It's challenging enough managing your own money, but when you are overseer of an aging loved one's finances, it's an even greater responsibility.
The Consumer Protection Financial Bureau recently published guides to help those who are managing someone else's money, specifically those who have power of attorney; those appointed by a court as guardians or conservators of property to manage money and property for someone who cannot manage it alone; trustees under revocable living trusts, and those appointed by a government agency to manage someone else's income benefits like Social Security.
"Fiduciaries are generally expected to act in the other person's best interest, manage their finances carefully, keep those finances separate from their own, and maintain good records," CPFB Director Richard Cordray said in a prepared statement when the guides were published.
Here's how to do the best job possible if you're asked to help out.
Get a clear picture of their finances
When managing an elderly person's money, it is important to have a sit down with that person to go over all of their expenses and establish a budget, says Leslie Tayne, an attorney with the Tayne Law Group, specializing in financial issues. "The budget should include room for additional funds in case of emergencies."
Carla Blair-Gamblian, a credit expert for Veterans United Home Loans, says to set the budget to live off as little as possible. "Leave funds in savings and try to live off pension, annuities and Social Security monthly payments. Retirees and the elderly need to maintain as much capital as possible so they have money for emergencies." Then too, she says that money in savings can build interest and ensure some additional cash flow and growth.
If upon review you find there is more month than money, you'll have to look for ways to reduce their expenses. "Think outside the box in terms of what the right solution might be for the senior in your life," says Dan White, founder and president of Daniel a. White & Associates. "Maybe they haven't considered downsizing or moving closer to other family members who can help provide care. Communication is critical for these tough decisions, but the right moves can improve quality of life for everyone involved."
If the senior is not capable of discussing what bills they are responsible for, when they are due, and how much they owe, dig on your own on their behalf by sorting through mail and reviewing bank statements to see what bills are paid regularly. "Contact all of their bill companies' and ask that they mail and/or email all copies of the bills to your mailing and/or email address," says Tayne.
Consider being an authorized user on all bank accounts. Do set minimum balance alerts so you will be informed when the balances fall below a certain point. This is also a good way to keep track of purchases and to monitor accounts for any suspicious activity like identity theft. "Regularly check your loved one's credit and put a credit lock on, so no one can take out credit in their name," she adds.
Keep an eye out for signs of fraud and abuse
The elderly are often the target of scammers. "I have had clients who have received fraudulent emails or phone calls regarding their bills, health insurance, Social Security, etc.," says ReKeithen Miller, a certified financial planner with Palisades Hudson Financial Group.
Given the possibilities, it's a good idea for you to have your loved one consult you before they respond to letters and email they receive, and to tell them to politely decline when they get calls for solicitations.
If your loved one sees something on one of those infomercials that they just must have, suggest that they write the phone number down and that item can be researched by you before they buy it, says Melody Juge, founder and managing director of Life Income Management.
What you need to know
Do know that problems can arise if you want to make payments and your name is not listed on the accounts.
Realize too, that becoming a user or co-account holder on any accounts could potentially affect your credit score. Set reminders so you ensure that you don't forget to pay bills, as a missed payment could put you and your loved one's credit scores at risk. You can also automate payments.
Makes sure though, that accounts are set up in a way that protects your loved one's assets from your creditors. "Think about what happens if you are sued, if their assets are in your name or if you share an account, you could inadvertently put your loved one's assets at risk," explains Mitch Adel, senior partner, and certified elder law attorney with Cooper Adel & Associates.
Under no circumstances should you commingle funds, says Blair-Gamblian. Clear records will settle any issues and answer questions family members might have about how the money is being managed. Avoid cash transactions which could become difficult to explain as well. "Do not make a personal loan or give yourself gifts from their money," advises Steve Starnes, a financial advisor with Savant Capital Management.
Without a properly drafted power of attorney or trust, you will not have the authority to take action on behalf of your loved one. Worse, says Adel, you may have no way to help them protect their assets in the event of a catastrophic health care problem that may require them to spend down their assets.
The best advice says Adel, "Plan before you have a crisis. Ask for counsel from a certified elder law attorney. This will ensure that your loved one's wishes and priorities are clearly identified, so you have the knowledge, tools and support you need to succeed as their helper."