By: Nancy Honig
We often think of financial planning for the times when we are young and starting to put money into savings. It could be for that first car, an engagement ring, a home, or retirement. But what we don’t often think about is that senior adults still need to think about budgeting and their financial future. They also need to consider what may happen to their assets when they are gone or if they are no longer able to take care of finances and their Caregivers become responsible.
It almost goes without saying but it is important for everyone to live within their means. As we age some expenses may go down while others such as medication or insurance go up. It is important to work with bankers, investment professionals and/or accountants to stay abreast of any changes in financial health. It is possible only one spouse was privy to that information and is no longer able to take care of the finances so the other may have no idea what their financial health is. If you are a caregiver who has been put in the role of helping with finances, it is important to know what the financial situation is.
Know where to find important documents. Obviously, a will is the most important document family may think to have access to. Though wills are essential, there are many other documents a financial caregiver needs. Insurance policies, pension records, banking account and investments are just a few. Locate and organize these as soon as possible, so in the event of an emergency, all financial documents are together. It is also important that passwords to accounts are available and kept in a safe place. In today’s electronic society you can easily be locked out of taking care of important financial obligations if you don’t have the correct emails or passwords.
If you or a loved one is reaching the point where someone else may need to help step in and assist with or take care of finances, there are some important things to think about. First it needs to be decided who will take on those responsibilities. Will it be a spouse, children, siblings? It is important to have some family discussions to make sure everyone understands who will be responsible and what they will be doing. Finances can cause family hardships in a hurry so planning and discussions prior to handing over finances are critical. It is important to allow a loved one to retain their independence and feel included in decisions as well so make sure they are included if they possibly can be.
Consider automatic payment or direct deposit options. If a senior has not been doing this in the past this can certainly help simplify their bill paying options. If direct payments are made make sure they correspond with automatic deposits such as social security to prevent overdrafts if automatic payments are made prior to automatic deposits.
Once access to accounts and bill payments are set up, a caregiver should look to the future, and anticipate what’s to come. Take an inventory of assets versus debts to make sure bills can be adequately paid. There may be decisions that need to be made legally about adding others to accounts, or to sign a Durable Power of Attorney (DPOA).
The DPOA allows a caregiver legal power over their loved one, which can include real estate, financial and banking transactions. It is effective immediately after being signed and stays in place if the person becomes disabled or incompetent. The health care proxy allows a caregiver to make health care decisions for the person in the event they are unable to do so themselves. Some states also have living wills, which may act in place of the health care proxy.
These documents are particularly important because if there is no DPOA and health care proxy, and it develops that an elder lacks capacity to make financial or health care decision, then a guardianship (over the person) or conservatorship (over finances only) may need to be established by a court proceeding. This can be an expensive and complex legal process at a time when the elder and family face a medical or situational crisis.
There is much to think about as we age. Making sure we plan early and well can be a benefit to ourselves and our loved ones. Have those conversations, meet with those involved in your finances, and prepare now rather than later.
