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

Nearly half of middle aged people are anxious about handling their parents’ money once they are no longer able to cope, a cross-generational study has found.

Around a third of people aged 35-59 say they have no idea what their parents’ inheritance plans involve, while two in five say they have some awareness but don’t know all the details.

The reluctance many feel about discussing money matters with family is laid bare by the research from Schroders Personal Wealth, which questioned a 1,000-strong cohort of midlife adults, and the same-sized group of over-60s with at least one child.

This revealed a lack of candour by many in the older generation, a fifth of whom said they had never spoken to their children about their finances at all.

Some 37 per cent said their reticence was because they want their children to be financially independent, 28 per cent felt it wasn’t their children’s business, and 23 per cent thought the conversation would be uncomfortable and overwhelming.

We have previously looked at how older people can prepare for a time they might become unable to handle their own affairs, by setting up power of attorney in advance. We also looked at how to approach creating a will here.

But the Schroders Personal Wealth study shows that the younger generation needs help getting ready for the sad reality of their parents aging and dying too, especially if they have received little or no guidance so far.

Scroll down for expert tips what to do if a family member loses capacity to cope financially, and how to sort out their estate after their death.

Schroders found that 32 per cent of people aged 35-59 don’t know whom their parents have appointed as executors of their will.

Some 44 per cent of the younger age group said they feel worried about having to manage their parents’ money in the future.

Among those who expressed concern, 52 per cent admitted feeling overwhelmed at the prospect, and 50 per cent were afraid of doing something wrong.

Some 23 per cent said said they don’t know anything about finance so wouldn’t know where to start and 34 per cent were worried about making decisions that could lose them money.

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

‘This is where we truly believe that tackling the taboo of talking to your family about money is a key factor for mental wellbeing. 

‘Often, these conversations happen too late, or not at all.’

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

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

Helping older relatives

– Recognise that interest in and capacity to deal with personal finances can wane with age.

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

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

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

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

– Ensure any life insurance policies are written in trust. This will not only speed up payment on death (proceeds can be paid out without waiting for probate), it can also protect the proceeds from inheritance tax.

– If they have pensions, ensure that their provider has an up to date ‘letter of wishes’ setting out who they would like to benefit on their death. The pension provider will take this into consideration when deciding who any death benefits are paid to.

– Should they like to leave the pension invested on their death, allowing beneficiaries to continue to draw down from it, check the pension provider offers this facility, as many older pensions don’t.

– Ensure wills are in place – if not, the laws of intestacy will apply which may not suit their wishes. Having a will reduces the risk of family conflict and makes the task of dealing with the estate on death much easier.

– Keep records of any gifts made.

– Keep records of income and expenditure, so that it’s easier to prove that regular gifts made from income qualify for an immediate exemption from inheritance tax.

– Plan for Inheritance tax while your elderly relative still has mental capacity. Those holding power of attorney are limited on the gifts they can make on their relative’s behalf.

Managing the estate of a deceased relative

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

– Collate full details of the deceased’s assets. Often bank statements can help with this, income from share dividends or overseas investments can help you identify the investments they are paid from.

– Similarly, bank statements can be a good place to start when establishing any gifts that have been made in previous years.

– Complete the Government’s ‘Tell us once’ form, this will allow the necessary action to be taken regarding state pension or benefits the deceased was claiming.

– Let life insurance and pension companies know about the death. Consider taking financial advice on the options available for the payment of pension benefits, which can make a big difference to the amount of inheritance tax payable on the estate of a surviving partner.

– 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 property within four years at a lower price, they can reclaim any excess inheritance tax. Similarly, if they sell shares or other qualifying investment at a lower price within 12 months of death they can make a reclaim.