Four Tips For Successfully Managing Your Parents' Money

If you’ve been asked to take on such a responsibility, tread carefully and keep in mind the following four rules:

1) Understand The Full Financial Picture. If you are not able to communicate or have access to the whole financial picture, then you simply can't do a good job of managing their investments. This is a prerequisite to accepting the responsibility.

2) Don't Be Afraid To Use A Professional. There are three reasons for this: One, it takes some of the responsibility and burden off of you; two, a good financial planner can often provide greater investment discipline; and three, a planner is emotionally removed from the money. Especially when managing your parents’ money, emotions can wreak havoc on investment decisions.

3) Know How Much Capital Is Needed To Support Your Parents. If a parent might reasonably live to age 90, plan for age 95. Based on that, determine how much money is required to cover their expenses.

4) Communicate With other Family Members. You can minimize criticism by communicating what you are doing, why you are doing it, and to get notional buy-in. You don't need consensus, but if the family is close enough, at least they will be part of the process and less likely to complain, attack or possibly sue you 10 years from now if there is no inheritance.

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