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To protect your financial future, hand over the keys to your kingdom today

To protect your financial future, hand over the keys to your kingdom today

Money. Depending on your family dynamics, it can be a blessing or a curse—no matter how much or how little you have to call your own. That’s especially true when it comes time to hand over the keys to your kingdom to the next generation. When that transition is managed carefully over time, it can be a natural, stress-free evolution. If there’s limited communication, secrecy, or just no plan at all, it can cause upset, bitterness, and unwanted financial consequences for Mom, Dad, and their adult children.

I spent yesterday afternoon working with Sarah. In her early 50s, Sarah is every aging parent’s dream financial trustee. She’s smart and educated, and she’s thoughtful and diligent about “dotting the i’s and crossing the t’s” when it comes to her mother’s finances. That thrills me because her mother Marion is one of my dearest clients. Sarah and my mission yesterday was to get all of her mother’s accounts connected to our eMoney platform so we can seamlessly work together to monitor and manage cash flow, bills, and investments. In less than an hour, we linked the accounts, agreed to a 6-month plan, and had our next meeting scheduled.

It’s not always so simple. First, not every parent is fortunate enough to have a “wise child” like Sarah to help. Second, not every parent is ready and willing to hand over the keys—even when the transition is long overdue.

Vicky and Rich are perfect examples of what not to do. Now in their 80s, the couple’s three adult children are all clueless about whether Mom and Dad have enough money to fund the remainder of their retirement—or not. They’ve named their son Josh as the executor of their estate, but they’re keeping the numbers a secret even from him. Josh is stressed because he has no idea where they stand financially or if he and his siblings may need to help them in the future. Vicky and Rich are stressed because they feel like Josh is invading their privacy every time he asks about money. My question to them is always the same: “If you don’t trust him with the keys to your kingdom when you’re alive and well, why should you trust him when you’re in a coma?”

Variations on the theme are endless. Melinda puts up appearances of being financially flush, but suddenly she’s out of assets and is ashamed of having to turn to her kids to help fund her remaining (and less-than-flush) “golden years.” Elizabeth notices that her dad, who has dementia, is suddenly writing large checks to his live-in caregiver (thank goodness she has that visibility!). Luci keeps urging her parents to “spend more and enjoy life,” but they (and I, as their advisor) know they’re wisely spending what they can afford.

Handing over the keys to your kingdom can be scary and humbling, and it’s hardly ever easy. But the process is better for everyone when the truth and the facts are out on the table. Take these three steps to ease everyone’s mind in the future—and the sooner, the better!

  1. Name a financial trustee.
    If you have adult children, begin by doing an honest, thorough assessment to determine who should act as your fiduciary. Can you trust them with your money? Do they have the character, the skills, and the time to work in your best financial interest as you age? A child is usually the ideal fiduciary, but you may find that a sister, best friend, or other relative is more suited to the task. Choose intentionally and begin the transition long before it seems mandatory.

  2. Communicate and educate.
    Once you’ve identified your “person,” communicate your values, so they have a deep understanding of what matters to you. Knowledge and insight are vital if and when they need to step in to make financial decisions in your place. Discuss how to recognize any red flags that mean you're not acting in your own best interest. Be clear about the details with your trustee and with your financial advisor to be sure everyone is on the same page.

    Next, educate your trustee on the technical aspects of your financial life. Create an inventory of your assets, including bank, investment, and credit card accounts; passwords; insurance policies; safe deposit box information (note that you must visit the bank in person together to add your trustee to your account and ensure access); contact information for your financial advisor and estate attorney; and estate planning documents, including your Healthcare Power of Attorney and Durable Power of Attorney (if these aren’t already in place, make this a top priority). And work with your financial advisor to make your personal documents available in a secure vault like our eMoney platform.

  3. Coordinate your team.
    With your trusted person on board, it’s time to arrange a meeting with your entire team, including your trustee, your financial advisor, and all stakeholders involved. Your adult children are a given, but it’s important to include any other beneficiaries of your estate as well. Taking the time to be sure everyone understands your wishes and is clear on who is in charge of what will make things easier for everyone—today and in the future.

The great news is that trusting the right person with the future of your finances can be tremendously freeing. When Marion appointed her daughter as her trustee, she told me how relieved she was. “If I’m forgetting words, I’m sure I’m forgetting to pay some bill or another. I worry about it all the time!” she said. “Now, Sarah is making sure I don’t make mistakes—big or little. What a relief!” Whether you’re 60 or 102, now is the time to hand over those keys and get on track toward an easier, less stressful tomorrow.

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Aging: 4 steps to walking a smoother path toward the inevitable

Aging: 4 steps to walking a smoother path toward the inevitable

At this moment, I’m on a long-awaited trip to Europe with my sister. We’re no youngsters, but we're certainly not elderly by any stretch. As we begin our six-day walking tour of the beautiful Cotswolds, I’m filled with gratitude that both my sister and I are physically fit and able to do this together. I know it won’t always be this way.

Aging is a fact that most of us don’t want to face. By accepting and planning for our (or our parents’) inevitable fragility, we can make life a whole lot easier down the road—especially when that road isn’t paved as smoothly as we would like!

Decide who will be in charge
Meredith is in her late 80s, and she has some significant signs of dementia. But now that she really needs help, she is too childlike and forgetful to know it. She refuses to trust anyone—her children, her sister, her doctors, or her financial advisor—and has decided to stay in her house alone until “I go out feet first.” The financial and emotional pressure on her family is huge.

One of the most important things you can do early on is decide who will be in charge when things start to shift. Deciding where, when, and how to live only gets more difficult, which is why it’s vital to make smart, deliberate choices before any serious decline makes doing so even more difficult—if not impossible. To build trust and ensure a smoother transition, decide who will be in charge early on, and sidestep any disagreements in the future by making it legal. Get a Healthcare Power of Attorney that gives someone else the power to make medical decisions based on your wishes, as well as a Durable Power of Attorney that gives someone else the legal authority to manage your finances when (not if!) you’re mentally or physically unable to do so.

Explore housing options.
When Mark was diagnosed with Alzheimer’s five years ago, he and Judy wanted to keep things simple by staying in their own home, but they both failed to accept how quickly his health would deteriorate. By the time they moved to a continuing care retirement community (CCRC) last spring, the disruption caused Mark’s symptoms to accelerate.

Senior housing is a conundrum. While there’s often an emotional desire to stay at home, physical and mental limitations that come with age often make staying put a challenge. Even if cost isn’t an issue (though it often is), how long does it make sense to live alone—or at home with a partner who is disabled? When is the right time to move? And to where? There are many options available, including those that are pretty well known—independent living facilities, CCRCs, and assisted living communities—as well as some lesser known options such as co-housing and naturally-occurring retirement communities (NORCs). To learn more about the options that are out there, see my blog House hunting seniors: Finding the right option for optimal living.

Plan for the costs of aging.
Michael was a lifelong athlete, and any doctor would have predicted that he’d live a long, healthy life. Even so, to be sure his income was protected, he bought disability insurance when he was in his 50s, “just in case.” It was one of the best decisions he could have made. Michael suffered a spinal cord injury when he was in his late 60s, and the policy has paid for his care and comfort ever since. Without the policy, the impact on his finances—and his family—would have been devastating.

According to the California Partnership for Long-Term Care, nearly half of people aged 65 and older who go into a nursing home will spend between $94,900 for just one year of care, and just under $500,000 for 5 years of care. Nearly 12% will face even higher costs. There are various options to help cover these costs, including insurance policies (life, health, disability, and long-term care), health savings accounts (HSAs) that use pre-tax dollars to invest for long-term medical expenses, and retirement savings. Talk to a financial advisor to create a plan that suits your needs (even those you can’t anticipate). From monitoring cash flow, determining how and when available assets will be used, and ensuring the person in charge of your Durable Power of Attorney has all the information and access he or she needs, a trusted financial advisor can help put every piece of the puzzle in the right place at the right time.

Agree on when to stop driving.
The hardest thing I had to do when my husband Ed became disabled was take away his car keys. I knew he’d be angry, so I secretly notified the DMV that he needed testing. Of course, he knew it was me who busted him, but I had no choice; I knew he was putting himself and others in danger every time he got behind the wheel. Even after his license had been revoked, I had to park the car away from our home so he wouldn’t be tempted to “just take a short little drive.” He hated losing his independence. Who could blame him?

Decide now how driving ability will be determined (and not by the senior!). AARP offers a Smart Driver Course for drivers over 50, as well as an online seminar to help talk to seniors about driving ability—or lack thereof. And, of course, there’s the DMV, as well as a family doctor who may be the first to recommend that a senior turn in his or her keys. By agreeing to an objective third-party decision maker before the time comes, no one has to feel like the bad guy, and everyone will be safer on the road.

It’s time to face the facts: we’re all getting older, and with age come change. Take the time to make some of these key decisions now, and that path will be much smoother when the time comes. Perhaps even more importantly, get help with the choices that matter most. Talk to your doctor about any changes in your health. Talk to your financial advisor about how to plan for future expenses. Websites focused on elder care and groups like AARP and the Alzheimer’s Association can also offer valuable support and guidance. For more information on getting the right help at the right time, see my blog When all feels lost, it’s time to find your A-team.

Need some guidance as you build a better plan for long-term care? This email address is being protected from spambots. You need JavaScript enabled to view it.  me to schedule a time to talk once I’m back from my trip. As always, I’m here to help.


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Lauren Klein quoted on finance site TheStreet.com

The following content originally appeared in an article by Chris Metinko on the popular finance site The Street on May 26, 2015.

b2ap3_thumbnail_coffinatfuneral.jpgEnd-of-Life Harsh reality – Older Americans Die Broke and Destitute

NEW YORK (TheStreet) – While people checkup on their 401(k) to make sure they're adequately planning for their golden years, most don't worry about dying with no money.

However, according to a new study by the non-profit Employee Benefit Research Institute, more than one in five Americans who died at age 85 or older had no assets beyond their home, and more than 12% of that cohort had no assets at all. It was even worse for singles who died at or above age 85, with nearly a quarter having no assets other than their home and 16.7% having no assets. The average net equity left in the homes of those who died at ages 85 or above was $141,147 for couples and $83,471 for singles.

While it’s no secret Americans are bad at saving for their retirement, the numbers paint a particularly bleak picture for those in their last few years. However, experts say there are thing people should keep in mind, especially as they get well

Commie Stevens, managing director of strategic and financial planning for Beacon Pointe Advisors in Newport Beach, Calif., said as people age, they shouldn’t be afraid to ask those they care for to check certain expenses and financial details.

“Your mental abilities may change over time without you even being aware of it, so it's wise to have an open discussion with loved ones now,” Stevens said. “It's important to let them know where you keep your records, what you owe and own and wise to ask them to occasionally check to see if you're staying current on bills and that no one is draining your resources.”

Stevens added it is typical for many people to have accounts spread out among many different custodians, and it’s wise to consider consolidating investments to simplify the review of your accounts and associated withdrawals that create a retirement paycheck.

Lauren Klein, a certified financial planner in Newport Beach, Calif., said the hardest thing for many as they get older is to change their behaviors and attitudes. She said she recently had a 73-year-old woman experiencing financial challenges in her later years, mainly because she was outspending her own means. 

"I explain that in the short run, almost everything is fixed, but in the long run most items become variable,” Klein said. “First, I try to get the client to clearly see the need to change.” Klein said some things she recommends as people get older is to substantially reduce the small -- and not-so-small -- luxuries, consider moving to a smaller apartment or even subsidized housing, use the Medicare Advantage plan and work as long as possible. 

“Even if you work less, a dollar earned is a dollar saved,” she said.

Another reason to work is to delay the start of Social Security benefits. Each year a person waits beyond the minimum age, their Social Security benefits increase approximately 8%, said Allison Alexander, a financial adviser at Savant Capital Management in Rockford, Ill.

Alexander also reminds people to be aware of what they have and determine their tolerance for risk and ability to maximize their investment return. She said an adviser can do projections of income and expenses so a consumer knows with some degree of certainty what he can expect for cash flow in her or his retirement. They also can do a stress test on one’s portfolio and expose it to different assumptions regarding inflation and market return.

“Whether the news is good or bad, it's better to know while you still have time to be proactive and adjust your saving habits,” Alexander said. “Small changes in savings now will provide a more comfortable lifestyle later.”


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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >