Have you had the financial independence talk with your parents?

(No, I don’t mean the one about college costs and student loans, or the one about helping out with your down payment on your first house.)

I’m talking about the one where you hope they’ll talk about their health and tell you how to manage their finances.

Getting ready for “the talk”

The advice is in dozens of blog posts. (With eye-opening comments.) You’ve seen it in commercials and magazine ads. The layout shows two or three photogenic generations enjoying a meal around a table, perhaps at the ol’ homestead or in a restaurant. Their clothes all match the decor. The older couple is “Medicare age” while another couple is in their 30s. Everyone seems relaxed and friendly, perhaps celebrating a holiday. Maybe one of the elders has just gently shared that they’re having trouble with their memory or the younger adults are asking how the older folks are doing at home. Everyone looks concerned. Eventually the elder father talks about their health and finances and tells the adult children where to find “the folder” in the file cabinet. Everyone gathers ’round dessert to sign powers of attorney and healthcare directives, smiling happily with relief. Whew, everything is going to be just fine!

Yeah, right. Maybe in a movie or a TV commercial, but not for most people.

In our family it started three years ago with the midwatch phone call from a trauma surgeon in the emergency room. Dad would recover but he could no longer live independently. When the hospital discharged him in a few days, what skilled nursing facility would we like to use for his therapy?

I’m 53 years old, and my pounding on a keyboard gives me lots of opportunities for introspection.  I’m shocked to realize I’m the same age that my Dad was when he retired. He’s now 80 years old and deep into mid-stage Alzheimer’s. He’s happy and reasonably healthy and he’s doing well at an excellent full-care facility. He has long-term care insurance and other assets. My brother is his guardian and I’m his conservator. We’ve handled the crises and we’re all getting along fine.

[2018 update:  My father passed away peacefully in November 2017 from late-stage Alzheimer’s.  That last paragraph held true to the end.]

Outside of our family, however, it’s not so harmonious.

A note for those whose parents have passed on

My sympathies if your parents passed away suddenly or if you didn’t get the chance to care for them in their final days.  We never have enough time to say goodbye, and it’s much better to be a guardian or a conservator than to be an executor.

Please bear with me– I do not intend for these complaints about eldercare to make light of loss and mourning.  My mother died over 25 years ago after her brutal and lengthy battle with breast cancer, and I know how grief feels.  This post’s frustration about caring for our elders is directed at the political, judicial, and legal systems– and not at our families.  As much as I kvetch about the problems, I hope that this post provides a warning and offers some solutions.  However, difficult it may be to take care of my Dad, I’m still grateful that we can care for him.  I just wish that the systems intended to protect our elders were a little more sympathetic (or at least a little less bureaucratically zealous) in that pursuit.

Legal powers

You would think that you could help with your parents’ finances by using a simple joint checking account or by signing a power of attorney. Once their cognition starts to slip, however, eventually that will no longer legally suffice. Even the fabled “durable” POA is largely ignored by most banks and financial institutions. The best legal document for this situation appears to be a revocable living trust with the elders assigned as trustees and the younger adults designated as alternate trustees. (I don’t have any experience with RLTs— yet.) A RLT may cost a few thousand bucks to draw up.

Regrettably, you can’t set up a RLT or even notarize a POA in the hospital’s ICU. When the financial institutions decide that the elder no longer seems competent to handle their own affairs, then the state probate court steps in. We’re very fortunate that Dad gave us the keys to his apartment, and after a day’s search I found his list of financial account logins and passwords. We still had to spend nearly $14,000 in medical exams and legal fees to prove to the probate court that Dad needed a guardian & conservator. Then we had to convince the judge that his sons were the right people to do it.  We have to continue to prove our worthiness every year.

Pro tip: when you help your elder pay their bills, then either set them up with online payments or make sure that only their handwriting is on the bill and their check. Otherwise an account manager will freeze an asset and (politely) insist on a POA or other legal authorization. If your elder lives in a small town then the bank manager may already have flagged the account when they heard that your parent was hospitalized. Let’s not get into how I learned this.

Conservator “power”

The probate court’s appointment order is not a magic wand. Bank managers (especially in another state) will ask for more forms. You’ll have to prove to them that you’re not laundering money or supporting terrorism. Insurers and medical billing companies don’t want to talk to you because their staff are excessively conservative about HIPAA privacy. You can’t even give them money, let alone receive a copy of the bill or persuade a supervisor. You’ll spend several days faxing court documents (and each company’s special additional forms) back & forth before you’re finally authorized to speak for your loved one.

Healthcare and insurance financial systems are charmingly antiquated. Supervisors are reluctant to use e-mail (no HIPAA privacy guarantees) and few of their websites support secure e-mails or uploads. Fax machines are still de rigueur in this bizarro 1980s universe. (Pro tip: Use FaxZero.com or, assuming you still have an actual land line, pick up a free fax machine on Craigslist.) Dad’s long-term care insurance company has finally implemented direct deposit of his payments and stopped snail-mailing paper checks– nearly two years after they began paying his claim. Small companies won’t even do that, and you’ll either need to mail them a check or have your credit union’s bill-paying website mail the check.

Medical billers are notoriously inefficient and uncommunicative. Hospitals and doctors use up to a dozen subcontractors to handle their tests and invoicing, and none of them seem to coordinate their databases. If you’re lucky, the statements will be forwarded to your loved one’s new billing address instead of to their old address or their care facility. Your first notification that a bill exists, let alone that it’s delinquent, might be when the collection agency calls. (They apparently don’t have to worry about HIPAA privacy.) Even after you pay the bill you may still have to slog through the process of stopping the collection calls.

Merely the simple act of opening a CD at a bank or credit union can take several weeks. My father’s checking account was frozen for over nine months, and even after the probate court’s appointment it took his bank’s staff another two weeks to give me access to his Social Security and pension deposits. Unfortunately for their business model, when I inquired about opening a CD they required me to start the identification & verification process all over again. Three years later I’m still reluctant to try to move his pension & SS deposits to another bank, but I transfer the funds out of that account as soon as they’re credited.

I took the rest of Dad’s financial business to other banks and credit unions.  USAA has been absolutely outstanding with their financial services, including secure website uploads and e-mail. They understand the conservator vocabulary, and the customer service representative actually executed fund transfers for me while I was on the phone. Another huge military-friendly credit union is relatively hassle-free, but a smaller national military-friendly credit union argued with me for over a month. They wanted a “notarized original copy” of the guardian (not conservator) appointment, and both the regional and national offices insisted that was their procedure without understanding the vocabulary.

I’m not even going to get into:

• the charity mailing lists and phone call lists that Dad was on,
• the monthly fees he was paying for years on services that he didn’t use,
• the life insurance policy that he didn’t need but was upsold by a “friendly” agent,
• the 12-year-old vehicle that he was driving on 12-year-old tires in snow & ice,
• the newspapers and magazines that he was “saving” in a closet,
• sorting through file cabinets and boxes to discover photos and info I’d never known,
• my brother and I taking care of all his apartment furnishings and ending the lease,
• closing his credit-card accounts, or
• doing his annual tax returns.

He was living very frugally on his Social Security and his pension, so his investments were concentrated over 80% in equities. I’m relieved that he didn’t own real estate or a business, and that he wasn’t a landlord. Diversifying his investments (and preparing the tax returns) turned out to be the easiest part of being a conservator.

As you can imagine, my first year of conservator took 10-30 hours/week of paperwork, phone calls, and mail.  After three years I now have it down to an hour or two a week.

Does setting up a revocable living trust still seem like an expensive and time-consuming hassle? Well, let me show you a little glimpse of the conservator’s world.

Dealing with the probate court

Dad’s finances are mostly on autopilot and now my time is spent on conservator’s reports– yet the probate court has nearly fired me twice in the last three years. On one hand, the probate court does a very good job of protecting Dad’s health and financial welfare. On the other hand their technology is at least a decade behind, they’re understaffed, and they could occasionally be tempted to execute their duties a little too zealously. The probate court provides a large and helpful conservator’s manual, but it’s clear that they would prefer to deal with professional conservators. (That’s a booming business.) Their customer is my Dad, not me, so conservator customer service is minimal. It’s a legal system, of course, but the court’s electronic filing system is not available to “civilians” like me.  There’s not a secure website upload feature.  I have to enter my conservator data on their forms (which happily are on their website) but I have to mail a printout through the U.S. Postal Service. The court staff still has to scan those 13-page annual reports into their electronic system, but the numbers are treated as PDFs instead of spreadsheet data.

The conservator’s relationship with the court is coercive, not collegial. Most Americans struggle to manage their personal financial affairs– imagine having to do it under a judge’s supervision! I had to pass a criminal records check and an interview, followed by the judge’s questioning. My appointment is only good for one year, renewals are at the court’s discretion, and I can be “fired” at any time. I didn’t have to post a bond, but I did have to agree that I can be extradited from Hawaii (4000 miles away) at any time the probate court wants to see me. I’m allowed to move Dad’s money around, but if I make mistakes then the court can order me to request their permission before each & every disbursement. I had to file an initial inventory of Dad’s assets followed by a financial plan and annual reports. Unless you’re a lawyer or a CFP, the process can be overwhelmingly intimidating.

The court clerk will confirm a mailing address or the receipt of a report, but all other business has to be conducted in a legally documented manner. One year the conservator’s report was misfiled in the electronic system, and my first indication that there was a problem arrived in the form of a court order to appear before the judge and show cause. If I want to ask the probate court’s permission for anything, the request has to be filed as a legal motion and may require a hearing. If I deviate significantly from the approved financial plan then I have to submit a new nine-page financial plan for the court’s approval. The response comes in the postal mail in the form of a court order. If I do a good job, my reward is a court order extending my appointment for another year.

Creating a revocable living trust or a durable power of attorney can seem to be a huge hassle. (I sure used to feel that way.) However, the amount of work involved in either of those documents pales in comparison to the labor of being a conservator.

What you can do now

So let’s return to that cheery family discussion at the beginning of this post. I hope you can pull it off. Our daughter is now an adult, and someday she could be one of the adult “kids” in that cheery holiday photo.

I manage the finances in our family, but the last three years with my Dad have convinced me that it’s time to have my own financial talk with the next generation. My military pension is automatically deposited to my checking account, and I have all of our bill payments automatically deducted from that account. (I don’t use a credit card for that– they expire and their new numbers can change.) Even our credit card balances are automatically paid each month. (I still reconcile the accounts to check the charges.) If my spouse and I died of simultaneous heart attacks in the Jacuzzi, none of our creditors would notice.  Even our estimated income tax payments are automated– it would literally take years for the state and the IRS to realize that I was delinquent on filing our tax returns.

My spouse is a joint owner on all our accounts, of course, and she has all the logins & passwords. If I’m disabled in a tragic surfing accident then she doesn’t have to do a thing financially. I update her on our investments and our asset allocation, but I trade less every year and those accounts are on autopilot too. She’s not interested in writing covered calls or other exotic investments, and there’s no reason for me to complicate our financial life just to make a few extra bucks for another longboard.

Our next step is setting up our own revocable living trust with our daughter as an alternate trustee.  We’ll have to retitle some assets into the trust, but now I know that’s a minor hassle compared to appointing a conservator.

In a few more years I’ll turn all the financial management over to my spouse– I’ve had it for over 30 years and she’s patiently waited for her turn.  All that she’ll really have to do is tweak the autopilot occasionally.  (I’ll spend more time surfing.)  In another 20 years she’ll turn most of those duties over to our daughter so that there won’t be any confusion when the time comes.

So… have you had the financial independence talk with your parents? Do you know how to log in to their accounts? Have they already set up a joint checking account with you, along with powers of attorney and a revocable living trust? For your sake (and theirs) I hope it goes well.

For everyone else who’s trying to set up “the talk”, here’s my advice: forward this post to your siblings and your parents. Share your worries and ask them to arrange their finances for an easy turnover. There will be fear and resentment– and maybe a little hostility– but you’ll be glad that you’ve made the attempt.

Military Financial Independence on Amazon:

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September 2012: Geriatric financial management update
June 2012: Forensic geriatric finances
January 2012: Geriatric financial lessons learned
Book review: “When The Time Comes”
Book review: “The 36-Hour Day”