3. Put everything on the table
Anyone who is going to handle your finances in an emergency must understand your financial picture. That person should know about:
• Sources of income and how they are deposited in your accounts, plus any assets that can be tapped if necessary.
• Professionals who handle your finances, including accountants, stockbrokers or financial planners.
• What bills need to be paid and when.
• Insurance policies such as life, disability and long-term care.
• Tax returns and any records used to complete them.
• Financial items such as property sales, credit issues.
• Medical issues, doctors, caregivers.
• Estate planning documents such as wills, advance directives (which let a doctor know what type of medical care you want if you can’t make that decision) and health and financial powers of attorney.
4. Making it work
Hall and other experts say most families would find these tools and procedures helpful:
Make a list of all the topics you covered in your family discussion. If you’re going to keep handling some financial tasks yourself, describe what you do, so a child can quickly step in if necessary. Note the location of important documents such as a will, a power of attorney or a deed to the family home. Write down how to reach your insurance agent, your investment broker, your accountant and any other outsiders involved with your financial affairs.
Share checking account privileges. By adding a child as an authorized signer on your checking account, you won’t be giving up ownership of your account, but that child will be able to write checks for you if you are unable to do so.
Use online banking and bill payment, and give your child the passwords, or have you child set up these accounts for you.
Designate someone to act on your behalf through a power of attorney. If you’re married, your spouse will make financial decisions if you are unable to, but that shouldn’t stop you from jointly designating a trusted child who can legally make decisions for you in an emergency.
5. Putting safeguards in place
If you’re concerned that a child may gain too much control over your finances, there are precautions you can take:
• Have a child share power of attorney with a third party such as a professional fiduciary, suggests Goodman. This creates a system of checks and balances.
• Make sure the power of attorney states explicitly what a child can and cannot do. For example, you might “make it clear that you would want that person to be able to access your bank account, but you would not want that person to be able to hire lawyers on your behalf,” Goodman says.
• Your bank may be able to set up a dual-signature requirement, says Susan Montoya, a vice president with Creve Coeur, Mo.-based First Bank. If a check is written above a designated amount, “the check would have to have both signatures in order to be honored,” she says.
• Once a financial backup plan is in place, remember that circumstances change. You may need more help eventually and not be able to cosign all checks. Or you may decide you’d rather someone else take over the responsibility. “Look at your plan every five years or so,” says Goodman. “Confirm that it’s still what you intend.”
A lesson learned
Handling her mother’s finances is working smoothly, Nance Rosen says. But she says the transition would have been easier if she had been familiar with her mother’s financial obligations earlier.
With that in mind, Rosen has decided to partially open her financial affairs to her own 24-year-old daughter, Molly Jo Rosen.
Nance says she is comfortable with the situation because Molly Jo “certainly has my interests, and her grandmother’s, at heart.”
Tamara E. Holmes is a Maryland-based journalist who writes about health, wealth and careers.