Steps to Plan for Diminished Financial Capacity and Illness

Aging can change many things in a person's life, including the ability to manage one's own money. That sobering reality is behind a recent resource, Planning for Diminished Capacity and Illness, issued by the Securities and Exchange Commission's (SEC) Office of Investor Education and Advocacy and the Consumer Financial Protection Bureau's (CFPB) Office for Older Americans. The two organizations offer one key tip for how to prepare for our financial future: Hope for the best, but plan for the worst.

Home Healthcare Nurse Holds Senior Woman's Hands
When people of any age
lose the capability to
manage their finances,
they may also become
more vulnerable to
investment fraud and
other forms of
financial abuse.

The resource defines "diminished financial capacity" as a decline in a person's ability to manage money and financial assets to serve his or her best interests, including the inability to understand the consequences of investment decisions. When people of any age lose the capability to manage their finances, they may also become more vulnerable to investment fraud and other forms of financial abuse.

These four steps can help you prepare in the event that diminished financial capacity becomes a serious problem for you or your loved ones.

Organize your important financial documents. Store your financial documents in a safe, easily accessible location. Give copies to trusted loved ones or let them know where to find them.

When it comes to bank and brokerage statements and account information, make a list of your accounts with account numbers. Keep a separate list of online bank and brokerage passwords and PINs, and keep the lists in a safe place. Also make a list of the locations of your safe-deposit boxes, including where the keys to the safe-deposit boxes are located.

In addition, keep your mortgage and credit information easily accessible. Make a list of your debts and regular payments, with account numbers and names of the financial institutions that issued the loans or credit cards. Other important documents to keep safe and accessible include:

  • Insurance policies.
  • Pension and other retirement benefit summaries.
  • Social Security payment information.
  • Contact information for financial and medical professionals, such as doctors, lawyers, accountants and securities professionals.

Provide your financial professionals with trusted emergency contacts. If you work with a financial professional, provide that person with emergency or alternate contact information in case he or she cannot contact you or suspects something is wrong. You may wish to discuss with your financial professional what you would consider to be an "emergency," and specify when he or she may contact someone on your behalf.

Consider creating a durable financial power of attorney. A financial power of attorney gives someone the legal authority to make financial decisions for you if you cannot. That person is called your agent. The document is called "durable" because it remains in effect even if you become incapacitated. You retain the ability to change it or cancel it as long as you are still able to make decisions. A financial power of attorney differs from a health care power of attorney, which only covers health care decisions.

After signing a durable financial power of attorney, you can still manage your money and property as long as you have the ability to make decisions. Since you are essentially giving financial decision-making authority to your agent, it is critical that he or she be someone you can trust. You can learn more about power of attorney for your investment account assets by reading a recent alert by FINRA.

Keep things up to date. If something changes (for example, you open a new account), be sure to keep your information as current as possible. Also, your trusted contact may change over time. Keep your financial professionals informed of changes regarding who has authority to review your account or whom they should contact in case of an emergency.

Speak up if something goes wrong. If you ever think someone is taking advantage of you, or that you've been the victim of a fraud, speak up. Sadly, sometimes even financial professionals and people we think we can trust commit financial crimes. If this happens to you, you're not alone—and the sooner you let someone know about it, the better chance there is of putting an end to it.

If you have an issue with a financial professional or firm, you can submit a complaint to FINRA at www.finra.org/investors/investor-complaint-center. Investors can also call (301) 590-6500. And senior investors can call the FINRA Securities Helpline for Seniors® toll-free at (844) 574-3577.

If you have an issue with a broker or investment adviser, you can also submit a complaint to FINRA at www.finra.org/complaint. You can also complain to the Securities and Exchange Commission (SEC) at www.sec.gov/complaint.shtml or call (800) SEC-0330.

If you have an issue with a consumer financial product (such as a mortgage or credit card), you can submit a complaint to the CFPB. Visit consumerfinance.gov/complaint or call (855) 411- 2372.

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