Here are some suggestions, based on the work of Carolyn McClanahan, MD, CFP.
1. Simplify. A good first step is to simplify your finances. For example, consolidate checking, savings, and retirement accounts. Reduce check-writing by using credit cards wherever possible and paying off the balances every month. Reduce credit cards to three: one to use in public, one only for automatic bill paying, and one for other online purchases. Not only does this simplify record-keeping, but it minimizes the disruption when one is stolen. (Believe me, it happens. It’s happened to me several times.) As McClanahan points out, “The easier it is, the longer independence can be maintained.”
2. Inform. Your surrogate needs to know about all your assets. Not only does this include common liquid assets like bank accounts and securities held in taxable and retirement accounts, it also means more obscure liquid assets. Some examples include variable and fixed annuities, structured notes, collectibles, mineral rights, and cash value life insurance.
3. Provide access. It’s helpful to have the person who will take control of your finances begin by periodically monitoring your accounts. This will require them to have access to your financial records. If your affairs are relatively simple and your surrogate is local, you can authorize them to access your accounts and receive statements. Another good way to share information, especially if your surrogate lives at a distance, is through a secure online access site where you can share relevant and up-to-date information. Almost every financial planner offers a “client portal,” and so do popular sites like Dropbox and Sharefile.
4. Observe. McClanahan recommends that your surrogate start with just observing the monthly financial activities. This can mean receiving duplicates of the bills or periodically logging into investment sites. Alerts could be set on various accounts if spending exceeds a certain limit. There are several money management sites, like quicken.com and mint.com, that can also give a surrogate online access to monthly statements and spending alerts.
5. Participate. The activity of the surrogate can eventually be increased to attending annual meetings with your insurance agent, investment adviser, attorney, and accountant. If you have a financial advisor, it would be helpful to bring your surrogate into your quarterly or annual updates. This way the surrogate can begin to build a relationship with the advisor, which will greatly smooth the transition to the surrogate working conjointly with the advisor in making all your investment decisions.
The surrogate can gradually begin to assist with the monthly bill paying. Eventually, this would culminate in the person taking over all financial decision-making and responsibilities like purchases, bill paying, taxes, and investment decisions.
6. Monitor the surrogate. Having a system of checks and balances by appointing someone to monitor the surrogate may help you be more comfortable allowing a surrogate to take over your finances. The monitor might be another family member. It might also be your attorney, accountant, or financial planner, whose fiduciary responsibility would be to you.
Planning for the transition of our financial caretaking is one more aspect of preparing for old age that we are reluctant to even think about. Yet without it, we must eventually accept options imposed on us by family or the court. This planning is crucial in order to take care of yourself and your finances in the ways you choose.