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Writer's pictureDon Drake

Creating a Financial Plan for Seniors

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"As people age, managing banking tasks and paying bills can become increasingly challenging," said professional fiduciary and certified elder law Attorney RJ Connelly III. "However, incapacitation can strike unexpectedly, affecting individuals of any age. This can happen when someone can’t drive to the bank or faces visual or auditory impairments. Without a proactive plan, such situations can jeopardize a loved one’s financial responsibilities."


Fortunately, there are solutions to address these challenges. Options include appointing a caregiver for daily financial tasks, selecting a power of attorney, using trusts to protect assets, or hiring a professional fiduciary. Combining these strategies can create a tailored financial plan.


In this blog, we will explore methods and strategies for protecting the assets of loved ones facing disabilities or illnesses, focusing on practical steps to ensure their financial well-being during challenging times. Let’s get started.


Creating a Financial Plan

"Whatever path you decide to take, it’s essential to approach the situation carefully and plan to achieve the best outcome,” emphasized Attorney Connelly. "Creating a financial plan for seniors, especially before facing an illness or accident, can help manage financial matters and critical decisions quickly and efficiently."


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Open conversations among siblings about their roles can foster clarity and transparency, setting expectations for contributions during challenging times. Don’t hesitate to discuss health management and financial oversight with trusted family members, as this can prevent misunderstandings and legal disputes.


If conflicts are hard to resolve, consider involving a neutral third party, like a trusted clergy member or mediator. Their objective perspective can facilitate productive dialogue and spark solutions, helping to maintain familial relationships.


Protecting Loved Ones from Creditors and Fraud

"While a joint checking account can seem like an efficient way for caregivers to manage finances, there are significant risks," stated Attorney Connelly. "There have been many cases where the second account holder misappropriated funds. Additionally, creditors can pursue debts from either account holder, potentially creating unexpected financial burdens. After the death of one party, the surviving account holder inherits the funds, which can lead to disputes among heirs. It's essential to carefully consider these complications before opting for a joint checking account."


Using a Convenience Account

"Many states now allow 'convenience accounts,' which help manage funds for another individual," explained Attorney Connelly. "In this arrangement, the secondary account holder has limited authority to make transactions solely for the primary account holder's benefit, such as paying bills or transferring small amounts, without the risk of misusing the funds or inheriting the account upon the primary holder’s death."


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Maintaining detailed records of all transactions in a convenience account is essential. Each check should clearly state its purpose in the memo field. The funds in this account cannot be borrowed against or claimed by creditors and should only be used for the primary account holder's benefit. Ideally, a trusted family member should be the secondary account holder rather than a paid caregiver to ensure reliable oversight. In cases where fiscal management becomes more complex due to aging or incapacity, other fiduciary roles may be needed for better protection and stewardship.


Power of Attorney (POA)

As Attorney Connelly explained, a durable financial power of attorney designates an individual to make financial decisions for the principal if the principal becomes incapacitated. The principal must be of sound mind when granting this authority. This appointment helps prevent family members from needing costly and time-consuming court intervention for guardianship in case of incapacity, which can also lead to disputes among family members.


Trusts and Trustees

"A loved one can have an elder law attorney set up a revocable living trust with a named trustee," said Attorney Connelly. "If the grantor cannot make sound financial decisions, the trustee manages the trust's assets, including insurance, paying taxes, making investments, and securing valuables. The grantor can change or revoke the trust as long as they are capable."


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Using A Professional Fiduciary

“If a loved one’s finances are complex, they could hire a professional money manager,” said Attorney Connelly. “Not every family has someone capable of managing complicated assets, and they may not be nearby for proper oversight.” This fiduciary could be a CPA, a trust company officer, or an elder law attorney. They charge a fee but allow family members to relieve them of duties if dissatisfied.


Court-appointed Guardian

"When a loved one has not set up a financial oversight strategy and later becomes incapacitated, the court will hold a hearing to appoint a guardian," said Attorney Connelly. "This process results in a significant loss of autonomy, so less restrictive alternatives should be considered first. While guardianship may be necessary in some cases, it can be lengthy and costly, especially for urgent decisions regarding the loved one's well-being."


A Final Word

"When considering financial management options for a loved one, the appointed individual needs to exercise the highest level of fiscal responsibility," Attorney Connelly said. "This ensures the effective management of their loved one’s financial health and safeguards against potential elder financial abuse. Engaging in conversations with family members, along with the guidance of an elder law attorney or a professional fiduciary, can help clarify which options are most suitable for your loved one."

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Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.

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