Plan Ahead: Prepare Your Finances For Illness And Reduced Capacity

Being unable to manage your finances is an issue by itself. Still, it also means you may be more susceptible to investment fraud and financial abuse.

Hope For The Best, But Prepare For The Worst While Planning Your Financial Future

You might prefer not to consider losing the capacity to handle your finances. Like our ability to drive, we frequently believe our financial capacity to be a key indicator of our independence. But even if your limited financial capacity becomes a significant issue, planning could help you maintain control over your finances.

By doing the actions outlined below right away, you and your family’s troubles may be avoided or reduced.

Sort Through Your Important Paperwork

Put critical documents in order and keep them somewhere secure but accessible. They are then easily accessible in case of need. Give copies to dependable family members, or inform them where to access the records. The following records are often the ones that pertain to your finances the most:

• Account information and statements from banks and financial firms
• List your accounts, including account numbers
• Keep separate lists of your PINs and passwords for your online brokerage accounts and banks, and store these records safely
• Make a record of where your safe-deposit boxes are and where the keys are kept
• Maintain a copy of your most recent bank and brokerage statements in addition to instructions on how to access them online if you access them electronically
• Credit and mortgage information
• Make a list of your debts and scheduled payments, including account numbers and the names of the lending or credit card companies
  Insurance contracts
• Summaries of pension and other retirement benefits
• Information regarding Social Security payments
• The phone numbers and addresses of experts in finance and medicine, such as physicians, attorneys, accountants, and securities brokers

Offer Reliable Contacts To Your Financial Professionals

Give your brokerage accounts a “trusted contact person” to use. A “trusted contact person” is someone you give your brokerage permission to get in touch with in specific situations. These might include when they can’t reach you or think you are at risk of fraud. The financial institution notifies trusted contacts if it notices indicators of financial exploitation; they do not have access to your money.

You may also provide emergency contacts for other accounts — names used if the institutions can’t get in touch with you or think something is wrong. You might want to talk about what constitutes an emergency with your bank, credit union, or financial advisor and clarify when they may make contact on your behalf.

Talk about the information your financial institution can give to your emergency contact. For example, a simple written instruction could look like this:

“Please call my son Mark at 222-555-5555 if you are unable to reach me and there appears to be unusual activity regarding my account; (ii) you are unable to reach me for two weeks regardless of any unusual account activity; or (iii) if you believe I am confused or acting strangely.”

Be sure to take additional measures if you want someone else to handle your accounts should you be unable to. Usually, providing an emergency contact will not allow that person to make investment or financial choices on your behalf.

Use Social Security Advance Designation

With Social Security Advance Designation, you can suggest a responsible party to handle your benefits if you cannot do so yourself.

You can designate up to three people through Social Security Advance Designation to act as your “representative payee” if you require assistance.

When you cannot manage your Social Security benefits, the Social Security Administration (SSA) assigns a representative payee to do so.

As long as you’re able, you can continue to handle your benefits using Advance Designation. However, the SSA will review your Advance Designation if your circumstances change and you now require assistance to ensure the selected person is qualified to act as your representative payee at that time.

Consider Creating A Durable Financial Power Of Attorney

A financial power of attorney gives someone the legal authority to handle your finances if you cannot. The title of that person is “your agent.” “Durable” means it remains in effect even if you become incapacitated. You maintain the ability to amend or cancel it as long as you can still make judgments. A health care power of attorney only pertains to health care choices, unlike a financial power of attorney. If you’re unsure whether a durable financial power of attorney is the best option, speak with a lawyer.

You can still handle your finances and assets after executing a durable financial power of attorney as long as you retain mental capacity. It’s also crucial to remember that you always have the choice of altering your authorized representative and the people you permit access to your financial information. Your agent must be someone you can trust because you are essentially handing them power over financial decisions.

Consider Enlisting A Reliable Family Member, Friend, Or Professional

You could provide a relative, friend, or professional a summary of your finances and name them emergency contacts — even if you don’t want to reveal all the data. For instance, you might ask your broker or bank to give your daughter or accountant duplicate statements. You can also consider inviting a reliable friend or family member to see your financial advisor with you regularly. Of course, the person you select must be someone you trust; consider consulting several reliable people when making your choice.

Keep Things Up To Date

Keep your information as up-to-date as possible if something changes (like when registering a new account). Additionally, your reliable contact might alter with time; keep advisors abreast of any changes to who has access to your account or who they should call in an emergency.

Speak Up If Something Is Wrong

Speak up if you ever feel like someone is taking advantage of you or that you’ve fallen victim to fraud. Unfortunately, even people we know and financial experts occasionally commit financial crimes.

Being a victim is not shameful, and the sooner you tell someone about it, the greater the possibility that it will end. At the end of this document are the contacts for reporting abuse.

Assisting Those with Potentially Diminished Financial Capacity

Your parent or another close family member may have limited financial capabilities, or you may be concerned they will face that situation in the future. If so, you might find the following steps helpful:

• Have an honest discussion about investing and other financial issues as soon as possible.
• Even though it could be uncomfortable, having an open discussion about money is crucial. Encourage your loved one to think about taking the above-described actions.
• Ask your family or friend how they want to keep control of their finances in the future, even if they don’t want to take these actions. Inform them that making plans in advance can ensure that a reliable person makes decisions if they are no longer able to.

Assist a Family Member or Friend in Managing Their Finances

Additionally, you might offer to help your loved one manage their finances more actively. Be on the lookout for potential financial blunders that your loved one might make and any indications of elder financial exploitation.

It might be challenging to determine whether behavior stems from confusion or from being taken advantage of financially. For instance, you should assist a loved one in correcting the problem if you discover they accidentally paid the same amount twice. However, be cautious because multiple or unexpected payments may also be a symptom of financial abuse; don’t rule it out without doing some research. In addition, watch out for any unexpected changes in investments that don’t seem to fit your loved one’s long-standing objectives, values, or investment philosophy. Again, these adjustments might result from confusion or an indication of financial abuse.

Recognize your obligations and how you can safeguard your loved one from financial exploitation if you’re designated to manage their finances or property. For instance, your loved one might have appointed you as a trustee or agent under a revocable living trust. Visit consumerfinance.gov/msem to read the Managing Someone Else’s Money instructions from the Consumer Financial Protection Bureau. They walk you through your responsibilities, instruct you on how to avoid financial exploitation and fraud, and let you know where to turn for assistance.

Here are some things you may do to aid if a friend or family member asks you to assist with their finances:

• Assist with ongoing financial obligations. You might need to take on urgent duties like aiding with bill payments, setting up benefit claims, completing tax returns, or assisting with investment choices.
• Examine their stock holdings. Considering the individual’s financial and health status, this might be a perfect moment to assist in re-evaluating the portfolio. As a result of their disease or handicap, does the person anticipate a significant rise in health care, personal care, or other costs? If so, do they have sufficient cash or liquid assets to pay for such expenses? (Assets with a liquid investment are those that the owner can quickly sell for cash when needed without having to pay a significant commission.) These might be complicated questions, so you might want to talk to a financial expert about them. Remember that you need legal authority to buy and sell investments on behalf of a loved one, such as a power of attorney, trust, or similar arrangement.
• Evaluate the level of risk in their investment portfolio. Of course, there is some risk associated with every investment. But do the investments carry the appropriate risk for the investor at this point in their life? If not, you might want to ask for assistance from a registered broker-dealer representative or investment adviser representative.
• Speak with their financial advisor. Make the financial expert aware of your loved one’s condition if your loved one has given the expert permission to speak with you. This lets the financial advisor tailor advice to the client’s financial requirements and watch for indications of future financial abuse or deterioration.

Your financial professional, or that of your loved one, may raise topics discussed in this bulletin. Financial services firms are paying increasing attention to improving communications on this subject. If a financial professional does not bring up these topics, raise them yourself.

Further Information

• Visit the Consumer Financial Protection Bureau’s (CFPB) Financial Protection for Older Americans homepage at consumerfinance.gov/olderamericans.
• Visit the Elder Justice Initiative website at justice.gov/elderjustice (including the page on victim and family support)
• Seniors can access the SEC Investor.gov web page at investor.gov/seniors
• Find the proper adult protective services organization by calling the Eldercare Locator at (800) 677-1116 or visiting eldercare.acl.gov to report any suspicions of elder abuse
• Financial exploitation of older adults frequently breaks one or more laws. You should report it to the sheriff or police in your area
• You can report brokers or investment advisors possibly involved in elder financial abuse by contacting the SEC at 800-732-0330 or sec.gov/complaint/select.shtml
• The Financial Industry Regulatory Authority runs the Securities Helpline for Seniors at 844-574-3577, or you can visit the Investor Complaint Center at www.finra.org
• To find your state’s securities watchdog Visit nasaa.org/about-us/contact-us/contact-your-regulator for a list of state securities regulators and their contact information
• To file a grievance with the CFPB, call 855-411-2372 or visit consumerfinance.gov/complaint.