What to do when adult children become the client

At some point in time, an adult child may suddenly become a client’s primary financial decision-maker as a result of an illness, cognitive decline, or another major life event.

“When this happens, the first step is to confirm the child has the legal authority to make decisions on behalf of their parents,” said Steven Rogé, chief investment officer and CEO at R.W. Rogé & Company, Inc.

The adult child could effectively take on an agent role, such as through a durable power of attorney or trustee designation, with guidance from the client’s legal counsel.

Once an advisor understands the relationship and the child’s responsibilities, a discovery call is worthwhile.

“The discovery call allows us to get to know the adult child better and build the relationship naturally as an extension of our relationship with their parents, while always keeping in mind that the parents are the clients,” Rogé explained.

Watch for insurance and financial planning gaps

The most significant gap that tends to emerge when adult children take over their parents’ finances is long-term care and other related health care expenses.

“Most individuals do not have long-term care coverage, so taking an inventory of assets and budgeting for long-term care costs are important priorities,” Rogé said.

After the cost of care has been addressed, making sure account beneficiary designations are in place becomes the next goal.

“Accounts that typically have beneficiary designations and must be checked include IRAs, annuities, and life insurance policies,” Rogé said.

Other helpful areas that aren’t typically addressed include getting the adult child set up with bill-pay access on the parents’ checking account and listed as an authorized contact on their utility accounts.

This makes it easier to pay bills, manage accounts, and handle administrative tasks, such as making changes to services.

Consider a formal caregiving agreement

Becoming a caregiver to an aging parent is an extraordinary undertaking and deserves acknowledgment.

The strain is twofold, both financial and mental, as caregivers almost always incur lost pay to attend to their parents’ needs. They also tend to incur out-of-pocket expenses that add up, and like most individuals, they have a difficult time keeping track of them while managing their increasingly hectic lives.

“Taking care of a family member around the clock comes with major financial implications. You suddenly have reduced work hours, you lose out on promotions, and you may have to forget early retirement,” said Jason Gerstenberger of Insured With Jason.

That’s why a formal caregiving agreement can serve as a valuable document.

“This is especially important if the caregiver has siblings who may want a full accounting of expenses paid or need to be reimbursed themselves,” explained Rogé.

Establish a family relationship early on

Ideally, advisors want to have a relationship with the next generation before a crisis occurs.

“The best high-value move is to have a family meeting while the parent is healthy and sharp. Have the advisor, the parent, and the adult children spend an hour and hash out the details because every conversation is 90% easier when it’s hypothetical,” Gerstenberger said.

While not a legal document, Rogé recommends a trusted contact form from the parents that authorizes us to share certain information with individuals of their choosing.

This usually helps bridge the gap between the incapacitation or death of a loved one and an advisor receiving legal instructions.

Rogé also encourages clients to complete an estate planning organizer that includes key information, so that advisors can quickly find where all their accounts and policies are located.

The organizer may also make it easier to identify all the working professionals involved, such as their accountant, estate planner, and financial advisor.

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