Motley Fool Hidden Gems Investing - Before the Crisis: How You and Your Relatives Can Prepare for Financial Caregiving

Starting point is 00:00:00 How to make sure you can manage your parents' or other relatives' finances if necessary, and how someone could do the same for you. That and more on this Saturday Personal Finance edition of Motley Fool Money. I'm Robert Brokamp, and this week I speak with certified financial planner and author Beth Pinsker about the challenges of being a financial caregiver, and how being prepared beforehand makes a world of difference. But first, let's look at some money-related headlines, starting with some somber news from the employment front. On November 20th, the Department of Labor released the Delayed Employment Report for September, showing that the unemployment rate

Starting point is 00:00:41 ticked up to 4.4%, the highest level since 2021. According to Bloomberg's Matthew Boesler, the jobs report showed that except for health care and leisure, U.S. private sector employment has declined in each of the last five months, something that's never happened in the past 35 years outside of a recession. Then this week, payroll processing firm ADP announced that private companies laid off 32,000 workers in November, the hardest hit being small businesses with 50 or fewer employees. Year over year pay increases for those who remained on the jobs also slightly declined to 4.4% from 4.5% in October. And then on Thursday, consulting firm Challenger Gray and Christmas reported that employers announced plans to lay off more than

Starting point is 00:01:23 70,000 employees in November. That was on top of the 150,000 cuts announced in October, which was the highest total for that month in 22 years. The total number of announced layoffs for 2025 is 1.17 million, which is 54% higher than the same 11-month period last year and the highest level since 2020, the year of the pandemic. This softness in the labor market is the biggest reason the federal reserve has cut rates twice this year and is very likely to do so again this week which brings us to our second item from the news and that is the performance of bonds in 2025 as rates go down bond prices go up resulting in a more than seven percent total return from bonds so far this year as measured by the performance of the vanguard total bond market etf bonds are on pace to have

Starting point is 00:02:12 their third best year of the past two decades of course you have other options for your non-stock money, which brings us to the number of the week, and that is $8 trillion. That's the total amount held in money market funds, which is the highest level ever, according to Crane data. As the Fed lowers rates, the amount you earn on your cash also decreases, but money market funds are still offering higher yields than what you can get from the bank. According to the Crane 100 Money Fund Index, which tracks the 100 largest funds, the average yield is 3.8% compared to a paltry 0.6% for the average savings account, according to Bankrate. That said, money market funds are not FDIC-insured,

Starting point is 00:02:53 unlike money market accounts and savings accounts from banks. While money market funds are considered very, very safe, you should look under the hood so that you choose a fund that aligns with your risk and tax preferences. Some invest in short-term corporate debt, which offers slightly higher yields, but with slightly more potential risk. Other funds invest exclusively in treasuries,

Starting point is 00:03:14 which makes them even safer and free of state income taxes. And then there are funds that invest in municipal debt, which are mostly or completely tax-free. Up next, what you and your family need to do in order to take care of each other financially when Motley Fool Money continues. If an illness or death befell your parents, spouse, kids, or any other close relative,

Starting point is 00:03:37 would you be able to access their financial information and handle their affairs? If something happened to you, would your spouse and family know what to do and where to find everything? If the answer is no, as it is for most people, then Beth Pinsker has a roadmap for you. Beth is a certified financial planner, a columnist for MarketWatch, and the author of My Mother's Money, A Guide to Financial Caregiving. Beth, welcome to Motley Fool Money.

Starting point is 00:04:01 Nice to be here. Thanks, Robert. Let's start with the story of your mom and your journey to becoming her caregiver. My mom had it all together. My mom thought that my mom had done all the planning. She had all her documents in place. I'm a financial professional. I am an expert in this. I have a certified financial planning designation. We thought we were all set. And it was so much harder than I ever anticipated to take care of the nitty gritty details of another human being's financial existence. it was so far detailed like you know you might have a big picture discussion with a family member you know even if you get to it you might get to the big number like how much money do you have

Starting point is 00:04:44 but not down to the level of mom do you still pay your electric bill with a check or do you pay it electronically or is it auto bill like nobody ever has that talk with their parents and your mom was in a situation where she had back surgery she became incapacitated she didn't have cognitive decline but she had medical issues that basically made it very difficult for her to manage her affairs so you live in new york she lived in florida you had to fly down there and basically try to figure out where everything was and how to do everything it was a big scavenger hunt and it started about three weeks after she had her surgery when she still wasn't back up to snuff and wasn't ready to resume taking care of anything, but also really didn't want to answer

Starting point is 00:05:31 any questions or couldn't answer any questions. And so I had to sit at her desk and reverse engineer her entire financial situation, make sure bills were getting paid on time, make sure anything wasn't falling through the cracks, make sure we had enough cash on hand, all of those things just blindly fumbling through papers and trying to figure it out. So there are really two aspects of this, right? There's first of all, making sure that your affairs are in order and then working with your relatives to make sure they do the same. So let's start with what you could do on your own. Where should people start in terms of getting everything laid out of their own situation so that someone else can take over either temporarily or maybe permanently because

Starting point is 00:06:10 you've passed away? What I've seen in so many households, including my own, because I am a divorced woman with teenage children, it's all in my head. I don't talk about it with anybody. I don't run it by anybody. I don't have a partner in any of it. And even if I did, probably one of us would delegate it to the other so that, you know, only one person in the family is thinking about these issues for any given length of time. And that is just a disaster when something bad happens. I just saw this recently in a family, you know, my greater relatives, the father of the family handled all the finances. It was all in his head. He knew when all the bills were due. He knew how much money was in each account and they were sort of short on money. So he was always moving

Starting point is 00:06:53 things from one place to another to cover bills. And then he got sick and was out of commission for three weeks. And his wife didn't know how to do any of it. Bills didn't get paid like essential bills, not just like, you know, oh, that can wait till next month kind of bills. This was like your electric is going to get cut off. Your mortgage is going to go into arrears. Your credit rating is going to go in the toilet because you haven't paid all of these bills. And they were in real trouble because he had not given a roadmap to his spouse or anybody else in the family. You talked about in the book about creating a couple of things. One is a cheat sheet. Another one is a death file. You've hinted at some of the things that should be in there. What else

Starting point is 00:07:34 should be in there and where should people put those? So a death file can be anything. One man I spoke to for a story long ago had a file folder on his computer desktop that said death in all capital letters. And it was like a Microsoft file icon. And so when his son went looking for the papers he needed, he just double clicked the icon. And it was like, oh, man, this is everything I need. My mom used, you know, manila folders that were very clearly labeled. Where was the life insurance? It was in a folder labeled life insurance. Where was my father's death certificate when I needed to put my hands on it in a file folder named death certificates. My life is a lot more digital, so my kids would have to go and look for the file folders

Starting point is 00:08:19 and files that are appropriately named. You know, mom's driver's license, mom's life insurance, all of those things that they would need to find are easily searched for in my digital system. Some of these documents that you need are legal documents. Let's start with one that you consider one of the most important, and that is the durable power of attorney. Why is it important and who should you be giving that power to? So it's important because the financial system sees each of us as individuals and will not let somebody else do something for us. There are certain things a spouse can do, but mostly if they're named jointly on an account.

Starting point is 00:08:58 And so IRA accounts sometimes can't be touched or other decisions can't be made unless you have that person's power of attorney. Like if you have a joint mortgage and you need to take out a home equity loan when one party gets sick and incapacitated, you can't do that without the authority to do that. They're going to want the signature of the person who's incapacitated who obviously can't give it. So if you need that money or access to loans of some sort of a joint asset, you need permission. And if you don't have that permission, you hit this like brick wall. People always think that they can talk themselves out of situations or talk themselves into whatever they want. And I'm telling you, this is like a brick wall. And even for the people who think that they can fake it and you can't really fake stuff anymore. You can't call up a bank and pretend that you are a parent because they have voice recognition. They have signature recognition. They have two factor authentication on everything. It's really hard to pull anything off without the proper paperwork anymore. So it's certainly a situation like you were in, right? You were taking care of your mother, so you needed a durable power of attorney to act

Starting point is 00:10:08 on her behalf. So it's very important. But what you found is actually it can also be very challenging because a lot of institutions are very picky about the form and how you do it. Yeah, a lot of banks want the person to come there themselves and sign their own paperwork at the financial institution. When my mom and I got around to this, she was already too sick to do that.

Starting point is 00:10:31 So we had the proper paperwork, but they gave us a huge hassle about actually using it. And so it took me three two-hour visits to the bank with scheduled appointments in order to get through just one of the financial institutions that I had to get through. They will throw every hoop that you can think of at you. You know, the person needs to come down.

Starting point is 00:10:54 You need to sign our own paperwork. The signature isn't valid. It has to be notarized in a different way. They'll claim anything and they'll just stop you up. And you can't move forward to take care of any of these tasks until it's cleared up. So you have a much greater stake in this than the bank does. And you have to learn how to stand your ground. Yeah, that's one of the lessons of your story. I mean, persisting with this bank, you persisted with the facility that your mom was in to allow so that she could stay there longer. So you have to be prepared to fight for your rights, know your rights, and fight for your family. This is why it takes a close family member to do this. The financial stuff is not something that's easily outsourced. I could hire somebody to help my mother bathe or help her in the bathroom. But I couldn't hire somebody to fight for her tooth and nail for all of these things.

Starting point is 00:11:47 There was nobody else who could be the financial authority and the trusted financial person with her bank account information, with her passcodes, with her ATM card and the code on it. She's not going to just hire some person off the street and give them bad information. That's crazy. You know, you have to have somebody that you're close to and you trust. The thing about power of attorney is that there's responsibilities that come with it. There's accountability. And so if you are named as somebody's power of attorney and you are acting in that capacity, you have to act in their best interest and you can be held to account if you don't. So if you go in there with the authority to do it and siphon off money for yourself, somebody can call you on that and you have to produce receipts and be accountable for that.

Starting point is 00:12:37 So that's why it's helpful in a family situation where maybe siblings are prone to fighting about these sorts of things, which, you know, name me a family where they aren't. You know, if you're going to end up fighting with the sibling, you want somebody to be the proper power of attorney because otherwise there's no accountability. They're just a joint owner on the account. They can do whatever they want. Nobody has any say over them. So the durable power of attorney is important. A couple of other things that you probably will be involved both for your own situation and maybe working with relative health care proxy will maybe a trust and the living will.

Starting point is 00:13:12 Right. And sometimes people confuse the living will and the health care proxy. So tell us a little bit about the differences between those and why they're important. So the health care proxy gives somebody permission to make medical decisions for you if you're incapacitated. The living will lays out what you want them to do in certain circumstances. If you want to be resuscitated, if you stop breathing, if you want a breathing tube, if you want other extraordinary measures of any sort. When it comes time for using those things, the doctors are going to want some sort of document that says what the person's wishes are. It's best if it's just all written down and notarized and documented so that the family has something to go on and the hospital can trust that that's what the person actually wants. Especially when it comes to siblings, too, right? You want to know what your parents wanted to happen because you don't want to be fighting with your siblings about whether or not, you know, mom or dad should be kept alive by certain means or methods when they could have just laid it all out ahead of time. The whole point of all of this, like the whole why that my message is that I'm trying to make people understand is that we do these things.

Starting point is 00:14:22 These things are hard. Nobody wants to fill out paperwork and do all this work. We do it because we don't want to be a burden to anybody. We don't want to put extra work on anybody. We don't want to put extra psychological pain on anybody, especially our own children. And our parents don't want to put that on us. And so the responsible, loving thing to do is to get all this stuff lined up so that your family has a less hard time. It's going to be hard no matter what, because, you know, somebody you love is sick or dying. So that's the only thing that should be hard. The rest of it should be as locked up and easy as possible. And the reason you do that is because you love these people and they love you. And so you don't want anybody to be burdened.

Starting point is 00:15:10 This relieves them of that burden. And that's the whole reason that we're in families in the first place. So you start by getting your own affairs in order, and then you talk to your relatives. That can be a tricky conversation sometimes, right? Some people are very private about their money. They don't really want to think about the fact that they may become sick or may pass away or just have to give up control at some point. Any tips on how to have that conversation with not only your parents, should be siblings, should be kids too? Well, understand first that the number one reason why people don't do this is because they don't do

Starting point is 00:15:42 this it's just procrastination there's really nothing else attached to it it's just a thing that they don't get to if you make it important you'll get to it so if you think about you know the repercussions if you listen to what happened to me you will understand that like this stuff is important and you should do it and that will help you get over the hump and that helps you get over the hump and talking about it with other people too because if you don't have that conversation It's going to be much harder on you. You're the one that's going to get the call in the emergency. So it's on you to talk to your parents and say, hey, I want to be able to help you, but

Starting point is 00:16:21 I can't help you if you don't do this one little simple form that you can download, you know, or I can bring over to you and I will drive you over to the notary. It's just like giving me an emergency key to get into your apartment if something happens to you. If you fall and you're lying in your apartment, do you want to go out like Gene Hackman and somebody finds you days later? Or do you want somebody to be able to come and help you? So give me an emergency key to your financial systems, and I will help you if something

Starting point is 00:16:53 goes wrong. It's time to get it done, fools. We'll continue to highlight some year-end financial planning considerations. And in this episode, let's talk about tax loss harvesting. It starts by selling any stock, bond, mutual fund, ETF, options contract, or crypto that is below the price you paid for it and held in a taxable brokerage account, not in a retirement account. The loss will first offset any capital gains you recognize this year, and then up to $3,000

Starting point is 00:17:18 in ordinary income, or $1,500 if you're married and file separately. Any excess losses can be carried forward to future years indefinitely. Just make sure neither you nor your spouse bought shares of the investment 30 days before the sale or buy back shares within 30 days after the sale in any of your accounts. With a market near ultimate highs, you may wonder how many losses investors have. But if you look in your portfolio, you may find a few duds. Despite the S&P 500 returning almost 18% this year as of the market's close on Wednesday, almost 200 of the stocks in the index are in the red for 2025.

Starting point is 00:17:53 And three of the 11 standard and poor sectors have lost money over the trailing 12 months, those sectors being consumer staples, materials, and real estate. On the flip side, you may have some big winners that have become an uncomfortably big part of your portfolio, but you're reluctant to scale back on those investments because of the tax consequences. Well, selling those investments while also recognizing some losses is one way to rebalance your portfolio while limiting the tax spike. And that, my Foolish friends, is the show. Thank you so much for listening. And thanks to Bart Shannon, the engineer for this episode. As always, people on the program may have interest in the stocks they talk about

Starting point is 00:18:30 and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content meets Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Robert Brokamp. Fool on, everybody! Thank you.

Motley Fool Hidden Gems Investing - Before the Crisis: How You and Your Relatives Can Prepare for Financial Caregiving

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