Why Transferring Control of Finances Is Essential for Older Relatives: Three Things to Do Now

When my Dad started to descend into the abyss of dementia, I discussed with my three brothers what needed to be done.

We needed to assign financial power of attorney and move all of his estate’s assets into his trust, which also needed a trustee. Although this process took more than a year, I’m glad we did it. When he passed, it made it easier to distribute his estate and protected my Dad when he had no intellectual ability to do estate planning.

Granted, my Dad’s estate was a mess. He had mutual funds all over the place and many of them weren’t in his trust. He also had a horde of coins in his safety deposit box, which had to be appraised and sold. The proceeds from his booty had to be deposited in his trust.

According to the Center for Retirement Research at Boston College (CRRC), families need to collaborate and manage older relative’s estates before cognitive decline occurs. You will need to appoint a “trusted” or “dependable agent,” which could be a responsible family member, bank trustee or lawyer.

“A recent survey of investors ages 55+ found that most have a dependable agent in mind, but they worry that they may delay transferring control and that a delayed transfer could significantly hurt their finances,” the CRRC found. “Thus, any measure to help the timely detection of cognitive decline could protect against costly mistakes.”

The key to this process is not waiting until the family member is unable to make rational decisions. Research shows that “cognitive decline is a significant risk for older Americans. About 23 percent of all individuals 65+ have a mild cognitive impairment; and an additional 11 percent have dementia. These rates, of course, grow as individuals age.”

How do you go about this process? It involves a family get-together and getting professional help.

Find and appoint a “capable agent” to manage your relative’s financial affairs.

This should be “the most likely person to make financial decisions on behalf of the respondent in case of severe cognitive decline (the “likely agent”).”

Discuss a timeline for transfer of assets.

You may need to work with an estate-planning lawyer and bank trustee. Every step should be transparent and communicated to family members. In many cases, you may not have as much time as you need. “For an agent to capably protect a person’s finances from the effects of cognitive decline, the transfer of financial control should occur before people make irreversible mistakes. Many factors make it challenging to transfer control at the right time, including the elusiveness of cognitive decline.”

Make Prudent Decisions/Keep Monitoring.

No timing will be perfect and not everyone will agree. If you keep in mind this is the best course for all involved — and to protect your loved one — the process may proceed more smoothly. “Any measures that can help secure the optimal timing of the transfer of control – e.g., regular monitoring of cognitive abilities – can go a long way to protecting older Americans’ financial well-being.”

 

This article was written by John F. Wasik from Forbes and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.