Prepare Your Finances For When You Can’t Manage Them
There is always the scary realisation that one day you may not be able to manage your finances as you currently do so.
Published: Tuesday, August 25th 2015
As you grow older, the risk of a cognitive impairment increases, and it is important make sure your family do not suffer when you are no longer able to make financial decisions for yourself.Potential cognitive impairment can involve the decline in processing speed, reasoning skills, spatial processing and the spontaneous ability to solve problems.The listed impairments can have a direct effect on your financial decision making skills, and so it may be wise to prepare for the future through trusted professionals, family and friends. Managing for one's future is more effective when the information and responsibility is shared.Nevertheless, how does one prepare for something that might not ever happen? The answer to that would be the adaptation of an "Emergency Checklist".An Emergency Checklist helps track all your important financial and legal commitments. This would usually be the work of advisers such as financial planners and attorneys.Likewise, families should be made aware of the location of all legal documents, all financial accounts as well as the location of necessary passwords and critical information.But let's start from the beginning - take a look at how to develop your Emergency Checklist.Know your debt and income sourcesAt this stage of the game, you should be aware of how money moves in and out of your various accounts, as this is effectively how you manage your daily expenses.As you grow older, your adult children should be made aware of this, in the event they need to manage your finances and bank accounts for you. An important point of entry into your finances would be debit orders, whereby monthly payments are automatically debited from the account.It is important to flag debit orders such as insurance or bond payments as these payments are usually the most exorbitant.If debt and income sources fail to become a part of the discussion with friends, family and attorneys, the history of your financial standings can be lost and sometimes made worse if much is unknown about your liabilities.As a result you may experience damaging effects on credit scores, the addition of financial penalties and the depletion of current financial accounts and assets.Have a plan for real estate holdingsReal estate is usually the most sensitive financial topic following the passing of the owner. Family usually want to keep the homestead despite being in the dark of the financial implications.The financial feasibility in terms of maintenance and bond repayments is rarely discussed and as a result, predecessors usually have no idea what they are in for.Be realistic about the expectations of financing and maintaining a homestead and take note of this when you draw up your will. Such properties are usually viewed as 'lifestyle properties' rather than assets, which in financial situations, they still are.To avoid your loved ones having to sell your property due to the inability to finance it, make sure this becomes part of the discussion. Allowing family members to plan and strategise the implications of an asset of this magnitude, it is important impartial discussion is upheld.Assign a health care agentA health care agent in charge of your health care proxy, which includes all recent preferences you have decided. A health care agent (who is named in your will) is able to make medical decisions on your behalf at a point when you can no longer do this.You may question the reasoning behind this. Deciding whether to use life support, palliative care, antibiotics or resuscitate in dire situations can be a difficult and emotionally charged ordeal for family, which is not the ideal state for decision making to happen.Make sure a recent and formally executed health care proxy is on standby at all times to avoid any discrepancy when you are no longer able to make decisions. Your family will need absolute clarity regarding health care decisions.Again, let this be part of the discussion to avoid family members receiving a nasty surprise.The benefits of open discussionIt is comforting to know that should the moment arise, family can be prepared for any situation, both financially and medically.Open communication, organisation and a team effort is vital in making the transition into more of a 'team' financial support system. This can spare loved ones of emotional complications and can be liberating as well as life changing.Taking active steps to ensure your financial future is set can be a weight off your shoulders and allow families time to enjoy together with less hardship over financial management.