Get Honest About Money
We pretend, when it comes to finances, all decisions are rational and can be plotted on a straight path toward a predictable result. This simplified notion forms the basis for the “Write Your Own Will” kits sold in stationery stores and the computer programs that forecast a guaranteed return in a given amount in a stated number of years. It is possible and quite often happens that, by focusing on what is quantifiable, we miss critical considerations. We have to be honest and dig deeper.
Computer programs may cover the mathematics handily but individuals vary. Money decisions cannot be divorced from personal goals and preferences, relationships, and other factors such as, for instance, health.
A sixty-five year old in excellent health with a strong support network of family and friends is, in my opinion, immensely wealthier, even in financial terms, than a person of the same age with the same investments who is in poor health and isolated from family, friends and other sources of support. The person in
poor health without social connections will need to pay for assistance that the first person would not need or might receive gratis. That kind of wealth can be missed when running calculations.
There are other ways in which quantifiable financial plans fail to reflect what is really happening. Money decisions are often not reasonable. Money can be used to motivate, control, liberate, protect, or express approval or disapproval of the person who will become the ultimate beneficiary. Spending patterns may originate from security, insecurity, generosity, rebellion, greed, or fear.
Suze Orman, a popular financial writer, describes in one of her books how, when her father’s store erupted in flames, he returned to the building to retrieve the cash register. Logically, even from a financial perspective, the injuries he could have sustained from that feat would not justify his action. She related that, at that moment she realized how important a motivator money could be.
Often in my work I witness informal understandings about money that should be discussed, described, and defined in writing. Here are some of the kinds of problems that can arise by not confronting money issues directly.
John, a spendthrift and gambler, “borrows” from his parents repeatedly. He always verbally assures them that he will make it up to them eventually. His parents, not wanting to see him homeless, continue to advance him the money over the protests of his brothers and sister who handle their assets responsibly. Finally, his parents fall behind in their own obligations and their remaining children bail them out with the help of a bail bondsman or a bail bonds service. Almost anyone who understands the situation, like a bondsman, would say that John should repay the money but in cases such as this, even when errant sons like John finally straighten their own finances, they often do not repay the loans. Here is where families should consider handling problems in a business like manner from the beginning.
Jennifer left a highly paid executive position with benefits with a major corporation to care for her elderly mother. She exhausted much of her own savings to hire aides to assist her and then eventually paid for her mother’s care in assisted living. Her remaining sister and brother remained on the sidelines. Mom, not wanting to alienate anyone, leaves everything in her Will to be divided evenly among Jennifer, her sister and her brother. Mom eventually moves to skilled nursing care and, when her assets are low, Jennifer seeks advice whether she
can be repaid for her lost earnings, her time, and the funds she actually spent for Mom’s care. At that point, Jennifer may be shocked to discover that, if she does not have a clearly defined agreement with her mother, preferably in writing, for Medicaid purposes she might not only be unable to receive compensation but the government might consider her payments toward her mother’s aides and assisted living as a “gift” that cannot be repaid to her without disqualifying her mother from receiving Medicaid. If there had been a clearly defined written agreement for repayment, she would likely have been able to receive reimbursement and probably also compensation without penalty. If she paid from her mother’s funds only and not her own, the issue would not have arisen in the first place.
It cannot be emphasized enough that in the complicated society in which we live today, if there is any intent to see repayment eventually, these informal understandings should be confronted directly and stated in writing. Otherwise the generous and kindhearted may again be shortchanged at the end.
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.