3 Steps to Lessen the Burden on Your Loved Ones When They Need to Take Over Your Finances

Benjamin Franklin famously quipped that the only certainties in life were death and taxes. Yet many of us try to ignore the inevitability of the former in a myriad of ways, not the least of which is neglecting to consider how our loved ones might be impacted when illness or death inhibits us from managing our own finances and household affairs.  A recent Wall Street Journal article chronicled the experience of one couple attempting to unravel the finances of the wife’s parents, who had recently moved to an assisted living facility and whose memories had begun to fail.  After a year and a half of effort, the couple is still trying to “reconstruct, clean up and resolve a financial life [they] were never privy to.”

Preparing for the likelihood of someone else taking over your finances and household affairs does not necessitate what some might consider an invasion of privacy, e.g. sharing the details of the amount of your assets and net worth, but rather focuses on preparation, organization, and communication.  Also, this task is not specific to any particular age group–unexpected events can happen at any age, so taking care of these issues at age 40 is no less important than taking care of them at age 80.  Consider the following three steps as a series of gifts you can give your loved ones that will save them time and help them avoid frustration (and probably do a better job on your behalf) as they fulfill their duties and desire to care for you.

1. Create a master list.  One of the easiest but most important items is simply to make a list of important financial and household data.  Ensure that it includes, first, all of your assets, liabilities, and insurance policies, along with the financial institutions where they are held.  Add to the list information on any income streams (e.g. pensions) as well as systematic expenditures (e.g. utilities or other expenses related to your home, all of the expenses that are deducted automatically from your bank account or credit card, etc.).  For all items on the list, ensure that you write down contact information for the relevant institution and/or log-on information for the online account by which you manage it.  Also, be sure to include log-on information for email and social media accounts, so that they can be managed or shut down, as needed.  Finally, and most importantly, tell your loved ones about the existence of this list and where to find it when they need it!

2. Ensure that your estate planning documents are up to date, including Power of Attorney.  Make sure that you have completed wills, trusts (as needed), health care directives, and durable Power of Attorney (POA), and that all relevant documents are up-to-date and reflect your current wishes.  The POA document will be particularly important if a loved one needs to manage your finances while you are alive.  No banks, pensions, financial advisors, or other financial institutions will take action at your loved one’s request prior to seeing that document.  Without a POA, your loved ones would have to go to court to act on your behalf.  It would also be wise to have a conversation with the person that will have your POA or be the decision-maker in your health care directive to make sure they know they will have that role and understand your wishes.

3. Simplify your finances (and household) as much as possible.  In the Wall Street Journal article mentioned above, the wife found that her parents had more than two dozen savings and investment accounts, small holdings of individual company stock, and over 45 pounds of coins laying around their apartment–all of which took time and effort to sort through.  Some older clients still have stock certificates locked up in a safe or are self-managing investment properties well past retirement.  These issues are significantly more challenging for loved ones to deal with than, for example, a few consolidated savings, investment, and retirement accounts (with up-to-date beneficiary designations), held at no more than 2 or 3 financial institutions.  As you age, do yourself and your loved ones a favor and simplify your finances.  And while you are on a roll, simplify your household too.  Sort through your files, discarding any old documents no longer needed.  (Tax return?  Keep.  Twenty years of old credit card statements or utility bills?  Shred.)  Donate unused clothing or household items to charity, sell any cars that you no longer drive, give away unused furniture, books, or paintings to younger family members or friends who may appreciate them and have less means to buy such things themselves. 

For those who, despite dutifully addressing each of these steps themselves, end up having to manage a parent or other loved one’s finances without the same degree of organization or thoughtful preparation, give us a call.  We have helped others through these issues, and experienced some of them ourselves, and we are here to help.