Financial hoarding doesn’t sound like such a bad thing. What’s wrong with accumulating assets? But this good behavior can easily backfire when taken too far. When saving for its own sake becomes a goal, you or someone you know may turn to financial hoarding.
Like the accumulation of physical objects, financial accumulation can get out of control because all those different accounts and funds become too overwhelming to manage. Ignoring the situation only makes it worse and harder to get tangled up, but that’s exactly what people want to do. I have experienced this in my family.
“Everything you need is in the black box in the back of my closet.”
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The first time my husband’s grandfather said this to me, I remained silent. I was an in-law, so I felt uncomfortable talking directly with him about finances rather than involving the rest of his family.
But then he mentioned something about share certificates.
That’s when the alarm bells rang. I could no longer sit in the uncomfortable silence. I knew I had to act. And since he wasn’t getting any younger, I had to act fast.
What is financial hoarding?
Being in the business I’m in, I’ve seen this scenario before. An older relative has accumulated a large variety of investments and bank accounts over a lifetime, thinking they are following the rule of diversification by spreading their wealth. But in winter, people like squirrels can forget where they left this or that fund.
It is simply a form of financial accumulation. And that could potentially create confusion for heirs when it comes time to settle the estate, something that could take years to unravel.
Think Aretha Franklin. At the time of her death in 2018, the Queen of Soul had no will (although many handwritten wills have surfaced. (opens in new tab) after his death), despite having an estate worth $80 million. His fortune was truly extensive, including real estate, luxury cars, furs and uncashed royalty checks.
Settling the estate after the death of the account owner can be a nightmare. You cannot benefit from their knowledge. The same is true if a relative has a cognitive impairment and cannot help guide you through the process. But imagine how much more to handle when combined with financial backlogs.
What causes financial hoarding?
Most often, the reason for financial hoarding comes down to fear.
My husband’s grandfather was comforted by the thought of being able to see all the stock certificates in his black box. But in reality it was the opposite. Certificates could easily be stolen and thus be lost forever.
What should you do if you or someone you know is a financial hoarder?
Financial savings may not be apparent at first. It wasn’t until my husband’s grandfather was nearing the end of his life and talking about his finances that the family took notice of the problem. Once you understand what’s going on, there are some steps you can take to straighten out the financial mess. The job will be much easier if your loved one is still alive and cognitively aware, as there may be legal documents to sign as you work through the accounts.
Consider these steps.
1. Convert from paper to digital
The year is 2022. There is no reason to have paper records. In fact, almost 20 years ago, the group of thirty (opens in new tab)A collection of global business and government leaders has called for an end to trading in paper stocks worldwide. That’s why. Refinitiv Securities Information Center that administers the SEC’s Lost and Stolen Securities Program (opens in new tab), reports that $48 billion worth of stock certificates were lost or stolen last year. (You can fill out this form (opens in new tab) (to locate lost or stolen securities.)
To convert paper-based stock certificates to digital versions, send them to your financial advisor or custodian (such as TD Ameritrade, Schwab, Fidelity or Pershing), who can add them to your account electronically. If you don’t work with a financial advisor and hold shares directly, you can deal with a transfer agent, a company that keeps a record of the company’s shareholders, who will do the same.
2. Consolidate accounts
Long lines of depositors outside banks trying to get their money became an enduring image of the Great Depression. People of a certain age still cling to the idea that spreading their cash around is the safest thing to do. Instead of making their finances more secure, this creates a lot of confusion, making it easy to lose track of accounts.
Consolidating accounts helps simplify finances by bringing everything under one roof. Make sure bank accounts don’t exceed the FDIC limit of $250,000 (opens in new tab) per depositor per bank.
3. Have a legal will and/or estate plan
An estate plan is a great way to bring order to financial chaos, as the process involves taking an inventory of all financial assets and figuring out how they should be distributed upon death.
People with modest financial assets may only need a will, beneficiary designations, and financial powers of attorney. But when the financial picture is more complex, trusts can be useful for minimizing taxes and specifying how assets should be managed and distributed.
4. Work with a trusted advisor
Sometimes it’s easier for a hoarder to work with someone outside of the family to get their finances in order. This is where a financial advisor can be of great help. Not only can an advisor take care of the hassle of consolidating, tracking, and properly titling accounts, but this person can also be a neutral third party who doesn’t carry the financial burden that a family member does.
For best results, find a counselor who has experience navigating family dynamics and knows how to facilitate effective family meetings and transitions.
Bottom line
Fortunately for my family, my husband’s grandfather knew exactly what he owned and how much his stock certificates were worth. We worked together through the whole box for several months before he passed away to get the certificates properly titled and to be electronic.
My family was lucky enough to catch him through a narrow window before he died while he was still conscious. If we were not there, it would be much worse. We had to send a death certificate to each of his bank and savings accounts, as well as each stock certificate, to have them converted to the new name. And in case the original share certificate was unavailable, we had to pay to reissue a new one.
To help your family avoid this potentially lengthy and costly situation, talk to a financial advisor about what steps to take.
Erin Wood is a non-registered partner at Cetera Advisor Networks LLC. Cetera is owned separately from any other named entity.
Securities offered through Cetera Advisor Networks LLC, Member FINRA/SIPC. Investment advisory services offered through CWM, LLC, an SEC registered investment adviser. Cetera Advisor Networks LLC is owned separately from any other named entity. Carson Partners, a division of CWM, LLC, is a nationwide partnership of advisors. Erin is a non-enrolled partner at Cetera Advisor Networks LLC.
This article was written by and represents the views of our contributing advisor, not Kiplinger’s editors. You can check the adviser’s records with the SEC (opens in new tab) or with FINRA (opens in new tab).
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