degeneration of her eyes, a heart that required a pacemaker to keep beating in rhythm, and had suffered a series of tiny strokes. "But Mom was in denial that she was getting older and didn't want to talk about her steadily deteriorating health," says Cerys. "Every time I tried to talk to her about her finances, she said, ‘Nope. I'm not going to let you take care of any of that.'"

The year her mom, Georganne, who lived roughly 3,000 miles away in Huntington Park, California, turned 81, it all collapsed. Cerys' mother fell twice in her home and broke both ankles, and, worst of all, she had a more severe stroke—that ultimately landed her in the hospital.

Cerys put her consulting practice on hold and flew to California to take over. One thing in her corner: When her father died of lung cancer 2 decades earlier, her mother, who was naïve about even the basics of opening a checking account in her name, allowed her daughter to be added as a co-owner, or joint tenant, to her bank account—where she deposited the proceeds from his life insurance and his pension.

"That was the only thing she was willing to do," says Cerys. "I went on for a long time thinking, OK, that's probably enough." She did, however, periodically dole out cash when needed to cover home repairs, such as a new roof or to fix a broken pipe.

But it wasn't until her mom landed in the hospital that she knew she had to act fast. "When I realized how things were spiraling down and how much her health had deteriorated, I told her that all of these things she had been putting off, like redoing her will, having her health care proxy in place, and naming durable power of attorney, had to be taken care of now—this week."

The time had come to take the financial keys away.

Luckily, her mother was still mentally, if not physically, sharp. "This time, she wasn't resistant," says Cerys. "I was overwhelmed with trying to deal with Mom's health care, but I knew I had to get the financial pieces in place."

While everyone's situation is different—and it might not be a parent, but rather a spouse or yourself whose welfare is at stake—there are certain financial moves to make now before a health crisis happens to your family.

1. Recognize the signs

Weakened health and mental capability are slow and gradual, as Cerys witnessed firsthand. "Why are we surprised by aging?" asks Dr. Timothy Habbershon, Managing Director, Fidelity Center for Family Engagement. "It is the one thing we know about life and the signs are relatively characteristic. Aging is not unique; it's just uniquely our family's experience."

"The more we normalize aging and life transitions, the more naturally a partnership around financial responsibilities can develop," says Habbershon. "Part of normalizing is being attuned to the signs and impact of aging. Aging is not a point-in-time event, which is why we can discuss and plan for it."

In Cerys' case, her brother and other relatives who lived near her mom weren't able to help, so she hired a geriatric social worker to act as her health care advocate. He became her "feet on the street and dropped in on her mom at least every week," she says. When Cerys had to return home after her initial 6-week stay, she credits him with finding the best assisted living option for her mother, and his reports kept her in the loop on how her mother was faring.

Read Viewpoints on Fidelity.com: Prevent financial elder abuse and see Fidelity Life Events caregiving content and resources

2. Make time for regular conversations

The best way to avoid financial missteps and potential financial abuse by outsiders is to have regular conversations within the family that correspond to the signs of aging. The surest way to turn fearful or sad conversations into hard or impossible conversations is to put them off until a physical or cognitive health crisis occurs, says Habbershon.

Many of these parent-child discussions don't start until the parent is about 70 years old, on average. Other catalysts to beginning conversations included the death of a spouse or family member, the deterioration of a loved one's health, or someone making a financial mistake. "But why wait until age 70 or a health crisis trigger?" asks Habbershon. "We know that time and transparency are 2 key factors that increase the odds of family unity around wealth preservation and transference."

One stumbling block is that parents often don't want to share private financial figures. It's personal. Don't get trapped in that debate. You don't need specifics to have meaningful conversations. In fact, according to Habbershon, you actually want to start with more conceptual conversations around wishes, guiding principles, and where financial accounts and documents are held. It's practice for later when a more detailed or harder conversation is necessary.

The trickiest part, though, is typically the role reversal. Telling your parent what to do is awkward for both of you. One way to kick off a conversation is to chat about how you've met with a lawyer to draft powers of attorney for financial and health situations so that someone, say, your spouse, can handle things if you're ever in a situation in which you can't make those choices yourself.

Then ask your parents what protections they already have in place. Or you might casually toss out that you've read recently about how important it is that kids have access to their parents' personal finance information in case they ever need help managing their money.

Tip: Another strategy is to suggest that you take over one of their financial tasks, such as preparing their taxes, or setting up automatic payments for regular bills to simplify checkwriting and be sure of timely payments.

3. Find the documents

If your parents are open to it, discuss where they keep vital documents, such as the deed to their home, tax returns, wills, trusts, and powers of attorney.

Get a list of their bank and investment accounts, insurance policies, and credit cards. Ask where the passcodes are stored, so you can access these accounts down the road. Find out who the beneficiaries are and ask whether they have a power of attorney or other documentation associated with a more comprehensive estate plan. And remember to keep this conversational and relational, Habbershon suggests. It should not feel like you are a private investigator. Be a child who is partnering for care into the future.

Additional information you'll eventually want to gather up includes contact information for their doctors, accountant, attorney, mortgage company, financial planner, and brokerage firm. If your parents are retired, you might ask about various income streams such as a pension, Social Security, and IRA withdrawals. Meantime, get their Social Security numbers and Medicare details.

Tip: You may want to consider helping your parents obtain copies of their credit reports at AnnualCreditReport.com or through another similar service, which can help you or your parents monitor for odd items and potential identity theft. And consider whether your parents should register their phone number(s) with the National Do Not Call Registry to help ward off phone solicitations. Home and cell phone numbers can be registered free at www.donotcall.gov or by calling 888-382-1222. There are also separate state registries. These sometimes provide additional safeguards.

4. Establish a power of attorney

Cerys' first legal move was to hire a local elder care attorney to obtain and sign a power of attorney for her mother that enabled her to legally take care of her mother's finances. This document is key to paying bills, managing investments, or making important financial decisions for someone other than yourself.

If properly drafted and executed, a power of attorney can provide the authorization for one person to handle all financial transactions on behalf of another—from signing checks to selling a parent's home, as Cerys had to do when her mother entered the assisted living care facility and it was clear she would never be able to live at home again.

A critical reason to normalize the aging process is because you can't wait until someone doesn't have the mental aptitude to handle financial transactions before this document is signed. For a power of attorney to be valid, your parent must be competent when they signs it.

Tip: Habbershon suggests considering these 4 points related to establishing a power of attorney:

1. Base the choice of power of attorney on whether the child has the skills, time, and location to do it well.
2. Keep it transparent with other siblings.
3. Keep the decision focused on the realities associated with this one role and decision, versus debating the whole estate plan or childhood feelings.
4. As a system of checks and balances, and to further transparency, consider naming 2 children or having different children in different roles. The sad reality is that most elder financial abuse is committed by family members or close friends.

Cerys agrees: "If your parent or you and your siblings are concerned about a single person having all the power, put checks and balances in place," she suggests. You might give one child power of attorney on investment accounts and name 2 children to have access to the bank accounts so they can see where those checks are going.

Many financial institutions and brokerages have their own forms that must be signed by the account holder before the institution will provide account authorization to anyone other than the account holder; simply providing a copy of the power of attorney may not be sufficient.

Generally, a power of attorney should comply with the laws of the state in which it is executed which, in most situations, is the state in which the person granting the power of attorney resides. If your parents split their time between more than one location or have assets located in more than one state, your attorney will also consider nuances of other states' laws in drafting the documents. Consider hiring a local lawyer who specializes in elder law to draft this document, as Cerys did. If someone does become incapacitated without having assigned power of attorney, the court will step in to appoint a guardian.

5. Revisit the will

This is also the time to review, or write, a will to determine how someone's assets will be divided when they are gone. Cerys had her mother's will redrafted to reflect her mother's current wishes regarding how she wanted her assets distributed. Since the time her mother's original will had been executed, the occurrence of many personal changes and life events (e.g., death of her spouse, birth of grandchildren) caused Cerys' mother to rethink her original intentions.

Tip: Seeking the wish or vision for the future is key, Habbershon suggests. Don't let fears or the power of the moment dominate the decisions.

6. Sign a health care directive*

A health care proxy, or a living will, allows a parent to give a child or any other trusted person the authority to make life-and-death medical decisions on the parent's behalf when the parent cannot. Let your parents' doctors know you have this document. Your parents might also have to sign a Health Insurance Portability and Accountability Act (HIPAA) release form to give you access to their medical documents.

Read Viewpoints on Fidelity.com: Time to update a health care proxy?

7. Store your documents in a safe place

Make sure at least one family member knows where important documents, contact information, and account statements are kept. Important documents can be stored in an attorney's office or a bank safe-deposit box, or any safe place where they can be retrieved in an emergency. A secure virtual safe, such as FidSafe^®, is another good option.

Parting thought: This family conversation is not a one-time deal. Review your important health, financial, and estate planning documents at least annually.