An experience with a client this week has reminded me yet again of the need to be prepared. What would happen if you or your spouse fell ill or suddenly became incapable of managing the family’s financial affairs?
In the experience of the past week, here is what I was reminded of:
Are you or your spouse using technology to manage the family finances? Would someone else be able to take over if you suddenly could not do it? Are bills not coming in the mail anymore because you are getting electronic statements? Are payments being automatically made from a bank account or put onto a credit card? If you were unable to access your online accounts, would someone else know what was occurring online – and if they knew, would they be able to get into those accounts?
Do you have an updated list of passwords to allow for access? Do you have a list somewhere that someone could access to know what bills come into your email or what bills you have set up online accounts to access? It does not have to be as final as death. Maybe you are in the hospital without access to your computer or access to email. For whatever reason, you are incapable of verbal instructions.
While one person may be responsible for managing the finances and paying the bills in a relationship, I will again recommend a weekly meeting between spouses. Both parties need to know what is going on. This is an opportunity to exchange information, make joint decisions, and ensure both parties have the necessary access.
In place of a weekly meeting, have your spouse follow you through the process of your financial activities for a month or so to make sure they understand (and hopefully take notes) your normal process.
If you do not have a spouse or your spouse is unwilling to participate, create a written document that provides information to another person if you are not available to provide it. This document should include how you run your financial affairs. It should include:
- What bills you pay, how you pay them, and how often they are billed. For example, I write a check for this bill monthly, it is automatically deducted from this bank account on this day or automatically charged to this credit card.
- Information about how that bill is received. For example, that bill is received in the mail, I access this website with this password to get that bill, or I receive the bill in my email.
- What income is received regularly, and how and when it is received. For example, I receive my Social Security check direct deposit into XYZ bank account, I receive my pension check in the mail around this date, or these dividends come in how often and are being reinvested into the brokerage account.
In my client’s case this past week, her name was on some of the bank accounts so she could access them. Her name was not on “his credit cards,” so she has no access to that. He set up all bills electronically, so everything is coming into his email, or he has access to them through password-protected websites online. There is no password chart, so she cannot get into his email or get into any of these accounts. We will need to scramble to figure out what all the bills are, how they are getting paid, and how to make sure they continue to be paid since he will be unable to do that in the future. Think about the extra costs of late fees, additional interest, and penalties that could potentially occur as we try to decipher their financial life over the next several weeks.
I understand the idea of separate bank accounts and credit cards for the practicality of married individuals. I would strongly suggest that you make all accounts joint. I put my spouse on my bank account as a “just in case.” He agreed not to conduct any transactions unless I was incapable of managing my financial affairs. Make sure all credit cards are joint, again as a “just in case.” Any loans should be joint – as a “just in case” and ensure that credit is being built in both names.
What if you have a spouse you do not trust enough to add their names to all accounts or have no spouse? A power of attorney (POA) becomes the fundamental document. My client this week has been telling me for years that they had a POA. It turns out the attorney did their wills but never did a power of attorney. In talking with a different attorney, I have learned they see this happen all the time.
Please do yourself a big favor – verify that you have a POA. Verify that it has been signed and that it is in good order. Do not put yourself, your spouse, your child, or the person who may need to assist you at a significant disadvantage of not having the authority to handle your affairs.
Without a POA authorization, individuals cannot sign a check to pay bills. They cannot call a pension company or your former employer to find out about potential benefits. No bank or investment company can answer questions about any accounts or income coming in. Individuals cannot stop subscriptions that are no longer needed. Make sure that you are naming an individual who does not procrastinate and takes immediate action when necessary. A spouse, child, or friend cannot act in your best interest if they do not have written permission to do so in the form of either joint on the account or having that power of attorney authorization.
I cannot stress enough that you need to get a power of attorney in place for you, your spouse, and any children over the age of 18. When a child is younger than 18, they are considered a minor, and the parents can make decisions on their behalf. Once they are over 18, that ability ends. If you need to manage the finances of someone because of illness, an accident, deployment, travel, or many other scenarios, make sure that a POA is in place.
Do not wait like this client and many before until you need a POA to learn you do not have one in place. Now, we have a spouse in a hospital that does not allow visitors, meaning the attorneys cannot get in to have a POA signed. They are about to get transferred to a nursing home that has also reinstituted COVID shutdowns, so they may not be able to get an attorney into the facility to sign. In many cases, individuals may no longer be capable of signing due to the extent of their injuries or illness. Without the ability to have a POA signed, the next step would be having to go to court to have an individual appointed as a guardian.
The person that you make your power of attorney should be someone that you trust. Consider using a sibling or friend if you are concerned about your child’s ability to handle the responsibility. Maybe your daughter-in-law or son-in-law might be a better choice than your child. Is your child a better choice than your spouse? A family friend might be an appropriate choice if you believe there may be disagreements among children.
If you are more comfortable, you can prepare a power of attorney but not give it to the person. Leave it with the attorney and let that individual know that one exists. That POA would need to call the attorney to get a copy of it if it is necessary to use. Even this is a much simpler scenario than no power of attorney existing at all.
A power of attorney, wills, living wills, and trusts are legal documents that an attorney should prepare. At Planning with Purpose, we have many discussions about the decisions you need to make to allow the attorneys to create them. We are constantly nudging individuals to ensure they have the documents in place that are current and up-to-date. You need to take action to see the attorney and get the documents created and in place. I implore you not to wait and take the steps now to get these estate documents in place, “just in case.”