Financial Literacy – What does that mean to YOU?

financial lit

Being financially literate empowers you to make daily decisions for things as simple as: should I buy that pair of shoes, wait until they go on sale or save the money? It also empowers you to set long-term financial goals and determine the means to achieve them.

It should also empower you to see the implications of deferring decisions in areas considered to be unpleasant.

AND… it should empower you to assess whether you have the information and skills to undertake fiduciary responsibilities for finances you currently have no control over.

 

Are you financially literate if you:

  • Pay off your credit cards each month?; and
  • Pay down your debt (car, mortgage and other)?; and
  • Pay all your bills on time?; and
  • Contribute to your TFSA or RRSP each year?; and
  • Save for emergencies?; and
  • Maybe have a bit left over to invest?; and
  • Still pay yourself to enjoy the fruits of your labour?

The answer is maybe. All of the above are short-term activities that contribute to long-term goals.

However there are also activities with long-term horizons that you may consider too unpleasant to contemplate.

  • Do you have life insurance? and
  • Do you have the right amount of life insurance? and
  • Do you have a Will? and
  • Do you have a Power of Attorney for Health and a Power of Attorney for Financial Matters? and
  • Have you updated them recently? and
  • Have you pre-planned and pre-paid your funeral?

While you think there is always time to make these decisions that is not always the case. If you do not make decisions for yourself and communicate them to your Power of Attorney and Executor you are gambling that “the right person” will know and understand your wishes although you are asking them to work without a net!

Finally, have you been appointed an executor for someone?

  • Do you understand the role, responsibilities & liabilities? and
  • Do you have knowledge of the individual’s financial affairs? and
  • Do you have knowledge of the individual’s wishes for their non-financial affairs? and
  • Have your life circumstances changed since the appointment? and
  • Is communication with the individual current and continuous? and
  • Do you have a real or perceived conflict of interest? and
  • Do you have both the time and the skills to fulfill your responsibilities? and
  • Are you prepared to make unpopular decisions in the best interests of the estate that might be inconsistent with a beneficiary’s wishes?

For Financial Literacy month we thought we’d contribute with the premise that “Sharing is Caring” extends to communicating an individual’s affairs and wishes beyond their time on earth. Planning, documentation and communication with family and the people selected as your Power of Attorney for Financial Matters and Executor is definitely part of being financially literate.

If an individual selects a professional Executor associated with their bank, that financial institution will require disclosure of all financial assets and a valid will on file with them in order to undertake the role. They may not require information about non-financial assets and the funeral and may be willing to delegate some of the responsibilities for these items to family members when the need arises. Perhaps in the future they will require that an individual also pre-plan and pre-pay for their funeral arrangements. However they, as Executors, are currently responsible for the funeral arrangements and for the safekeeping and disposal of all assets (financial and sentimental).

It’s perhaps ironic that if an individual selects a family member or close friend they do not disclose the same information required by a professional. AND… Why would you accept the appointment as a Power of Attorney for Financial Matters or Executor without the information needed to do the job? And it is a JOB!

According to Mr. Donald A. Stewart, Chief Executive Officer of Sun Life Financial Asia and Head of the Canadian Task Force on Financial Literacy, “Few individuals understand the range and complexity of the issues involved… (in being an Executor).

As Executor you are the person who is legally obligated to ensure:

  • the Estate assets are located, protected and properly disbursed;
  • the debts, liabilities and taxes are identified and paid; and
  • the beneficiaries are kept informed throughout the administration of the Estate.

On top of that you are expected to complete these tasks in a thoughtful, caring, and efficient manner, often while you are experiencing the grieving process yourself.

In summary:

As an individual assesses their financial literacy: How much information needs to be communicated, how to communicate it and how to secure it are just part of the information management strategies and tactics that The Last Detail can assist you with. Ignoring these requirements places your Power of Attorney and Executor in situations where they must interpret past actions and communications as they attempt to fulfill your wishes.

As a Power of Attorney for Financial Matters or Executor assesses their financial literacy: Depending on your relationship with the individual who requested you to act as their Power of Attorney or Executor, they may not wish to share personal financial information while they are still managing their own affairs. However, if you have accepted either of these positions  you should educate yourself on the roles and responsibilities and request the information you need to be documented. Mutual agreement on the storage of the information for access when needed is also integral to the documentation process. In the future, when you called upon to fulfill those responsibilities, if you have the time but not the skills or the skills but not the time to execute your responsibilities as an Executor The Last Detail can provide the level of service you require.

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