'We fear financial exploitation': Who will manage our finances if my wife and I become incapacitated?

By Quentin Fottrell

'We have witnessed our parents' gradual decline in cognitive ability'

"I would not want someone to move all of our assets into the stock market." (Photo subject is a model.)

Dear Quentin,

I am 65, and my wife retired this year. We are also both helping to care for our aging parents. We have witnessed our parents' gradual decline in cognitive ability and, along with it, the risk of becoming victims of fraud. We fear financial exploitation.

That has made us think seriously about how we can protect ourselves and our assets as we get older. We currently have IRAs, an HSA, and a joint brokerage account that includes various money-market investments.

We would prefer not to put that responsibility entirely in the hands of a family member. We are not currently working with a financial adviser because most advisers seem primarily interested in managing our assets. I am comfortable doing the actual investment management myself.

I would not want someone to move all of our assets into the stock market.

What I would really value is more of a financial GPS - someone who could review our overall situation, identify potential pitfalls, help us plan for the possibility of cognitive decline, and provide guidance without necessarily taking over management of our investments.

If we eventually do need someone to take control of our finances because of cognitive decline, can we establish guidelines in advance for how our assets should be managed? For example, I would not want someone to move all of our assets into the stock market.

Finally, what is the current typical cost or fee structure for a financial adviser providing this type of planning and ongoing guidance, particularly if we are not looking for someone to manage our investment portfolio? We are primarily trying to protect our assets.

An Aging Couple

Don't miss: 'It feels slimy': My friend offered to be my adviser, but didn't tell me he's paid to push financial products. Can I trust him?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

A person who holds power of attorney should put your interests first.

Dear Couple,

You need two things - a trust and a durable power of attorney.

A trust manages all of your assets and accounts that you have formally transferred into the trust's name. If you and your wife were to die or become incapacitated, a successor trustee could step in and manage the trust assets without the need for court supervision.

Otherwise, a court would likely have to appoint a guardian or conservator to manage your estate. When you both pass away, the trust and trustee would manage the distribution of your assets, providing an income and/or inheritance for your heirs.

For any assets outside of your trust, a durable power of attorney would be both appropriate and useful. A financial adviser, as you say, helps to manage and invest your assets. A trusted lawyer, banker or fiduciary with durable power of attorney would have specific tasks to fulfill.

In theory, you would give this agent the power to sign your tax returns on your behalf, communicate with government agencies like the Social Security Administration, and address other legal or financial issues that do not fall into the purview of a trustee.

For any assets outside of your trust, a durable power of attorney would be both appropriate and useful.

A person who holds power of attorney should put your interests first. That's called having a fiduciary duty, and it comes with legal ramifications. They could face prosecution if they fail to be transparent, honest, or act in a responsible manner.

A lawyer or other third party who holds durable power of attorney, which remains in effect after the principal becomes incapacitated, may generally access the client's bank account. However, access does not equal ownership.

Serving as an authorized agent or co-signer differs greatly from becoming a joint owner of the account and its funds. Attorneys should not, for example, add their names to a client's bank account or use the power of attorney document against a client's wishes.

This column is replete with stories of elder abuse. It's very easy for a child to convince their parents, in a vulnerable moment, to sign a power of attorney document. That person's power is not under the jurisdiction of the courts in the same way as guardianship or conservatorship.

Related: As a nurse, I've seen people use their power of attorney to take advantage of their parents. It would chill you to the bone.

Guardianship vs. power of attorney

Guardians, meanwhile, are appointed by the courts and have immense powers, while power of attorney is set up by the principal. If you are concerned, you can also set up a dual power of attorney - that is, appoint two or more people as your agents.

I have read and replied to many cautionary tales about people abusing their responsibilities. In one instance, a son liquidated his mother's 401(k) to pay for her nursing home and kept the rest of the money. His sister wrote to me, understandably distraught as to what to do next.

In another frightening case, a woman stole her sister's Social Security Number and persuaded her sister's husband to sign away his power of attorney when he was in the hospital. I urged the letter writer, whose parents were the victims, to petition the court to revoke her aunt's POA.

As for your question about paying a financial adviser, it sounds like you require a certified financial planner (CFP) who can look at your financial life in its entirety, rather than push you into investments for which they may or may not receive a commission.

A financial adviser typically charges about 1% annually of the total value of assets they manage for you.

Some credit unions provide financial advice to customers. The advisers are paid by their employer, so it's technically not free advice, and you should be careful that they don't sell you unnecessary insurance or annuities. Ask if your adviser works on commission, fees or both.

Many fee-only fiduciary advisers operate as registered investment advisers or investment adviser representatives. They are primarily regulated by the Securities and Exchange Commission if they belong to larger firms, or by state securities regulators.

A financial adviser typically charges about 1% annually of the total value of assets they manage for you. They might charge 1% annually on a $500,000 portfolio, but this rate should drop to 0.50% or lower for larger portfolios over, say, $1 million to $5 million.

For what it's worth, someone in the early stages of dementia may still be able to handle some financial responsibilities, such as paying bills, but may have trouble reviewing bank statements or paying bills or taxes. These are some of the warning signs. You can read more here.

Your 60s are certainly a good time to start planning for such events.

Related: 'This is a first-world problem': I can't roll over my $800,000 401(k) from my prior employer. What did I do wrong?

More columns from Quentin Fottrell:

My wife and I are in our 70s. Should we move to California and take on a bigger mortgage to be near our kids?

'Poverty doesn't have to be my reality': I thought I'd have to rely on Social Security. Then I taught myself how to invest.

'We're living the simple life': I was a fisherman and my wife was a nurse. We retired with $6 million. Here's how we did it.

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-Quentin Fottrell

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09-13-26 1030ET