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Thursday, February 26, 2009

Ways To Help Your Aging Relative With Their Finances

Sometimes aging loved ones need a little help managing their money. Many times they don't need everything handled for them, but a little guidance or a review is helpful.

In my prior post, Help Your Aging Relatives With Their Finances, some of the warning signs of financial meltdown were discussed, along with the need to bring up the issue early. Here are some tips on how to help without taking over completely.

  • Set up direct deposits for Social Security, Pensions
  • Set up automatic billpay for recurring expenses
  • Minimize the number of accounts ***Do your parents have 15 CD's at 15 different banks? Do they have 5 different brokerage accounts? In my opinion, these accounts should be consolidated with a qualified, trusted advisor in the first place...but even if not, the number can be pared down to make it easier to keep track of what's happening with the money***
  • Set up regular meetings to review
  • Arrange for duplicate bank and bill statements to be sent to you so you can track income and spending
Do NOT add your name as joint owner on your parent's bank accounts or brokerage accounts to help them manage the money. Many times, mom may name the in-town child as the joint owner because the other three children live across the country and have a more difficult time going into the bank. This causes large problems at death, when the entire value of the account passed to the joint owner in-town child, and leaves out the other children or loved ones entirely.

Instead, consider the use of a Revocable Living Trust with the in-town child named as co-trustee. That way, the in-town child can deal with the bank, but the money will pass in the intended fashion (perhaps equally to all four children). Another alternative, a little more risky, is to give the in-town child power of attorney to deal with the finances. Either one, however, is better than adding a joint owner to the account.

Sunday, February 22, 2009

Help Your Aging Relatives With Their Finances

Keeping an eyes on your elderly relatives may provide signs that they could use your help with handling their finances. Don't wait to get involved!

Eileen AJ Connelly of the AP writes:
[a]t first, you might notice a pile of unopened mail. Your normally fastidious mother might be getting sloppy with her checkbook. Your elderly uncle might be behind on his electricity bill. The signs are often subtle, but they might indicate that aging relatives are no longer able to handle their finances.
Once you have noticed a possible problem, now is the time to have a conversation where you offer help. Don't wait, as that will risk compounding any problems that already exist. The longer the topic goes unspoken, the greater the chance that once the problem is critical, that your offer of assistance will be met with resistance or denial. However, don't avoid the topic because you think there will be trouble...sometimes the elder may simply assume you're too busy and they don't want to bother you with their troubles.

Sometimes is is easier to enlist the assistance of one of the elder's professional resources: their lawyer, CPA, financial advisor, or doctor. Connelly writes:
Once the conversation is started, be sure to discuss a budget, income, assets and insurance policies. It also can be a good time to make sure that a will is in place, and discuss whether a health-care power of attorney is appropriate.

While I agree that this is an excellent time to discuss whether your parents have an appropriate estate plan in place (at a minimum: Will, General Durable Power of Attorney, Health Care Power of Attorney, Living Will, Organ Donor Registration, HIPAA Release), I strongly disagree that this is the time to "discuss whether a health-care power of attorney is appropriate".

A health care power of attorney is always appropriate from the moment one turns 18 years old. There is no reason to wait and risk having the court be involved in order to appoint the one in charge of making medical decisions on your behalf should you be incapacitated. All adults should have a health care power of attorney!

Should the financial problems be a result of limited, fixed income, investigate state or federal programs that might help with some of the monthly bills. Your local Area on Aging is a good place to start.

Warning Signals:

Signs to watch for if you suspect an elderly relative might be having trouble handling finances:

  • Unopened mail
  • Late or unpaid bills; collections actions
  • Confusion or lack of interest about what bills have been paid
  • Bounced checks
  • Disorganized personal paperwork
  • Uncashed checks or unclaimed property reverting to the state
  • A large number of magazine subscriptions
  • Unusual or increasing direct mail or shopping-channel purchases

Read the entire article, Aging Relatives May Need Help With Finances.

Tuesday, February 17, 2009

Family Financial Freedom Notebook

The following article is written by America's Personal Family Lawyer, Alexis Martin Neely.

Lots of people are wondering, what do I do know that the economy appears to be melting down?

First and foremost, don’t panic. You are not going to end up standing in line for the soup kitchen. Not if you’re reading this right now.

What you are going to do is get more aware of your family finances, learn to live within your means and generally gain awareness you didn’t have before.

Then, you’re going to look back on this “financial crisis” as the best thing that ever happened to us.

One of the most important things you can do is to establish a family freedom notebook. This is a notebook that you use to keep track of everything related to the financial well-being of your family.

At a minimum, here’s what you put in it:

1. Monthly bank statements for every bank account you have, including any custodial accounts in your kids’ names (keep 12 months worth of statements in the notebook and then scan and archive older statements).

2. Monthly brokerage account statements for every brokerage account you have, including college savings accounts, like 529s (keep 12 months worth of statements in the notebook and then scan and archive older statements).

3. Monthly retirement account statements for each of your retirement accounts (keep 12 months worth of statements in the notebook and then scan and archive older statements).

4. Monthly insurance policy statements for each of your insurance policies ((keep 12 months worth of statements in the notebook and then scan and archive older statements).

5. Copies of your insurance policies (keep these forever).

6. Documents related to any other assets owned, such as the pink slip for your car or lease papers if you are leasing your car.

7. Monthly mortgage statements (keep 12 months worth of statements in the notebook and then scan and archive older statements).

8. Monthly credit card statements (keep 12 months worth of statements in the notebook and then scan and archive older statements). Also, in this section, keep a list of all of your credit card numbers, along with their security codes and the 800# on the back of the card. This list will be a lifesaver if you lose your wallet.

9. Any other loan statements or statements evidencing liabilities you may have, such as student loans, personal loans from parents or car loans.

10. Family Profit and Loss Statement: This is a monthly updated ledger of all income that comes into your family and all expenses that go out.

11. Family Balance Sheet: Updated monthly, this will list out the current values as of month’s end for each of your accounts, including liabilities.

12. Estate Planning Section: Your whole estate plan would be too big to keep in your Family Freedom notebook, but you can keep a CD or jump drive with your estate planning documents on it and any documents related to the transfer of assets into your Living Trust. Plus, keep your long-term guardian nominations and your Kids Protection Plan, medical powers of attorney for your kids, and your own health care directives and powers of attorney in this section as they will need to be accessed immediately if anything happens to you.

13. Other personal legal documents: if you own property with anyone else, have entered into any business arrangements, or have personal legal agreements, keep those in this section.

14. Pay stubs: keep a year’s worth of the part of your pay stub that shows how much you got paid, how much went to taxes and how many hours you worked. I can’t tell you how many non-breadwinner spouses have told me they don’t know how much money the breadwinner spouse makes. Bad idea. Make sure you know and have the records.

15. Social Security Statement: You know that green and white letter you get in the mail each year that says how much you’ve paid into social security and how much you can expect to get, keep it here. I can’t promise you’ll actually get this as our system may not have the money to fund it, but you can at least keep the record that shows you paid into the system.

Obviously, this notebook contains very sensitive information, so consider keeping it in a small fireproof safe in your house. Just make sure the safe is not one that can be lifted up and carried away by a thief. Make sure it’s the kind that anchors into the ground or the wall.

Please note: this is not a household notebook or a Family Emergency notebook. That’s a whole different animal and something that SHOULD be kept accessible to other family members, babysitters and household helpers.

SOURCE: Family Wealth Planning Institute