At first glance, financial hoarding doesn’t seem like such a bad thing. What’s wrong with asset accumulation? But this good behavior can easily become hoarding when taken too far. When hoarding for fun becomes the goal, you, or someone you know, might be getting into financial hoarding.
Like hoarding physical items, financial hoarding can spiral out of control because all those different accounts and pools of money become too overwhelming to deal with. Ignoring the situation only makes the situation worse and harder to sort out, but that’s exactly what people want to do. I experienced this in my own family.
“Everything you need is in the black box at the back of my closet.”
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The first times my husband’s grandfather told me that, I was silent. I was a brother-in-law, so I felt uncomfortable discussing finances with him directly, rather than involving the rest of his family.
But then he mentioned something about stock certificates.
It was then that the alarm bell rang. I could no longer sit in awkward silence. I knew I had to act. And, since he was not getting any younger, I had to act quickly.
What is financial hoarding?
Being in the company I work in, I have seen this scenario before. An older relative has amassed a wide variety of investments and bank accounts over his lifetime, believing he is following the rule of diversification by spreading his wealth around him. But just like squirrels in winter, people can forget where they left that account or stock.
It’s just a form of financial hoarding. And it can potentially create a mess for heirs when it comes time to settle the estate – something that could take years to unravel.
Think of Aretha Franklin. At the time of her death in 2018, the Queen of Soul did not have a will (although several handwritten wills have emerged (opens in a new tab) in the years after his death), despite an estate worth $80 million. His estate was truly sprawling, encompassing real estate, luxury cars, furs, and uncashed royalty checks.
It can be nightmarish to settle an estate after the death of the account holder. You cannot benefit from their knowledge. The same is true when someone close to you is cognitively impaired and cannot guide you through the process. But imagine how much more difficult the situation is to manage when combined with financial hoarding.
What causes financial hoarding?
Most often, the cause of financial hoarding comes down to fear – fear of going bankrupt, fear of not being able to access money, fear of being taken advantage of, fear of technology, etc.
For my husband’s grandfather, the idea of being able to see all the stock certificates in his black box was reassuring. But in reality, it was the opposite. The certificates could easily have been stolen and thus lost forever.
What should you do if you or someone you know is a financial hoarder?
Financial hoarding may not be obvious 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 looked into the matter. Once you realize what’s going on, there are steps you can take to untangle the financial mess. The job will be disproportionately easier if your loved one is still alive and cognitively aware, as there may be legal documents to sign when working on accounts.
Consider these steps:
1. Convert from paper to digital
It’s 2022. There’s no reason to have paper records. In fact, nearly 20 years ago, the Group of Thirty (opens in a new tab), a group of global business and government leaders, has called for an end to the trade in paper stocks around the world. Here’s why: Refinitiv Securities Information Center, which administers the SEC’s Lost and Stolen Securities program (opens in a new tab), reports that $48 billion worth of stock certificates went missing or were stolen last year. (You can fill out this form (opens in a new tab) to find lost or stolen titles.)
To convert paper 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 electronically to your account. If you don’t work with a financial adviser and hold shares directly, you can deal with a transfer agent, a company that maintains a register of a company’s shareholders, who will do the same.
2. Consolidate accounts
Long lines of depositors outside banks trying to get their money became the enduring image of the Great Depression. People of a certain age still cling to the idea that spreading their money is the safest thing to do. Rather than making their finances more secure, it creates a lot of confusion, making it easier to lose track of accounts.
Consolidating accounts helps simplify finances by bringing everything together under one roof. Make sure bank accounts do not exceed the FDIC limit, which is $250,000 (opens in a 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 inventory of all financial assets and determining how they should be distributed after death.
People with modest financial assets may only need a will, beneficiary designations and financial powers of attorney. But when the financial situation is more complex, trusts can be useful to minimize taxes and specify how assets should be managed and distributed.
4. Work with a trusted advisor
Sometimes it’s easier for a financial 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 details of consolidation, research and ownership of accounts, but that person can also be a neutral third party who does not bring the financial background of a family member.
For best results, find a counselor who is experienced in family dynamics and well versed in how to organize productive family reunions and transitions.
Luckily for my family, my husband’s grandfather knew exactly what he had and how much his stock certificates were worth. We worked together on the whole box for several months before his death to get the certificates properly titled and make them electronic.
My family was lucky enough to catch him through the narrow window before he died while still cognitively aware. If we hadn’t, it would have been much worse. We should have sent a certified death certificate to each of his bank and savings accounts as well as each stock certificate – just to convert them to a new name. And, in the event that the original share certificate was not available, we would have had to pay to have a new one reissued.
To help your family avoid this potentially long and costly situation, talk to a financial advisor about what steps to take.
Erin Wood is an unregistered associate of Cetera Advisor Networks LLC. Cetera is under separate ownership from any other named entity.
Securities offered by Cetera Advisor Networks LLC, Member FINRA/SIPC. Investment advisory services offered by CWM, LLC, an SEC-registered investment adviser. Cetera Advisor Networks LLC is under separate ownership from any other named entity. Carson Partners, a division of CWM, LLC, is a national partnership of advisors. Erin is an unregistered associate of Cetera Advisor Networks LLC.
This article was written by and presents the views of our contributing advisor, not Kiplinger’s editorial staff. You can check advisor records with the SEC (opens in a new tab) or with FINRA (opens in a new tab).
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