If your memory fades, you’ll need someone to help you, so choose wisely.
Many seniors ensure that they have a durable medical power of attorney to carry out their wishes if they cannot direct health care providers. However, only 39% have given any kind of power of attorney to protect their money. While we’ve all heard horror stories about people committing fraud or making substantial financial mistakes due to cognitive decline, many of us believe it will not happen to us. But you never know, so it’s always a good idea to be prepared.
With support from AARP, the Stanford Center on Longevity, and the University of Minnesota developed the six-step Thinking Ahead Roadmap. These six steps will give you peace of mind, confidence, and relief from being prepared for the future.
Step 1: Select a dependable advocate.
This is usually your spouse, but you should have a backup because your spouse is probably your age. Your advocate should be able to manage your daily expenses, supervise your investments, store your financial records, and protect you from scams. Look for someone reliable, organized, and good with money. Steve Vernon, the Roadmap’s coauthor, stated that having more than one advocate is fine. If you have two children, one could pay the bills while the other manages your investments. If you don’t have children, think about a younger relative or a close friend you know you can rely on.
Step 2: Sort through your financial records.
Begin by compiling a financial inventory that includes all your assets and any debt you owe. Include any income you have, such as Social Security or a pension. Then, list all the bills you must regularly pay, such as utilities, loan payments, and subscriptions. It’s critical to keep a list of all your passwords in a secure location. Then try to simplify — do you genuinely require all of those accounts? Declutter your finances to help your advocate.
Step 3: Start talking to your potential advocate.
You could start by saying that you admire their work ethic and how well they managed their finances. Then tell them that is why you would like to ask if they would be willing to assist you with your money management if it ever becomes too difficult for you to do it on your own.
Tell your advocate that you’re okay and just preparing for the possibility that someone will need to intervene in the future. It may take some time for your advocate to understand what it means to take on this role for you — if they even want to. So, if they appear surprised or resistant, let them know it’s okay to think about it, then you can continue talking.
Step 4: Describe your future financial needs and expectations.
Take your advocate through the financial inventory you created. Tell your advocate what’s important to you, such as continuing to donate to a charity you support. Put everything in writing so your advocate can refer to it in the future.
Step 5: Formalize it.
Your financial institutions will not simply give your advocate access to your assets and allow them to manage your assets without legal authority. You’ll need to fill out paperwork to appoint your advocate legally. This is referred to as financial power of attorney. Understanding that this power of attorney will expire when you die is critical. This is where the executor of your estate steps in. You can choose whether or not that person should be the same.
Step 6: Alter your money management gradually.
The first five steps of the Roadmap will prepare you for a possible scenario in which you will need your advocate to manage your money. Knowing when it is appropriate for your advocate to intervene is an entirely different matter. Some warning signs are noticeable. These can be obvious, such as a dementia diagnosis. However, there may be more subtle signs, such as failing to pay bills on time or having difficulty conducting business over the phone or on your computer.
It is a difficult step to relinquish control of your financial affairs. Request that your advocate and others keep an eye out for some of the warning signs of dementia. You may wish to write a letter to your advocate, including a copy for yourself, outlining the specific circumstances that indicate it’s time to delegate financial management.
It can be depressing to plan for a decline in our physical or mental health. However, following a plan can protect you and your family members while providing peace of mind, allowing you to enjoy life while worrying less about money.