Retirees with cognitive impairment and especially dementia need help managing their money, according to a recent report published by the Center for Retirement Research at Boston College (CRR). And, “without help, they are vulnerable to financial fraud, abuse, or mismanagement,” wrote the authors of the CRR report.
One source of help, according to the report, is Social Security’s representative payee program, which allows a designated person to receive and manage a retiree’s benefit check. Unfortunately, just 9% of people over age 70 with dementia have a payee, according to the CRR report, Are Many Retirees with Dementia Lacking Help?.
And that’s a bit concerning, wrote the authors.
The good news? Most people without a representative payee do have other potential sources of help, often a family member such as a spouse or child. But they can also get help from the staff of a nursing home, or from a power of attorney they may have assigned.
“And these arrangements,” say the authors, “may be preferable to having a payee because they allow individuals to maintain some autonomy for as long as possible.”
In fact, the CRR reports notes that most elders do have help: 85% of those with mild cognitive impairment have at least one form of help and 95% of those with dementia have help.
So, what do family members need to know about managing their loved one’s money?
Don’t procrastinate. “It is important to understand long in advance what needs to be done, where everything is, and how it will be handled,” Carolyn McClanahan, the co-founder of Whealthcare Planning and the founder and director of financial planning at Life Planning Partners. she says. “Additionally, families need great communication and transparency to reduce the chance of wrongdoing, resentment, and mistakes.”
And, if a family is concerned an elder having cognitive impairment, address it early. “Get help sooner rather than later before cognitive issues make it difficult for someone to make decisions,” McClanahan says.
McClanahan also recommends drafting what she describes as a financial caretaker plan, a roadmap that shows how finances will be turned over to a designated caretaker.
Draft a durable power of attorney. One big part of a financial caretaker plan is a durable power of attorney, a written legal document whereby a competent adult appoints someone to act as their agent to manage their financial affairs
“We use durable powers of attorney and trusts much more than representative payees because, as the (CRR) study suggests, there’s often no need to go through the rep payee process,” says Harry Margolis, the founder and president of ElderLawAnswers. “A spouse or family member has access to the account receiving the Social Security payments and can help manage the funds.”
Seek help from community-based organizations. The problem, Margolis says, comes when there’s no one to help out. “Those with money can hire attorneys, financial planners and trustees — assuming they’re willing to spend the money,” he says. “Others may be dependent on volunteers or left vulnerable to being exploited. Some parts of the country have public guardians who can step in, but most don’t, leaving a real gap in protection.”
The CRR report notes those “without any help are more likely to be isolated from family, less educated, and non-white.”
Experts suggest contact your local senior center or council on aging if you need help managing your money.
Use Social Security’s Representative Payee Program? The Social Security Administration’s representative payment program provides financial management for the Social Security and Supplemental Security Income (SSI) payments of beneficiaries who are incapable of managing their Social Security or SSI payments.
“In the representative payee program, a retiree’s benefit is sent to another person (often a relative) who spends it on the retiree’s behalf and submits records to Social Security documenting that the expenditures were in the beneficiary’s best interest,” the authors of the CRR report wrote.
Should you use this program? As with most things in life, there are pros and cons. “The program keeps elder people out of trouble due to loss of cognitive function,” says McClanahan. “But one really needs to put the pieces in place to keep the payee from taking advantage of the elder.”
Her bottom line advice about using the representative payee program: “Be proactive about planning for this long in advance,” says McClanahan. “We recommend that elder people have multiple people looking behind them to reduce the risk of fraud and abuse.”
Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal, TheStreet and MarketWatch. Got questions about money? Email Bob at firstname.lastname@example.org
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