Financial Decision Problems May Affect Elderly
The idea that one spouse can effectively take over all financial decisions for the couple while the other is uninvolved came under attack again recently as a result of a sobering study on dementia, couples and money.
While it has long been understood that concerns about widowhood and being suddenly single can cause women to become more concerned about money issues later in life, the effect of leaving one spouse to handle everything while her spouse is still living have not generally been explored. It is not only women either. Some men leave all the check writing and finances to their wives.
In either case, where you are the decision maker, involving first your spouse definitely and then eventually trusted others who might be one or more of your children or an independent personal or daily money manager is probably a wise idea. Just be certain that the person with whom you are sharing your financial information is someone you can trust with money matters.
The study to which I refer was co-authored by Joanne Hsu of the Federal Reserve Board and Robert J. Willis, University of Michigan and titled “Dementia Risk and Financial Decision Making by Older Households: The Impact of Information.” It has been cited in Forbes, in their Personal Finance Section – Richard Eisenberg, 4/30/2014 www.forbes.com/sites/nextavenue/2014/04/30/a-stunning-study-on-dementia-couples-and-money/. Judging by the title you would think that the only issue is dementia but that
would be wrong. In reading the study, it becomes clear that, even before a medical diagnosis of dementia, there can be difficulty handling money. The astonishing conclusion is that handoff from a person who could be developing dementia often doesn’t happen until “well after difficulties handling money have already emerged” and “even after he is aware of his difficulties handling money or has even received a diagnosis of a memory-related disease.”
In fact, even for those who tested in the demented ranges, the stunning conclusion is that more that 80 percent of those who handled the money (the “financial respondents”) continued to handle the money after realizing they had difficulty and, in many cases, even after receiving a diagnosis. The study does recognize that, in some cases, the spouse cannot become involved because the spouse may have greater difficulty than the person reporting. People who self-reported difficulty handling money delayed some time before obtaining a memory diagnosis and even longer before involving their spouse or other party to help.
Generally speaking, those who individually managed accounts such as stock, investment, IRA and 401(k) accounts, tended to hand over to spouses or advisors sooner possibly because they have more to protect.
The study also notes that, regardless of their condition, “older Americans are more financially vulnerable than the general population.” This is not just because they may have left the labor market but also because they face complex tasks including budgeting, health care expense, debt, handling retirement wealth, and estate and financial planning and are targets for financial abuse.
This leads to the question what can be done.
First, entering into a Financial Power of Attorney is not a sign of dementia. It may, in fact, be one of the smartest things you have ever done if you chose the right party or parties. Frankly, I believe everyone age 18 and over should have a Financial Power of Attorney since anyone could be in a situation whether through health, accident or disability, when they need someone else to pay the bills and handle financial matters. Spouses need powers of attorney for each other since, by definition, they do not have access to their spouse’s retirement accounts and, without a power of attorney, they are unlikely to be able to sell their house if their spouse is disabled. The alternative is guardianship which is expensive, time consuming and requires a Court hearing. The power of attorney should include a backup since it is possible both the person and his or her spouse could become disabled.
Second, in the right case, you might consider a personal or daily money manager if you are experiencing difficulty with bills and paperwork. I have written before about daily money managers, see www.collitonlaw.com, September 19, 2013.
Evaluate who is helping you and get help when you need it and, preferably, before you need it.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.