Who’s Watching the Money?
What to do When Seniors Aren’t Able to Manage Their Money
Edith reached the age of 85 with substantial savings and home that was fully paid off. She did this by planning, budgeting and pinching a few pennies. After 85 years of careful management, though, her assets are now at risk. Recently diagnosed with dementia, her family has noticed that she has been slipping for several years. In the past, she has steadfastly refused any assistance with managing finances. During a recent hospitalization, though, her children had to step in and pay some bills. When they did, they discovered a mess.
This scenario is not uncommon. Unfortunately, by the time family members recognize the problem, it has sometimes gone on for quite a while. The problem can be worse if the senior does not have much family, or tends to be a loner. Here are some things to keep in mind:
Gain Control Over the Finances
If a senior is still legally competent, and willing, she can sign a power of attorney for property, allowing somebody to make financial decisions for her. These types of powers of attorney have gotten a bad name because they are occasionally abused by predatory family members. In the overwhelming majority of cases, however, they are a critical tool to protect seniors.
If Edith is no longer legally competent, it will be necessary to seek guardianship of her estate. This is a court process that allows somebody to be appointed to manage Edith’s assets. It is more costly and cumbersome than a power of attorney, but it is necessary in some circumstances.
Look for Lost Assets
When the situation has been ongoing for a number of years, it can be difficult to track down all of the assets. It is surprisingly common to find that a client with dementia has forgotten about a number of accounts. Start by assembling all of the account statements in the house – regardless of their age. Call the banks and find out if the account was ever closed, and if it has any balance. The results can be surprising. The State of Illinois also maintains a web site where you can look up money that was transferred to the state because the bank could not track down the owner. It only takes a moment to find out if accounts were lost.
Watch out for Abuse
People who are inclined to financially abuse seniors know when to strike. When a senior begins to exhibit signs of dementia, they become vulnerable to abuse. Abusers often act as though they are stepping in to help. In reality, they may only be interested in helping themselves. Remember that it is common for the abuser to be a member of the victim’s family or a close friend. Commonly, the problems start when the abuser gets into financial trouble, and “borrows” some money from the victim. Beware of anybody who seems overly interested in a senior’s money.
Watch out for Bad Investments
In addition to outright abuse, there are a number of people who profit from selling bad investments. Financial planners who want to put seniors into risky stocks, or churn a portfolio are one example. Insurance agents who sell long-term care policies that cover little and carry exorbitant costs are another. Annuities with large fees and limited benefits can also be a concern. All of these investment tools can be appropriate in the right circumstances, but they also can be a big mistake in other circumstances.
Who Didn’t Get Paid
There are a few bills that you really must pay: Income Taxes, Real Estate Taxes, Homeowner’s Insurance and the Mortgage are good examples. When these bills are being neglected, seniors begin to face the risk of losing their house or other substantial assets. Sometimes, seniors become embarrassed or frightened about a debt, and then avoid dealing with it for many years. Every year we get calls from clients who are three or four years behind with the IRS, and scared to face the situation. Often the problem can be fixed once it is faced. If it is ignored, however, the penalties and interest can be enormous.
Keep Them Involved
Those who work in the field of aging know that dementia is not an “on-off” switch. A person with dementia can often understand and process lots of things. Nobody wants to feel like they are irrelevant. Moreover, with all the talk of financial abuse, seniors are rightfully skeptical about anyone who tries to assist with their money. For all of these reasons, it is good to keep people involved, even if they need assistance with their money. Sit down and go through the bills together. Discuss larger purchases. For clients with memory issues, it can be really helpful to give them a monthly printout of expenditures and income. They are easy to print from Excel or similar programs. Put it in a file, so that they can go back and look at it when they get concerned.
Do Some Estate Planning
Once the crises are addressed, it is time to move on to planning for the future. If money is running out, this might include doing some Medicaid planning. Medicaid planning is a means to spend down assets without disqualifying the senior for Medicaid benefits. For example, seniors have the right to pre-pay some funeral expenses without disqualifying themselves from Medicaid benefits. There are many other things that can be done to maximize the remaining money. This is, however, a tricky area of the law, and should only be handled through a qualified elder law attorney. If the senior is legally competent, this may also be a good time to do a checkup on their estate plan. It is surprising how many have a plan that does not meet up with their current wishes.
Photo courtesy of Steve Wampler on flickr.com.
This article was edited by Heidi Enriquez.