Saturday, July 16, 2011

KISS - Keep It Simple, Seniors

Keep it simple is the goal, start to simply early on. I see my elderly clients with multiple checking accounts, CD's at various banks, a number of small life insurance policies and annuities with different companies. What happens is a lot of confusion, a lot of paper, and a huge administrative issue. What seemed like good financial sense at the time ends up being overwhelming.

Does this scenario sound at all familiar?

It seemed like a good idea to go to another bank in town to buy a CD as their rates were slightly higher than their primary bank. It seemed like a good strategy to take advantage of an annuity that their bridge partner's son was selling. After all, it was nice to help a friend's son out when he was just beginning. Back in the day when Money Markets were paying a decent amount of interest, it made sense to open up another checking account. But, that account couldn't be used as the main account as only a certain number of transactions were allowed per month. Some of these financial investments were titled individually, some jointly, some in a trust account.

The examples could go on and on. The repercussions range from the mundane daily overload of statements to the legal implications upon the death of one of the account holders. Maybe one of your parents enjoyed spending time taking care of their finances, researching opportunities, and investing/purchasing different investment vehicles. That may have worked when they were younger and could keep on top of everything. But, that may no longer be the case.

Listen when one of your parents starts to make little comments about being overwhelmed trying to keep track of their finances. They may be embarrassed to admit that they need help. When you visit with them, notice if there are piles of papers accumulating. That's a sure sign that no one is looking at them.

The first thing to do is to start to make a list of all their accounts, where they are held, how they are titled, how much they are worth, and if there is an advisor or sales rep handling the account. This may take some time to accomplish. I've been working on this with one of my elderly clients and thought I had it complete. Totally out-of-the-blue, an IRA statement came in the mail that I hadn't known anything about.

Once you know all the accounts, a plan can be devised to try and simplify things. Ideas can be to merge checking accounts so that there is only one account to use and keep track of. If there is a primary investment accounts, other scattered items can be brought under the envelope of that primary account. For example, the client I mentioned before has some annuities that were separate from her primary brokerage account. They now are being moved under the umbrella of her brokerage account.

Depending on your level of knowledge, advise may need to be obtained from a CPA, attorney, or financial advisor prior to making too many changes. Tax and estate planning implications need to be looked into before making any changes.

Bringing this conversation back to the original idea of KISS -- your elderly mother shouldn't be confused as to which checking account to write a check from, be stressed about all the statements coming in the mail, or worry about who is watching over all her accounts. Simplifying things will help her now, and you and your siblings when the time comes that one of you need to take things over.

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