I have always managed my own financial affairs ever since I had a paper route as a 10-year-old growing up in Ottawa. It has never really occurred to me that anyone other than me would look after my finances, however, I am occasionally reminded of my own reality – through encounters with others in my law practice – that some day I may not be able to do so.
The most challenging situation faced in the area of family finances is the situation of the surviving spouse who has never had the responsibility of "keeping the books" for the family. Some surviving spouses have never even written a cheque during their lifetime. Happily, this is usually the product of a bygone era where the male member of the household always assumed that it was his job to keep track of the money and so did his wife. Being a male was the only qualification for this responsibility and many males were not particularly good at it but they kept the responsibility of the position as a result of tradition and thus created a situation of dependency in which their survivors have been left vulnerable to others willing to assist them in the management of their affairs.
The problem created is not beyond remediation. The first step is to simplify, and the bank is a good place to begin. Almost every bill that you receive in the mail can be paid automatically by way of pre-authorized payment at the bank. You still get the bills to review but the process is easier to monitor. The financial advisors at your bank are willing to help you set this up and also to assist you in ensuring that the money is there to cover your obligations. Overdraft privileges can protect against temporary shortages and is significantly cheaper than the interest charges that come with credit cards or utilities. If you do have to write a cheque, you can still receive your statements every month and arrange for microfiche copies of every cheque that you have written.
Banks, at least in this country, know how to manage money and so we should let them do it. You will inevitably have service charges but you will also be able to sleep at night knowing that your finances are being looked after. It is important to develop a relationship with a real person at the bank so that you can have someone to turn to when you are introduced to the convenience of telephone banking or Internet banking. If there is a problem there will be a financial advisor to explain it and to help you make the necessary adjustments. This kind of "in-your-face" banking also helps to minimize fraud in the event that someone else is trying to manipulate your account. These are professional people doing a professional job who have your best interests at heart (for a fee).
The next person that you might like to get to know is an accountant. This does not have to be a chartered accountant but you do need someone who can help you with your income tax return. I have not done my own tax return for years and I am sure that the tax savings that I have been able to obtain have more than paid for the cost of the professional services. Having these people on your side gives you an extra eye on your affairs.
Once these protective elements are in place it is still useful to have one or more members of your family assist you with your financial management. Sometimes it is as simple as getting your children to help you set up your computer or to drive you to the bank to meet your financial advisor or to meet your accountant. If this is unfamiliar territory to you, it certainly helps to have a trusted family member with you, for the journey and also to introduce that member of your family to the people who will be assisting you.
I have written on a number of occasions about the effective use of a continuing power of attorney for property. This is an ideal tool for this situation because it creates a legal framework for the exercise of your authority and a legal requirement for accountability. Once you have completed the document naming an attorney to manage your financial affairs, you should lodge the document with your bank. This is an official way of notifying your bank as to the person that you want to look after your accounts in the event that you are not able to do so.
Please remember that a joint account with a member of your family does not provide any kind of accountability. Once you have passed away there is inevitably some controversy in the family as to who is the actual owner of the funds in the joint account. If you insist on doing it this way then you can protect yourself by limiting the amount in the account and by providing a letter to the bank that the other signatory to the account is not intended to be a joint owner of the funds in the account who will become entitled to its contents as a survivor when you pass away. Tell the bank that this person has been named a joint signatory merely to assist you in managing the account. I apologize if I sound like a broken record on this subject but the pandemic of elder financial abuse is still growing and the steps to prevent this are quite straight forward.
The warning signs are well established and may also provide insight to other members of your family who are interested in your welfare. In situations of abuse a person appointed as an attorney for property will usually disavow that he or she is acting on the authority of the power of attorney because the parent is still quite capable of giving instructions but the truth is that a continuing power of attorney for property takes effect on the day it is signed and continues whether the donor is capable or not of providing these directions.
Beware the family member who acts as a shuttle service between parent and bank. This technique is very simple. Cheques are presented to the parent already made out and ready for signature. This does not even require the existence of a joint account. Sometimes the cheques presented are blank "just in case money is needed when you are not around." Sometimes the cheques are blank and sometimes they are made in favour of the person presenting the cheque.
A more modern but still insidious version of this gambit is giving your child the Personal Identification Number (PIN) for your bank account to access the ATM. Cash transactions on the ATM are virtually untraceable. Sometimes these dry-land pirates have simple needs such as food, alcohol or gas, but I have seen transactions for the purchase of cars, boats, cottage rentals, even a new trailer, so that the recipient could winter in Florida.
Another warning sign that you might watch out for is when the mail starts to disappear. Normally you get bank statements on a monthly basis. This is where your connection with the bank will pay off because you can simply call the bank if you do not get your bank statements. Internet banking is also useful as long as you are the only one with the password, but when the mail starts to disappear it is usually the sign of someone who wants to keep information from you. Canada Post is a lot more reliable than most people think and the disappearance of your bank statements is something you need to get on right away.
Most of the time the children who look after their parents' affairs are scrupulous and honest but often their accounting is restricted to handwritten notations in a passbook. You will want to protect your responsible children who look after your finances from their curious siblings who will want to have an explanation for every entry after you are gone. You can start by protecting your own right to receive and review your own records. Make sure that your records are preserved and maintained by your attorney for his or her sake as well as your own.
With all of the facilities available there is no good reason not to have a good set of accounts and this will serve your attorney well after you pass away and your estate trustee takes over. If the estate trustee is the same person as your attorney the transition is even smoother. Be vigilant about your affairs while you can and it will pave the way for your successor to follow the same direction.
John Johnson is a partner with the law firm Nelligan O'Brien Payne LLP (www.nelligan.ca), with offices in Ottawa, Kingston, Vankleek Hill and Alexandria.
[This article was originally published in the October 2009 issue of Fifty-Five Plus Magazine.]