What a nightmare! Untangling a loved one’s finances
Imagine for a moment that your mother or father suffered a catastrophic illness and could no longer handle his or her financial affairs. They had been living alone and you visited every week, called every other day or so. This should be easy, right? You open the door to their apartment and wonder, where to start? Where is the checkbook? Where are the bills? What is the income? You call the bank and they will not talk to you because you are not authorized. Same thing with Social Security, health insurance companies, pension and 401K administrators. You want to scream, cry, and pull your hair out. This could never happen to me, right? Well that happens all the time.
Statistics tell us that it is very likely one or both of our parents will end up in a nursing home or rehabilitation center for an extended period. If you’re like most people, you do not know a whole lot about your parent’s finances.
Recently a client, Sara (not her real name), came to my office with just that problem. Her mother, Margaret (not her real name), had recently suffered a stroke and been moved to a nursing home, where she remained unable to communicate. The medical crisis was over, but the unraveling and understanding of her mother’s financial situation was just beginning. Among the first questions I asked was whether she had a Power of Attorney to handle her mother’s affairs.
Most of us have heard of a Power of Attorney and know we are supposed to have one, but many do not understand why. A Power of Attorney is a notarized legal document that, when properly prepared, gives a designated person the right to step in and handle the financial affairs of another. Without a Power of Attorney, the only way to handle the affairs of another is to be appointed as the legal guardian. Unfortunately, that requires thousands of dollars in legal fees and can take months to accomplish. In the meantime, bills are unpaid, financial affairs are not handled and anxiety reaches a boiling point. The situation is even more complex if the loved one lives far away.
In Sara’s case, she lived local -- and she did have a Power of Attorney, but it was an Internet form and not properly signed. As a result, banks and other institutions were not accepting the document. . In 2015, Pennsylvania enacted a comprehensive Power of Attorney law that gives extra protection to those who correctly complete and sign a Power of Attorney. In Sara’s case, a bank insisted on its form being used but unfortunately, Margaret was unable to sign due to her declining condition.
In Sara’s case, we were able to limp along with her Power of Attorney because it was less expensive than starting a guardianship proceeding in court.
Once that crisis was averted, what next for Sara? First is to get organized. Take time to go through Margaret’s apartment and look for all important papers, bills in one place, bank statements in another. It turned out that Margaret was a child of the Depression and didn’t put her money in one bank but rather four different banks. That added up to four times the work. Sara contacted the post office and had the mail forwarded to her address and watched out for more bills and bank statements.
The next step was to consolidate and try to simplify matters. Just because Margaret had three Certificates of Deposit (CDs) in three separate banks did not mean Sara must follow suit. As the CDs matured, Sara switched them into one bank account at the bank that she uses. Sara also arranged for the Social Security funds and the small pension check to be directly deposited into the new account.
My advice to Sara was to reach out and get help. Enduring this process alone can be daunting and increase the frustration. Sara needed to divide her time with caring for her mother and taking care of her career and family. Over time I could see that all the extra added stress was bringing her down. Margaret’s two-bedroom apartment was filled to the brim with papers, keepsakes and other items – and organizing and paying the rent month after month added up to another fulltime job. Sara eventually sought help with a company that helped organize and move Margaret’s possessions and close the apartment. Once Sara turned over the reins to this company, her stress and frustration eased significantly.
Bottom line: It can’t be stressed enough – Put into writing your financial picture, including the location of your money, bills and insurance policies, and advise your loved ones where the list is located. That will go a long way toward minimizing the stress you will add to your loved ones’ lives when thing go wrong. I also can’t stress the importance of a properly prepared and signed power of attorney to you and your family. Reach out to a competent estate planning attorney and have that done. In the end, it could save thousands of dollars and endless hours of stress and anxiety on your loved ones.
To obtain a free copy of my Personal Record and Digital Asset Record to start putting your financial records in one place, contact me at 215-8866600.