Your Estate … with James Ward: Stress can lead to making unwise financial decisions with your money

There is no “magical” age when you need help on making financial decisions.

By James Ward

James Ward

How much is something worth? How much is the value as it relates to your net worth? How does it compare to the amount of your liquid assets? Is spending some money something you need to do?

How much can you spend or gift and still be in the “safe zone” as far as your own care, level of readily available assets, and the need for basic living expenses or the desire for gifting?

There is no “magical” age when you need input or help from others on making financial decisions. I’ve had people in the 40s and 50s make very poor decisions, and I’ve had 99-year-old clients who were still driving and sharp as tacks. Age is one factor in being financially sharp, but so is stress. Some people seem to be just fine, but then they make poor decisions when they end up temporarily, or permanently, with a lot of stress in their lives.

If you have absolute trust and faith in certain people, maybe they can help give you a reality check. Think about whether they’re looking out for you or just looking out for themselves.

In one recent case, the wife was paying more than $125,000 per year for her husband’s care at home. They had been clients for many years, and the husband now had severe dementia. I told the wife we could establish a specialized Medi-Cal trust and then get Medi-Cal to pick up the majority of the bill for her husband’s in-home care, but she just couldn’t make a decision. She was under too much stress, and she just kept spending the money.

The client knew she had problems she needed to deal with, but she just couldn’t act. She needed the support of her adult children, but they thought she was taking all the steps by herself so they didn’t dive in to reassure her and help with the decisions.

In the last flurry of emails, her daughter presented the very real issue of timing to get care for her father. She was aware of the five-year Medicaid waiting period, but nobody thought her father would live that long. Yes, that’s a problem — in every state except California. The daughter’s Internet search was part of what kept the mother from moving ahead. But that information is wrong for California, which has very different rules, and the mother needed to stop spending so much of the family money paying for her husband’s care that could be covered by Medi-Cal.

Finally, with the support of both her son and daughter, she made the decision to move ahead, but only after twittering away more than $200,000 in care expenses that could have largely been covered by Medi-Cal.

In another case, the husband took a rapid decline and had to be placed in a memory care facility. The wife now needed to make all decisions for the family. She had a plan, and her adult children supported her, but they lived far away and their mother was left to do it all alone.

The plan was to sell the large residence and downsize to something closer to her husband so she could easily visit him. She had plenty of money in investments, so she was comfortable paying for all of her and her husband’s expenses, but it just made sense to move closer to her husband. Everything went according to plan, but then she started to freeze after she made the move to the smaller home. The stress of selling, buying, and moving — all while simultaneously overseeing her husband’s care — was just too much for her. Her adult children could have helped, but they thought their mother had everything under control.

I had encouraged her to make a budget for her needs and her husband’s care, and then I realized she was just overwhelmed in doing it all by herself. Despite having about $3 million in liquid investments, she hit a roadblock of functioning logic when she had unexpected expenses at the new house of “almost $1,500.” That was alarming for her, but she had lost the sense of reality in regard to her finances. That amount was less than one-tenth of one percent of her liquid investments, but she froze. She was scared and couldn’t make the necessary decisions.

Sometimes people under stress need help with certain decisions that may seem rather simple for other people. When someone is dealing with stress, it might be helpful to take a step back from the day-to-day stress and look at the bigger picture to see what matters most. Focus on what’s important and on what you can change. First things first.