Seniors 5 tips, arranging for someone else to handle financial affairs

One area that few seniors prepare for is arranging for someone else to handle their financial affairs when they can no longer fully care for themselves. This is easy to put off for three primary reasons.

Why People Don’t Arrange for Handling of Financial Affairs

First, there are a lot of difficult emotions involved with the thought of losing our cognitive ability and the inherent freedom to financially care for ourselves. This is something we have done for ourselves all our lives, so it’s very hard to imagine not being able to do so.

Second, for many of us the loss of cognitive ability is slow and almost unrecognizable. There isn’t an urgency that suggests we need to do anything soon. Often by the time we do realize we need help, it’s too late for us to arrange for it.

Finally, while we’re in good health we tend not to consider the possibility of a sudden catastrophic health event. Yet such a crisis can leave us without a plan and no way in which to have any say in what happens. (For related reading, see: Power of Attorney: Do You Need One?)

Fortunately, if you are reading this you have time to prepare. The following information is based on a presentation by Carolyn McClanahan, MD, CFP, given to the National Association of Personal Financial Advisors in May 2016. She suggests the major questions to answer are:

  1. Who will be in charge?
  2. Are the right documents in place?
  3. How will you monitor your decline?
  4. Do you have a written investment policy?
  5. How will the transition occur?

Who Will Be in charge?

Choosing a trusted third party to take over bill-paying, investment management, and financial caretaking is essential. Options include a spouse, a child or other relative, a friend, a professional bookkeeper or a financial planner. For couples, the odds are that both partners won’t lose their ability to handle financial affairs at the same time. If one spouse handles most of the money matters, it’s important that the non-involved spouse becomes involved in the bill-paying routine and understands the basics of the couple’s finances. If you are the caretaking or surviving spouse, or if you are single, designating a financial caretaker is crucial. (For more from this author, see: How to Find Happiness Through Work.)

Are the Right Documents in Place?

The most important document is your power of attorney that names the person or organization who will be in charge of your finances. If the bulk of your net worth is in retirement accounts, annuities and jointly owned, another option is to create a living trust, place everything you own individually in it, and identify the successor trustee who is in charge when you can no longer make decisions. (For related reading, see: Establishing a Revocable Living Trust.)

How Will You Monitor Your Decline?

It’s important to have some written agreement in place—even if for no one but yourself—that lists the triggering events which will indicate to you the time has come to transfer the control to someone else. It’s up to you to determine what these triggers are and to self-assess every few years.

Do You Have a Written Investment Policy?

And is it current? This is a good time to review your investment policy, making sure it’s been updated to reflect your changing cash flow needs and asset allocation. You might also evaluate your ownership of any complicated and illiquid assets like real estate or closely held business interests. It may be wise to simplify and liquidate them while you’re still capable of managing them, before it’s time to pass responsibility to a surrogate.

Once you’ve answered these four questions, it’s time to consider the last step that I’ll address next week: how the transition should take place. (For more from this author, see: How Income and Financial Debts Affect Happiness.)

Article provided by: Rick Kahler, CFP®, ChFC