Get smart with your money
By Liz Weston
Dear Liz: In helping my 92-year-old father update his trust, we ran into a snag. Both his passport and driver’s license had expired.
We thought he didn’t need them since he does not travel, drive or hit the bars.
But to notarize documents, you need current identification. Getting a state ID card added many weeks to the process.
Remind your elderly readers to keep their ID current.
Answer: Consider it done.
By Liz Weston
Dear Liz: My dad, age 90, needs personal care and I am trying to get him to move out of his house to a senior residential place. He is in agreement, but it is taking a long time to make this happen. He owns his home free and clear and, along with the sale of his home, has enough financial assets to cover these costs.
The problem is my two sisters’ husbands, who overspend and are in debt. These two guys continue to pressure my sisters to ask my dad for money for such things as their mortgages, expenses for their children and credit card debt. My sisters are not just starting out — they are in their 50s! Not only that, when I ask them for help with our dad, they flake out on me. I’ve told them that the financial assistance can’t continue because Dad will need his money to pay for his care.
I feel that my sisters’ and their husbands’ behavior is senior financial abuse. I read that this situation happens a lot in families, where the kids will milk an elderly, wealthy, sympathetic parent or grandparent, sometimes draining their savings. Or one dysfunctional sibling with take financial advantage of a parent, while other siblings in the family struggle with making ends meet. In our family, both my sisters have children, so my dad feels a soft spot for helping them out. I am single, no children, and I am treated differently. I do struggle to make ends meet. My dad is sometimes even reluctant to reimburse me $20 for gas that I spend driving him around and doing shopping and errands.
I’m trying to remain on good terms with my sisters but it is getting tough. Is there any financial advice or references you can give in my situation?
Answer: You’re right that most financial abuse of the elderly is committed by people close to the person, typically family, friends or caregivers. The toll isn’t small, either. A survey by Allianz Life Insurance Company found that the average victim lost $30,000 and 1 in 10 lost more than $100,000.
Family members may not see what they’re doing as abuse. They may think that they “deserve” the money or that it’s some kind of advance on a future inheritance. They also know that Dad just can’t say no and will continue to press him for money as long as they’re allowed to do so.
You and your dad should consult an elder law attorney to discuss ways your dad can be protected against predators. You can get referrals from the National Assn. of Elder Law Attorneys at naela.org, and the attorney can discuss your options.
One obvious solution would be for Dad to hand over his checkbook to you, which would give you the unpleasant job of standing up to your brothers-in-law. You’re certainly in a better position to do so than your elderly father, but he may not be willing to give up control or you may not want the job.
Another option is hiring third parties. Daily money managers provide personal finance and bookkeeping services to elderly clients. They can keep a watchful eye on transactions and spot signs of fraud. You can get referrals from the the American Assn. of Daily Money Managers at aadmm.com. Hiring a geriatric care manager also could be a good move. The manager could assess your father’s health, living and financial situations and help craft a plan to help him move forward. Referrals are available from the Aging Life Care Assn. at aginglifecare.org.
By Liz Weston
Dear Liz: My mother is 74 and her health is starting to deteriorate. She had a last will made up about 15 years ago when my stepdad left her. I found out that she named me executor and gave me power of attorney for healthcare decisions. After the last year, when she became very contentious about giving me any information to do this (such as sharing her credit cards numbers), we have decided it would be better to assign these jobs to another sibling. There are also big differences in what each sibling is to receive. This will cause huge problems with two of the siblings.
I do not want to be a part of that as these two cannot even be civil to each other right now. I am afraid that my mother will not get around to changing her will. Am I legally obligated to fulfill this? It is causing me extreme anxiety as I am dealing with her decline in health as well.
Answer: No one is forced to become an executor. If your mother doesn’t name an alternate, the probate court can appoint someone to take the job — and it may not be the person your mother preferred. Let her know that if she wants to have a say in who settles her estate, she needs to change her will.
You’re smart not to want to oversee a situation that’s bound to get ugly. It’s not clear, though, why you thought you needed access to your mother’s credit cards while she was still alive. The job of executor, which would require settling her accounts, wouldn’t start until after she dies. Healthcare decisions typically don’t require access to credit cards — although she should also have named someone to make financial decisions for her if she’s incapacitated.
If you’re worried about your mother’s ability to handle her finances, now or in the future, you can start the discussion by mentioning how important it is to have a power of attorney for finances as well as one for healthcare decisions. It’s not uncommon to name different people for these roles, because the skill sets needed are not the same. Someone who’s “good with money” isn’t necessarily equipped to carry out someone’s end-of-life wishes, which may include fights with medical providers about which treatments will and won’t be pursued.
Once you’ve covered that ground, you can segue into talking about what she would like to happen if she starts having trouble keeping up with daily money management tasks. Many parents add a trusted child to their bank accounts so the child can monitor transactions and make sure bills are paid. Or your mother may prefer to hire a daily money manager (referrals are available from the American Assn. of Daily Money Managers at www.aadmm.com).
By Liz Weston
Dear Liz: Our mother recently died after a long illness. Our father is in his 70s and is getting a lot of attention from ladies at his church and the senior center. We’re concerned because of a pattern we’ve seen in other families, where the widower remarries and the new wife convinces him that his kids are only after his money. When he dies, she gets everything. The kids and grandkids are left out in the cold. We love our dad and don’t want him to think we’re gold diggers. We also don’t want someone to take our father from us and take advantage of him. What can we do?
Answer: If your father is willing to consider it, an irrevocable trust could go a long way toward protecting his assets from avaricious future wives and any number of other financial predators, including scam artists and unethical financial advisors. The trust could continue to pay income to him while allowing the underlying assets to be transferred at his death to the heirs he chooses now, when his judgment is presumably not impaired.
This is not a do-it-yourself project. Transferring assets to an irrevocable trust could create a gift tax issue for your dad. An attorney who specializes in trusts will have to carefully craft the language to avoid that, Los Angeles estate planning attorney Burton Mitchell said.
The problem may be convincing your dad that he’s vulnerable to impaired judgment. Although our financial decision-making abilities peak in our 50s and our cognitive abilities decline fairly rapidly after age 70, our confidence in our abilities continues to rise as we get older.
Financial literacy expert Lewis Mandell likens it to driving ability. Other research has shown that older drivers often don’t perceive their driving skills as deteriorating, despite declines in sensory ability that come with aging, said Mandell, author of the book “What to Do When I Get Stupid: A Radically Safe Approach to a Difficult Financial Era.”
But the same research found that when the drivers took an objective test that demonstrated their decrease in skill, they were more willing to alter their driving behavior to reduce the probability of accidents.
It may help to have a third party, such as a fee-only financial planner or an estate planning attorney, talk to your dad about the importance of protecting his assets at this stage in his life.
If that effort fails and he marries the type of woman you fear, try to remain in his life, no matter what. She may try to pick fights with you and then demand he take her side as a way of isolating him. Avoid conflict where possible and maintain contact with regular calls, letters and visits. It will be harder for her to demonize you if you remain a constant, loving presence in his life.
By Liz Weston
Dear Liz: You’ve been writing about how much to save for retirement, including how much of our incomes we should aim to replace with our savings. Two additional reasons to shoot for a higher replacement rate is the possibility that medical needs will be higher the older one becomes (even with Medicare and a supplemental plan) and the possibility that long-term care will take a huge bite out of savings if one self-insures for this. My wife and I took these into account when we saved as much as we could afford during our working years.
Answer: Many people erroneously believe that Medicare will take care of their healthcare costs in retirement. In reality, Medicare generally pays for about 60% of typical healthcare services, according to the Employee Benefit Research Institute. Fidelity Investments estimates the typical couple at age 65 can expect to spend $245,000 on healthcare throughout retirement. That figure doesn’t include the costs of nursing homes or long-term care, which also aren’t typically covered by Medicare. Anticipating and saving for these expenses was a smart move on your part.
By Liz Weston
Dear Liz: We have raised our granddaughter since birth. She is the apple of our eyes. Then she fell in love. The boyfriend had no job, no car. My husband co-signed a loan for this boy! He didn’t even know the boy’s last name. I was devastated, as we are on Social Security so our income is limited. Our granddaughter couldn’t afford the payments and the boy was useless. They got so far behind that we ended up having to mortgage our home to pay off the truck. We hoped to sell it but of course the kids have broken up and the boy disappeared. When I asked the Department of Motor Vehicles what I could do to get him off the title, they said I couldn’t do anything.
Answer: Your husband is showing signs of cognitive impairment. Co-signing a loan can be (and often is) a lapse in judgment; co-signing for a virtual stranger indicates a more serious problem.
A study for the Center for Retirement Research found that people’s financial decision-making abilities peak in their 50s. By our 70s, our problem-solving abilities typically have declined enough to make us more vulnerable to bad decisions and fraud.
That’s why it’s important to simplify our financial lives in retirement and to consider safeguards that can keep us from being victimized.
Freezing your credit reports at the three major credit bureaus is one good option. That can keep criminals from opening accounts in your names. You would have to thaw your reports to apply for a loan or credit card, and adding that extra “speed bump” to the process could give you time to rethink a bad decision.
If you had children you could trust, you might have your financial institutions send them duplicate statements and discuss any large purchases or investments with them. If you don’t have someone you trust, a licensed fiduciary could serve a similar function. California has a Professional Fiduciaries Bureau within its Department of Consumer Affairs where you can learn more.
At this point, you should check the vehicle title to see if the names are listed with an “and” between them or an “or.” If it’s an “or,” your husband should be able to transfer title to the new owner. Otherwise, you may need to get an attorney to help you get a legal order to remove the boy’s name from the title. Check with your local bar association to see if there are any pro bono or legal aid services that can help you.