Unlocking Financial Capability for Seniors
submitted by Kristen Orr, Tech ParalegalApril is National Financial Capability Month. Being financially capable means having the knowledge and the confidence to take charge of your financial wellbeing. You can take charge on your own, but it’s also okay to recognize that you need assistance and enlist appropriate help. Being active and engaged in your own finances lowers your risk of financial exploitation and ensures a more secure and stable future. This month is the perfect time to not only make sure that you have a solid understanding of your personal finances, but also to augment that foundation with some concrete steps to improve your overall financial health. Financial capability is an ongoing process. You should be consistently reassessing your financial situation as your needs change. Make sure the people you chose to help manage your affairs are still working out for you. Are you happy with your Power of Attorney? Do you still trust the joint owners on your bank accounts? Have you experienced any life events? Reflect on any recent marriages, divorces, the death of a loved one, the birth of a grandchild – it may be time to reconsider your beneficiary designations. So, what can you do?
KNOW WHAT ACCOUNTS YOU HAVE
It’s important to have a solid overview of your assets. You should know how many accounts you have and what they are (ex. CDs, checking accounts, stocks, etc.), and the financial institutions that house them. Your credit report should list all of your active accounts; you can also review your tax returns from the last few years and make sure you recognize all of the 1099s that were filed. Many New Yorkers have forgotten bank accounts or refunds. In fact, there’s currently $16.5 billion in unclaimed funds in New York State. Check here to see if any of that money belongs to you: https://www.osc.state.ny.us/unclaimed-funds
MONITOR YOUR ACCOUNT AND CREDIT CARD STATEMENTS EVERY MONTH
You should have an accurate estimate of how much money you have in each of your accounts, and how many charges you’ve made on your credit cards. This way, if the balance is different than expected, you’ll be able to easily identify if fraudulent charges are made. Contact your banks, credit card companies and financial institutions to make sure that they have your correct mailing address, phone number, and email address on file. This will ensure that the companies can contact you if there is any unusual account activity. Make sure that you are receiving your statements at your correct address, or that they are available to you online. Unless you have specifically asked someone else to review your statements for you, they should not be going to someone else. Always be sure to contact your financial institutions to question any unfamiliar transactions as soon as possible. Delaying the reporting of unfamiliar or unauthorized transactions may mean that you cannot get them reversed.
UPDATE YOUR BENEFICIARY DESIGNATIONS
A beneficiary is someone you choose to receive a death benefit or remaining funds in an account after you pass away. When a beneficiary is named, the funds pass directly to that person upon your death. This means that they do not need to formally open an estate with the Surrogate’s Court to access the money, avoiding the lengthy estate process and the need to pay filing fees and attorney fees. You can name a beneficiary to almost any account or income stream you have, including life insurance policies, annuities, bank accounts, and pension benefits (depending on the elections you have made). You need to explicitly name your beneficiaries for each policy with your financial institutions, as most accounts do not have automatic beneficiaries. If you need to change the beneficiary that is named on an account, contact the financial institution that manages the account for further guidance.
EVALUATE YOUR JOINT ACCOUNT OWNERS
Joint owners have full access to whatever account they are named to. They can withdraw funds or even close the account without your permission. If a joint owner dies, the survivor would retain ownership of the account, superseding any beneficiary designation. Having a joint owner on your account can be helpful for estate planning purposes; as the joint owner has full access to the funds in your account, they can easily pay bills on your behalf and help monitor your account for suspicious activity. If you are going on vacation, or need to move to a long-term care facility, your joint owner can continue to pay your bills out of your account.However, you should know that the joint owner will be able to use your personal money for their own gain without your knowledge, and even close out your accounts and move the money elsewhere. Unlike a POA who is obligated to be prudent with your money, the joint owner may not be held to the same restrictions depending on the financial institution.It is important to choose someone you can trust with your money; if you feel a joint owner is right for you, consider someone who is adept at handling their own finances and not in personal debt, and who you know has your best interest at heart. Once you make someone a joint owner on your account, it is very difficult to remove them without closing the account, so you should be very careful in making this decision.
SWITCH YOUR PAPER CHECKS TO DIRECT DEPOSIT
Having your income directly deposited into your bank account can prevent someone else from fraudulently cashing your checks. It also eliminates post office delays and the risk of payment being damaged in the mail. In the event of a disaster, direct deposit ensures you will still receive your funds regardless of any issues with the postal service, transportation, bank closures, etc.
PROTECT YOUR PERSONAL INFORMATION – OFFLINE
Do not carry your PIN or passwords in your purse or pocket; keep your checkbook, cash, and personal information in a safe and private space. Shred any documents containing sensitive information like your social security number, date of birth, or account information. Check with your bank for the best shredding options if you don’t have access to a shredder.
PROTECT YOUR PERSONAL INFORMATION – ELECTRONICALLY
Don’t connect to public wi-fi networks, as they are not secure. Never give your personal information over the phone or via the internet unless you initiate the contact with your bank or other institution. Strengthen your passwords by using a combination of capital and lowercase letters, numbers, and symbols. Don’t use the same password for everything and consider changing them every 2-3 months. Enable two-factor authentication for added protection – this involves using both a password and a code sent to another device/account that you control (such as a cell phone or separate email account) in order to access an online account or make changes to personal information.
CHECK YOUR CREDIT REPORT
Make sure that your personal information (name, date of birth, address, social security number, etc.) is accurate and there are no changes. Review the report carefully for bank accounts you do not recognize, credit cards or loans that you never applied for, and erroneous information, such as a closed account being listed as open, or an up-to-date account being marked as past due. Check for any companies that ran your credit report unexpectedly, as this could indicate that someone else applied for a loan in your name.Right now, due to the COVID-19 pandemic, the three national credit reporting agencies (Equifax, Experian, and Transunion) are offering free weekly credit reports through April 20, 2022. For your free credit report, visit www.annualcreditreport.com.
MAKE A BUDGET & TAKE ADVANTAGE OF DISCOUNTS AND PROMOTIONS
Compare your monthly income with your monthly expenses. If your expenses are higher than your income, see where you can reduce your spending. Try tracking every purchase you make for one month and see what sticks out as a superfluous or unnecessary expense.Often, insurance premiums can be paid in monthly installments rather than lump sum annual payments, which can make budgeting easier. However, some companies might offer price reductions when you pay the lump sum up front or may charge a small fee for making monthly payments, so be sure to check with each company to see what options work best for you. Similarly, some utility companies offer budget billing options, keeping your expenses the same each month rather than fluctuating with the seasons, which can help for advance planning.Many museums, parks, restaurants, and retail stores offer senior discounts. You may even get a discount on your phone bill or car insurance – it never hurts to ask! There are also a number of federal, state, and local benefits, such as property tax or food assistance, for which you may be eligible. Many seniors experience a steep drop in income when they retire or when their spouse/partner passes away, which can make them eligible for government benefits that they would not have previously considered. Visit https://www.benefits.gov/ to see if you qualify for Federal benefits, and https://www.mybenefits.ny.gov/screening/ScreeningWelcome_input.nysmybw to see if you qualify for benefits administered by New York State.
DESIGNATE A POWER OF ATTORNEY
You may feel that you could benefit from having someone regularly assist with your finances. Executing a Durable Power of Attorney (POA) document is a great option to appoint someone else to help manage your affairs. A POA is a legal document that allows someone (known as the “principal”) to appoint another person/people (known as the “agent(s)”; also referred to as the “POA(s)” or the “attorney(s)-in-fact”) to act on their behalf in specific financial and legal matters. In the POA document, the principal has the option to grant a blanket financial authority to their agent, or they can pick and choose different tasks the agent is explicitly authorized or not authorized to act on. Because there is no “one-size-fits-all” POA, you should always consult an attorney before signing a POA to ensure that the document best fits your specific needs. It is also important to note that your agent cannot make medical decisions on your behalf; you need to execute a Health Care Proxy to appoint someone else to make medical decisions.You are not giving up any of your rights by appointing someone as your POA.
As long as you have capacity to do so, you can continue making your own financial and personal decisions. However, it’s important to note that a Durable POA goes into effect as soon as it is signed by you and your agent. Your agent does not have to wait for you to become incapacitated for them to begin acting on your behalf. That is why it is so important to choose an agent that you trust.You should know that your agent has an obligation to use your funds for your own benefit; they must follow any instructions you give them, and if there are none, they must act in your best interest.You can revoke a POA at any time, for any reason, so long as you have the capacity to make that decision. You should consult an attorney, as your agent and any third-party financial institutions will have to be provided with a written Revocation.
If you do not have the capacity to revoke your POA, a Judge can terminate the document on your behalf. The validity of the POA expires upon the death of the principal.Taking control of your financial health doesn’t mean you have to do it alone. Even if you are entirely confident in your ability to manage your own money, you should still consider executing a POA document. If you like to spend the winter months away from home, your agent can handle your bills and other matters for you at home while you’re gone. No one plans to become incapacitated, but if that time ever comes and you already have a POA in place, your agent will be able to assist with your affairs.Appointing someone as your POA gives them unrestricted access to your finances; in addition to consulting an attorney, you should consider the following when choosing an agent:
Your agent should be someone you unequivocally trust – remember, this person has the ability to make financial decisions with your own assets even while you still have capacity
Avoid someone with a history of money problems, gambling or drug addictions, or a lot of personal debt; they may be tempted to use your money to dig themselves out of a hole
Consider appointing a monitor who can make sure your agent is acting properly
If you have multiple people you trust, consider naming two agents to work together and keep each other in check
Stay involved – remember that you can ask your agent for an accounting at any point after executing the POA document.
CONCLUSION
National Financial Capability Month is a great time to start taking more control over your finances. Handling your financial situation to the best of your ability can reduce your risk of financial exploitation and help you to live independently and with dignity. For more information on this topic or to obtain a free financial health checkup, please visit the Center for Elder Law and Justice’s Senior Financial Safety Tool. The Senior Financial Safety Tool project is supported through a cooperative agreement with the U.S. Department of Justice, Office of Justice Programs, Office for Victims of Crime award number 2018-V3-GX-K024. The opinions, findings, conclusions or recommendations expressed in this Project are those of the author(s) and do not necessarily represent the official position or policies of the U.S. Department of Justice.