How Do I Manage My Parents’ Money When They Can’t?

The hardest part of managing a parent’s money is figuring out how to make it last. Photo courtesy of Flickr user JBStafford.

Paul Solman frequently answers questions from the NewsHour audience on business and economic news on his Making Sen$e page. Friday’s comes from a reader at Next Avenue. The NewsHour has partnered with Next Avenue, a new PBS website that offers articles, blogs and other critical information for adults over 50.


Question: What’s the best way to manage a parent’s money when he or she is unable to do so? And how should I deal with communicating the plans with my siblings?

Paul Solman: I have dealt with this problem personally, as my dad lived past 99. I and my one sibling — my sister — got him to sign over power of attorney to us. The problem was that he had begun to spend somewhat indiscriminately, bidding on art, and the auction house wouldn’t — or couldn’t — simply refuse his bids just because we asked them to.

It turns out this is a common problem with old people, and especially very old ones: they lose their aversion to risk and become increasingly uninhibited financially. (Don’t even ask about “carnal knowledge.”)

Step two: my sister began to manage our dad’s bank statements. I monitored his credit card for anomalies and immediately found an egregious one: a monthly charge from Citicorp for some sort of utterly unwanted insurance, obviously sold to him by phone. I had it removed and asked to speak to a supervisor, identifying myself as a journalist.

“You should look into this further,” the man told me. “You have no idea how much of it is going on.” And this was the guy from Citicorp!

In our case, all this was easy. Neither my sister nor I would have dreamed of taking any of these steps without the other. You shouldn’t either. And if you have trouble working as a group, perhaps you can decide on a trusted person — a lawyer or financial adviser, say — to take on the role, under the family’s supervision.

The hardest thing, we found, was figuring out how to manage our dad’s money. Investment safety was the key consideration: he needed to preserve what he had so that, given his costly but high quality lifestyle, he wouldn’t outlive it. We paid a younger person — $25,000 a year, I think — to live with him in his rent-controlled New York City apartment, while hiring a young person to spend the day with him as well. He went out for all meals, paying for himself and his companion. He never went to an institution. He loved his life. But all in all, he cost about $135,000 a year. So his savings had to last.

This was pre-crash, when the interest rate on a diversified bond fund was more than 4 percent, enough to more than hold its value against inflation. As “The Onion” recently pointed out in a video, the price of money is mighty unpredictable.

So we put his money in a diversified bond fund. Today, given low interest rates, the decision is somewhat more difficult. All I can offer by way of advice is my own asset allocation, designed to preserve the savings my wife and I have managed to salt away over our working decades.

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions