Ask Liz Weston

Get smart with your money

power of attorney

Q&A: Coping when dementia causes reckless spending

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Dear Liz: Our son-in-law has been diagnosed with early Alzheimer’s disease and sometimes makes reckless purchases. Our daughter has appealed to their bank to close their account or cancel his credit and debit cards. They refuse because the accounts are in his name. What can she do?

Answer: What your daughter can do may depend on how advanced his Alzheimer’s is, says Carolyn McClanahan, a physician and fee-only financial planner in Jacksonville, Fla.

If your son-in-law has enough capacity to understand the situation, McClanahan suggests the couple go to his doctor and have the doctor explain why it is important for the wife to manage the finances going forward. If your son-in-law agrees, a power of attorney document can be created giving your daughter the legal power to manage their finances.

They should visit an elder law attorney to help her with the situation, McClanahan says. If the bank balks at accepting the power of attorney, as banks sometimes do, she can have the attorney send it a strongly-worded letter to force them to honor the document, McClanahan says. Having this kind of backup is an important reason why people should use an attorney to draft these documents, rather than using a form or software, she notes.

Even if your son-in-law lacks capacity, as a joint account holder your daughter should be able to withdraw all the money in the bank account to protect it. She also can cut up the credit and debit cards.

If all else fails, she can go to court to be appointed his conservator, but that option is an expensive and intrusive one, McClanahan warns. Involving an elder law attorney as early as possible may help her avoid court intervention.

It bears repeating that every adult, no matter their age, should have powers of attorney that appoint someone else to make financial and health care decisions for them in case of incapacity. Trying to get these documents in place after a tragedy strikes can be difficult, if not impossible. Get them drafted now, while there is still time to avoid unnecessary hassle, stress and expense.

Q&A: Choosing the right health care agent

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Dear Liz: There is a lot of dysfunction and drama in my family so in my will, I’ve named a friend to be my executor. But I don’t think she’s the best person for my advance healthcare directive. She’s too nice and I think she would cave under pressure from my family. Can I choose someone else?

Answer: Absolutely, and often that’s the best choice.

Your executor is the person who will settle your estate after you die. You should pick someone you know to be trustworthy and diligent. The executor (or successor trustee, if you have a living trust) doesn’t need to be a financial expert, since they can use estate funds to pay for legal and tax help.

The person who makes healthcare decisions for you may need another set of skills. They may face considerable pressure from others, including family, friends or the medical establishment, so you’ll want someone who not only understands your wishes for end-of-life care but who will fight to carry them out.

Your advance care directive or living will is the document where you articulate your wishes for the care you do and don’t want at the end of your life. You’ll also need to create a medical power of attorney, which is where you name the person you want to speak for you if you become incapacitated. Even a detailed advance care directive can’t cover every circumstance, and the power of attorney will help ensure that your chosen person can advocate for you no matter what happens.

You’ll need one more document, which is a financial power of attorney. This names someone who can pay your bills and otherwise handle your finances if you become incapacitated. You can name your executor, the person you named for healthcare decisions or some other person to serve this role. Check with your financial institutions, since they may have their own documents they’ll want you to use.

If possible, you should name at least one backup for each position, since people may not be able to serve when the time comes. Also, your wishes or circumstances could change over time, so all these documents should be reviewed at least annually and updated as necessary.

Q&A: Financial institutions reject powers of attorney

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Dear Liz: I read your column about the parent who unexpectedly had to take over for their incapacitated son. You suggested every adult have a power of attorney and healthcare proxy. Excellent advice! However, as I discovered in dealing with my father’s illness and estate, these general documents are not always recognized by the very institutions they were designed for. His bank, mortgage company and health insurance company would only recognize their versions of these documents.

Fortunately, while he was still able to, I was able to procure each of these documents with his signatures on them but it was very stressful at a difficult time for all of us. I would suggest you amend your advice to people to check to see if their banks and so on also require their specific forms.

Answer: Financial institutions are supposed to accept properly drafted powers of attorney, but some of them insist on their own forms, agrees Burton Mitchell, an estate planning attorney in Los Angeles.

“Sometimes one can get around these rules by appealing to higher ups in the organization, but it is unnecessarily difficult, time-consuming and complicated,” Mitchell says.

Checking with your financial institutions now could avoid hassles later.

Q&A: In estate planning, finding the right trustees can be a challenge

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Dear Liz: My partner of 37 years and I have shared a revocable living trust for much of that time. It has become necessary to update our successor trustees, since one has passed away and the second is our age. It has been pointed out that we ought to name younger people who are more likely be around when the need arises. This is becoming the hard part. Both of us have a single sister but they are also seniors, so not the best long-term choice. Nieces and nephews live out of state and are not the ideal choice, either. I am wondering about designating this task to an accountant or attorney firm but have absolutely no idea how to make this happen.

Answer: Yours is a common issue for “solo agers” — people who don’t have reliable adult children who can take over in case of incapacity or death.

Naming someone younger does increase the odds the person will be able to serve when the time comes, but nothing is guaranteed. That’s why Los Angeles estate planning attorney Burton Mitchell urges his clients to focus first on naming the best choices, rather than eliminating people because of age or geography. He also recommends naming multiple alternates. Circumstances change, and your first choice may not be available when you need them.

You want successor trustees who are trustworthy, dependable and honest. They don’t have to be relatives: Friends or professionals may be good choices if they’re willing to serve. Jennifer Sawday, an estate planning attorney in Long Beach, urges you to ask first before naming a tax pro, attorney or financial advisor, since many are unable or unwilling to serve in this capacity for clients.

Professional fiduciaries may be another option, or you can look for professional or corporate trustees. Your local bank may offer trust administration services, for example. These options obviously would be more costly than a friend or family member. Sawday recommends consulting a knowledgeable estate planning attorney who can recommend trust officers or professional fiduciaries for you to interview.

Even if you opt for a professional to handle the financial side, you may prefer to have a friend or relative serve as your healthcare decision maker should you become incapacitated. In that case, geography may matter, since the person may need to get to the hospital quickly or spend an extended period advocating for you. Even here, though, it’s more important to name the right people, rather than necessarily the closest ones. You want someone who understands your priorities and who will fight to ensure those priorities are honored. Someone older who understands the concept of a “good death” may be more appropriate than someone younger who doesn’t. (Katy Butler’s book “The Art of Dying Well” has helpful information for this choice.)

If you don’t have enough people in your life you can rely on, there’s still time to turn that around. As a fellow solo ager, certified financial planner Carolyn McClanahan recommends building a mixed-age community. McClanahan says this means making “care deposits” starting in your 50s by volunteering and mentoring younger people.

“If you come from a place of giving, when you get older, that tribe is willing to look out for you,” she says.

Q&A: Is getting old reason enough to cancel some credit cards?

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Dear Liz: Recently, someone asked if closing a credit card would be worth the hassle and you responded that there is no compelling reason to do so and in fact, it might hurt your credit scores. As an older person, I can think of two good reasons: theft and fraud. Many of us of a certain age no longer carry a mortgage or other debt. But, I am finding it harder to keep track of my finances. I would like to cancel three of my five credit cards for that reason.

Answer: You misquoted my response. What I actually wrote was, “If there’s no compelling reason to close a card, you might consider leaving the account open and using the card occasionally to prevent the issuer from closing it.”

Wanting to reduce your risk is reason enough to close a card account. All of us would be smart to consider simplifying our finances as we get older, says Carolyn McClanahan, a certified financial planner and physician in Jacksonville, Fla.

You also might think about who could help you manage your finances as the task gets more difficult. A legal document called a power of attorney allows you to name a trusted person to take over should you become incapacitated. You can familiarize this person with your finances and consider giving them online access to your accounts so they can help you spot fraud, theft or missed due dates. Involving them now, when you can help guide them, is generally better than waiting for a crisis and hoping they can figure everything out on their own.

Q&A: What you need to know about power of attorney documents

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Dear Liz: My husband has Parkinson’s disease and is showing early signs of dementia. I’ve been advised to get a financial power of attorney. If all of our accounts are joint, is this necessary? What will that do for me?

Answer: A power of attorney gives you the authority to make decisions on your husband’s behalf. You wouldn’t need one to pay the bills from your joint accounts, but this document could be invaluable if you wanted to take action on jointly held property, such as selling a car or house or refinancing a mortgage. Otherwise, you might have to go to court to get a guardianship, which can be expensive.

Please don’t wait. For the document to be valid, your husband needs to be able to understand what a power of attorney is and what it does. You’ll also need a power of attorney for healthcare, which is sometimes called a healthcare proxy or advanced directive, to make decisions regarding his medical care.

There are do-it-yourself options, but given your husband’s condition you may want to hire an experienced estate planning attorney who can offer personal guidance and help make sure the documents won’t be challenged.