Don't Leave it to Chance: Appoint a Trusted Contact

This article originally appeared in Aldrich Community, a client experience offering from Aldrich Wealth.

If you have a friend or family member who lives alone, you’ve likely experienced the angst of being unable to reach them at one time or another. In those situations, having a second point of contact can be a major relief, if not a lifesaver. One of our clients recently experienced a significant health issue that left them hospitalized for several weeks and unreachable. When we finally heard from them, we were grateful to learn they were doing well and no time-sensitive matters had arisen. This situation is a great reminder of the benefits of having a second line of defense; while it is a personal decision, we thought we would share more about the purpose of identifying a trusted contact(s) in your financial life.

A trusted contact is a person(s) designated by you to act as a point of contact for your financial institution in specific situations. By designating a trusted contact at Charles Schwab, you’re granting authority to contact this individual if account activity raises concerns or there are problems reaching you or communicating with you about your account. Your trusted contact should be someone you trust who is well-positioned to know your current situation, whereas a professional contact such as your attorney might not.

What Trusted Contacts Can Do:

In the event you can’t be reached or if there are concerns about your well-being, trusted contacts can:

• Verify contact information
• Confirm health status
• Provide contact information for other authorized parties associated with the account (e.g., power of attorney)

What Trusted Contacts Cannot Do:

Regardless of your health or capacity, trusted contacts cannot:

• Access your accounts or be given any information about your accounts
• Transact on your behalf or engage in account activities
• Update account information such as beneficiary designations, bank links, addresses on file, etc.

The primary benefit of a trusted contact is the added layer of security. They can help detect and prevent fraud, especially in cases of elder financial abuse. Furthermore, in situations where health issues arise, they can inform your advisor, ensuring your financial affairs are managed appropriately without delays. This proactive measure can save significant stress and protect your assets during vulnerable times.

Establishing a trusted contact is a simple yet powerful step to enhance your financial security. To explore more about how to set up a trusted contact or to discuss other ways to protect your financial future, contact an Aldrich Wealth advisor today.

Now that we’ve explained what a trusted contact is and what they can and cannot do for an account owner, let’s look at a few scenarios to determine whether the advisor should reach out to the trusted contact.

Scenario 1: Client Joe Smith has shown signs of cognitive decline and mentioned he struggles with occasional memory lapses. During a meeting with his advisor, he requests a review of his beneficiaries and decides to remove one beneficiary that he is no longer in contact with. Can or should the advisor reach out to the trusted contact about Joe’s decision?

NO. The advisor must abide by the client’s wishes to make account changes since the client demonstrated the capacity to understand the impact of the account decision. A trusted contact does not have authority to approve or deny any account changes.

Scenario 2: Client Jane Doe has not responded to phone or email outreach from her advisor over the past few months, which is unusual for her. With year end coming up, Jane must take a required minimum distribution or else face IRS penalties. Can or should the advisor reach out to the trusted contact?

YES. Because the advisor is concerned about Jane’s whereabouts, they can reach out to Jane’s trusted contact and inquire if her contact information is still current. The trusted contact may also be able to provide context if there is another reason Jane hasn’t answered the phone, for example, an extended holiday or hospital stay. Finally, the advisor could ask the trusted contact to confirm contact information for an existing power of attorney that Jane may have previously named, in the event Jane cannot be reached.

Scenario 3: Client John Doe listed his long-time friend and caretaker, Suzy, as his trusted contact. Suzy had accompanied John to meetings at his request for the past several years, and John highly regards her opinion. One afternoon, Suzy called in, requesting a one-time distribution on John’s behalf for extra medical expenses he’d incurred. Can or should the advisor process Suzy’s request as his trusted contact?

NO. Trusted contacts never have authority to transact on behalf of an account owner, regardless of the level of comfort the account owner has with that individual’s involvement in his or her finances.