Last year, Blossom Rosen realized it was time to get help with her finances. Now 80 years old, she was experiencing confusion and memory loss, and had started settling accounts with her gardener and handyman by simply handing over her checkbook to them.
Walking to lunch one day with her daughter Nance, 54, Rosen stopped suddenly and confessed: “I can’t write checks anymore. I need you to do it for me.”
Within six months, with her mother’s memory continuing to deteriorate, Nance Rosen was handling all of Blossom’s finances.
The Rosens’ situation is not unusual, says Suzanne Hall of the Baltimore investment advisory firm The Financial Consulate. As director of a program called SENIOR Connect, Hall has seen many older people mismanage funds because of diminished capabilities.
“As we get older we are going to need help,” says Hall. “So if seniors have a good relationship with their children, they want to start the process of talking with them about certain aspects of their finances.”
The gathering of families over the holidays provides an opportunity to discuss the issue of financial assistance and who will provide it. While a child is usually the natural choice, the handoff requires careful planning to avoid straining relationships and to make sure nothing is forgotten.
Here are five steps for a smooth transition:
1. Choosing the appropriate helper
Naturally, you should share your financial information only with a child whom you trust, but other factors also come into play. One child may handle money better, but another may be more able to act calmly in an emergency.
Keep your child’s personal situation in mind. “I have a client who did not select her son because her son’s wife is disabled, so she felt that he has enough on his plate,” says Marsha Goodman, an elder law attorney in Phoenix.
Avoid giving this responsibility to any child who has his own money problems or is struggling with addiction, advises the MetLife Mature Market Institute, a New York-based organization that studies aging and longevity issues.
“If you know someone has an alcohol or drug problem or they’re gambling or they’ve lost a lot of money, they could be looking to replace that money or get additional resources from members of the family,” says John Migliaccio, director of research for the institute.
If you don’t feel comfortable sharing your financial information with your child, consider another trusted relative, a friend or a professional fiduciary.
2. Starting the conversation
Let your children know in advance that you’d like to have an important discussion about your finances, suggests Nancy Brooks, a Denver-based psychotherapist and mental health expert with JustAnswer.com.
When it’s time to talk, have the conversation face to face, with financial documents in hand.
Ask your children what they’re willing to do. “They may have time constraints,” Brooks says. Also ask whether they have ideas about ways to help you manage your finances.
When a solution is reached, put it down in writing, particularly if other children are not involved. “Sibling rivalry can rear its ugly head when one child is chosen over another to help mom and dad, so be sure everything is out in the open and is traceable on paper,” Brooks says.
If the conversation is too challenging for you to handle on your own, consider hiring a mediator. “A professional mediator is a trained neutral who facilitates the conversation, with no stake in the outcome of the conversation and no baggage based on years of family dynamics,” says Jane Beddall, founder of the mediation firm Dovetail Resolutions in New Haven, Conn.
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.