No one likes to imagine a day when they can no longer manage their own financial affairs. It's a difficult topic -- and one that's fraught with emotion -- but it's also a subject that should be discussed long before the fact.
As family wealth advisors, we often field questions about end-of-life issues, such as knowing the right time to turn over your financial accounts to someone you trust. Though it's not easy to discuss, planning well in advance will provide you -- and your loved ones -- with peace of mind.
How Do I Prepare to Relinquish Control of My Wealth Planning?
It's a hard question to answer, but it's best to answer it as soon as possible. Creating a clear, detailed plan will remove ambiguity, making it easier for your loved ones to handle the issue when it arises. Sit down with your trusted wealth advisor or retirement plan fiduciary and assess your financial situation.
Will you have enough funds to last well into your 90s? Have you taken health care costs into consideration, especially the high costs of assisted living or long term care. According to the Centers for Disease Control, almost two-thirds of people age 65 and over will require long term care or assisted living at least once in their lives -- so plan accordingly.
Next, consider your estate planning. Meet with your attorney to ensure that your will is finalized. Though it can be difficult to decide who will receive your assets, it's better to make decisions early and avoid confusion and bitterness among family members after you pass away. If you wish to create a living will -- also known as an advanced healthcare directive -- now is the time to finalize that, as well.
Finally, meet with the person you wish to handle your financial planning and openly discuss these issues with them. Having the conversation early will allow them time to prepare, as well.
How Will I Know When to Turn Over My Wealth Planning Duties?
The decision to hand over control of your finances varies by individual. While there's no "magic" age, there are some signs that may indicate that it's time to relinquish control, such as memory loss or confusion. Other health issues, such as stroke or medication interactions, can mask or exacerbate problems. Cognitive tests may shed light on the subject; take the results seriously and know when it's time to let go.
Depending on who you've chosen to manage your finances, you may want to consider naming a trusted advisor as a co-executor. Having two executors provides oversight and reduces the opportunities for misuse of funds.
When you have turned your accounts over to your executor, you may not always like how they handle your finances. This is a normal reaction; after all, it's hard to let go of control over something that you've been managing throughout your adult life. However, unless you see clear evidence of mismanagement, it's often best to listen to what the trusted and capable people around you are saying and allow your executor to do their job.
These decisions are never easy. But planning, preparing and making the tough calls ahead of time will result in less stress for everyone involved when the time comes to let go.