Sooner or later many families in California will have to face the reality that aging loved ones are no longer able to manage their own financial affairs. Research has shown that an individual’s ability to make financial decisions peaks at about age 53. A person’s capacity to deal with new information begins to decline around age 60. For family members, it is best to be prepared for the possibility of an older relative’s diminishing capacity by planning ahead, and being watchful for some key warning signs.
According to a recent study, there are five warning signs that an older person’s financial skills are beginning to decline. First, the person may take longer to perform routine financial tasks. Second, they may overlook important information in financial documents. Third, they may find it harder to do common mathematical computations. Fourth, their ability to understand everyday financial concepts may diminish. Finally, they may have a harder time understanding the risk in a financial opportunity.
When an elderly relative begins to exhibit one or more of these signs, it may be time to step in and offer some help. If the older person recognizes their own diminishing capacity, they may wish to seek help from family members.
One of the simplest and most effective ways to prepare for the possibility of incapacity is to prepare a durable power of attorney. Under California law, a power of attorney is a legal document authorizing a trusted relative or friend, known as the attorney-in-fact, to handle the financial or other affairs of the person granting the authority, referred to as the principal. A power of attorney is said to be “durable” if the principal expressly grants the attorney-in-fact authority to act on the principal’s behalf when the principal becomes incapacitated.
Source: San Francisco Chronicle, “Signs your aging parents need help managing their finances,” Sarah Skidmore Sell, Jan. 4, 2017