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If something unexpected were to happen to you today, who could you trust to take care of your affairs?
Appointing a trusted individual to help you handle your financial obligations can give you peace of mind by providing an extra layer of security. This can be particularly useful in unforeseen circumstances that may impair your ability to manage your money, such as health problems or cognitive decline.
From fraud prevention to ensuring your investment choices reflect your true intentions, I’ll discuss some of the key benefits of naming a trustee to take over your financial responsibilities.
What is a trusted contact?
A trusted contact person acts as a safeguard, providing a reliable point of contact for your financial institutions in situations where you may be unreachable or unable to manage your affairs, according to RBC Bank.
This person does not have the authority to make decisions about your accounts or have direct access to your money. Instead, their role is primarily advisory, alerting your advisors or bankers to potential red flags or unusual activity that could suggest financial exploitation or cognitive decline.
By establishing a trusted contact, you ensure that someone familiar with your circumstances can provide context or raise concerns to your financial institution, helping to protect your investments while respecting your autonomy and privacy.
A trusted contact could be:
- a friend
- Immediate family member (mother, father, brother or sister)
- Indirect family member (cousin, aunt, uncle, grandparent)
- Business partner
- Spouse or personal partner
Basically, your trusted partner could be anyone in your life. The key point here is that you trust them with your financial well-being.
The benefits of having a reliable contact
Some of the key benefits of having a reliable contact include:
-
Fraud prevention: A trusted contact can help detect and prevent fraudulent activity before it causes significant damage by serving as an early warning system and alerting financial institutions to suspicious activity that might otherwise go unnoticed. -
Continuity during emergencies: In cases where you are incapacitated or unable to communicate, a trusted contact can reliably communicate your circumstances and preferences to your financial advisers. -
Support during cognitive decline: As you age, the risk of cognitive decline increases. A trusted contact can help manage financial matters sensibly and respectfully, ensuring that your financial decisions reflect your wishes, even if your ability to oversee accounts diminishes. -
Emotional peace of mind: Knowing that someone you trust to oversee and protect your financial interests can provide emotional peace of mind and confidence that your money is in safe hands.
Establishing a reliable contact: legal and practical steps
Here are some practical steps you can take to establish a trusted contact to help handle your financial responsibilities should the worst happen.
Choose your trusted contact
Identify someone who is reliable, financially savvy, and truly has your best interests at heart. This could be a family member, a close friend, or a trusted advisor.
Here, it is best to have an unbiased approach.
Your “closest” friends and family members are often not the best choice, as they may be too emotionally involved. Instead, I would recommend choosing a contact person with whom you have a good stable relationship, but who can keep a cool head and approach financial matters logically.
Get legal advice
Consult a legal professional so that you properly understand the implications and ensure that the role of your trusted contact is clearly defined and complies with relevant laws. This will ensure that they have the power to make necessary decisions and will also prevent them from making some life changing decisions that you would not want them to have power over.
Document your decision
Finally, you’ll want to formally document your trusted contact. This may include filling in forms provided by your financial institutions, drafting a letter outlining their roles/responsibilities, or having personal contracts formally notarized and approved by your solicitor.
Maintain a relationship with your trusted contact
Once you have assigned responsibilities to that trusted contact, it is also important that you maintain a relationship with them. If life events go south, this will help ensure they best fulfill the role you need.
Annual reviews
Arrange annual meetings to review your financial situation and any changes in your personal life that may affect your investment strategy or needs. This ensures that your trusted contact is known and ready to act on your behalf if necessary.
Instant updates for major changes
Notify your trusted contact immediately of any significant changes, such as changes in your health status, financial goals, or family circumstances. This ensures they have the latest information relevant to your financial decisions.
Reassess their role
It is a good idea to reassess your relationship with your trustee from time to time. As your position develops, so too may you need a trusted contact or the most suitable person for this role.
The person you originally named may no longer be the person for the job. Or, they may still be, but they will need to learn and adapt more to better handle the responsibilities you may be planning to hand over to them.
Regular feedback
Encourage an open dialogue where your named contact can provide feedback on their experiences dealing with your financial institutions or managing your financial affairs. This can help identify areas for improvement in how they carry out their responsibilities.
It can also help you identify potential problems with your financial agents that can be improved or fixed, so that they don’t become major issues when you can’t deal with them (ie, worst case scenarios).
Final thoughts
In the best case scenario, you should never have to rely on a trusted contact person. To everyone reading this now, I hope you have a healthy, prosperous life.
However, the unexpected is nothing if not…unexpected.
By keeping a trusted contact informed and actively involved in your personal and financial life, you can create a layer of security around your financial life and investments, ensuring it aligns with your beliefs and goals and that those you care for are adequately cared for. for.
Not sure how to start creating your own nest egg? One of the best ways is to start living a more debt-free life, which will allow you to set aside more for your savings and investments.
Christopher Liew is a CFA Charterholder and former financial adviser. He writes personal finance tips for thousands of Canadian daily readers on his website Wealth Awesome.
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