By helping your parents or other elderly relatives to manage their money efficiently, you can protect them and give them a better standard of life. Together with financial wellbeing experts, nudge, we take a look at a few ways you can help.
Knowing when to step in and help with money matters for your aging parents or relatives can be tricky. Dementia or physical disabilities, for example, might make everyday tasks, such as writing cheques more challenging, so then it seems an obvious option. If this is not the case however, a gradual approach may be better.
Offering to see whether you can help reduce their household bills could make a big difference in making their money go further. Older people are less likely to switch providers, and are even more likely to be paying over the odds. Switching tariffs only takes a few minutes and could help them save money on everything from phones to gas and electricity.
It is estimated that more than £5bn worth of means-tested benefits go unclaimed by retired people each year. There are a number of benefits designed to help older people who need a bit of extra help. Two that you may find useful to look at are:
Despite possibly not earning a salary anymore, an elderly person may still have to pay tax. There are also a series of allowances that should be taken advantage of. Many of these are dependent on exact age and health which obviously change so it is worth regularly reviewing. For more information on income tax, click here.
Equity release is a way to convert capital in a home into cash or income. There are two distinct methods of equity release for over 55s:
In both cases, the homeowner is granted the right to remain in the property until they die, go into care or sell it. With the Lifetime Mortgage, there is also a guarantee the debt will not exceed the value of the property.
All reputable equity release providers are members of the Equity Release Council (formerly SHIP), a consumer protection trade body set up in 1991. The Equity Release Council sets out strict standards in their code of conduct. However, homeowners should always think carefully before securing other debts against their home as the home may be at risk if necessary repayments are not kept up.
A power of attorney enables someone to manage someone else's affairs when they are no longer able to, or no longer wants to, do this themselves. It's a useful tool for families dealing with dementia or Alzheimer's disease, as long as it is set up while the sufferer still has the mental capacity to make decisions.
The Alzheimer's Society recently reported there to be 850,000 people with dementia in the UK (of which 40,000 are younger than 65), and more than 1 million expected by 2025. Yet only 12% of people have a power of attorney in place. If a power of attorney has not been arranged, not only will you be unable to manage your loved one's finances (even if it is to pay for their care), you also won't be able to sort out (or officially discuss with providers on their behalf) things like utility accounts or pension schemes.
If it gets to the stage where someone can't manage their own affairs and there is no power of attorney, you'll have to apply for the power to manage a person's financial affairs. However, you should expect to be carefully monitored to make sure that you're always acting in the person's best interests, and restricted with the types of decisions you can make. There are generally two types of power of attorney and both require separate applications:
For more information on setting up a power of attorney click here.
If your elderly relative has a lot of money in savings or investments, you could ask them if they would like to put the investments into trust. This could be used to pay for their care later on. A trust means they can set down more specific rules about how the money can be used. They can appoint trustees (usually friends or family) to manage the money according to the rules of the trust.