As individuals age, their ability to manage their financial affairs tends to wane. In most cases, they need a financial caregiver whom they can trust to act in their best financial interest. Financial caregivers may act in an advisory capacity at first, but will need legal authority to make financial decisions when the senior is no longer able to act effectively.
An effective caregiver builds the senior’s trust, establishes a strong working relationship with the senior’s bank, other professional advisers, beneficiaries and family members, and recognizes that the level of financial care that is needed may escalate as the care receiver ages.
QUESTIONS TO ASK
To handle the job of caregiver, you need some key pieces of information:
Are financial records organized and secure? Organized records include a list of all bank and brokerage accounts, insurance policies, safe deposit boxes and their contents, the location of a signed copy of a will, any trust documents, and deeds to real property, plus contact information for financial advisers, lawyers and other professionals.
Is there an up-to-date list of assets and debts? A current list of assets and liabilities should include all real property, valuable personal property, uncollected debts and payments due.
Are financial transactions streamlined? Ideally, most regular income will be deposited directly into the senior’s bank account and regular bills will be handled through automatic bill pay or direct debit.
Is health and other required insurance in force? Health and other insurance premiums must be paid on time to keep the policies in force.
If you, as caregiver, find that the answer to one or more of these questions is “no,” you should make every effort to address this situation from the start.
RECOGNIZING DANGER SIGNS
Caregivers have to be alert to red flags. There are three quite distinct ones:
- Failing to cash checks or pay bills
- Failing to take required minimum distributions from retirement accounts
- Leaving valuables in plain sight
MORE EVIDENCE OF NEED
While it’s common to stress seniors’ diminished mental capacity in talking about the need for a financial caregiver, evolving physical limitations, such as failing eyesight or reduced mobility, can also impact seniors’ ability to manage their financial affairs.
Failing eyesight may make it difficult to key in a PIN at an ATM or point-of-sale (POS) terminal. It may also create a hardship distinguishing currency denominations. Either way, some “helpful” person could rip the senior off. Other indications of need may be difficulty in writing checks, reading statements (especially online), and differentiating important mail from junk mail.
Similarly, if a senior has limited mobility, it may make them feel more socially isolated, which can increase their likelihood of being scammed by people who offer to “help.” It’s important to be alert to the unexpected emergence of a new friend who seems to be influencing the senior’s financial behavior or is trying to interfere with existing relationships. It’s not an easy problem to resolve, though you’ll want to try. At the least, it requires you to pay even closer attention to bank and credit accounts.
THE FINANCIAL CAREGIVER
How do you, as a caregiver, actually do your job? Each caregiving relationship is unique, based on who the caregiver is (child, sibling, or friend), the level of help that’s required, and how financially comfortable or needy the senior is, among other things.
The caregiver’s role may be informal, at least initially. The key here is that if you’re acting as an informal adviser, you have no official authority to act on the senior’s behalf. In an informal relationship, you help out and try to anticipate needs and solutions, which you encourage the senior to act upon.
However, at some point, either you or someone else will need legal authority to handle the financial matters if the senior no longer can. As your responsibilities increase, either because you sense the need or because the senior asks for more help, there are some things you should encourage a senior to do.
ACTIONS TO ENCOURAGE
Among the documents the senior should create if they don’t already exist—and to bring up to date if they do—are a will, an advance directive (sometimes known as a living will) and a power of attorney for healthcare.
Why is it important to make these documents timely? If they were created a number of years ago, some of the people named as beneficiaries may no longer be alive, or the senior may have other beneficiaries in mind. The same is true for the health-related documents. In matters of healthcare and probate estates (assets left by a will), legal disputes are possible. They can be time-consuming, costly and emotionally wrenching.
Also encourage seniors to request that statements, such as utility and telecom bills, insurance company invoices, and statements from bank and brokerage accounts, be sent to you. These notifications:
- Can provide early evidence of potential financial problems, and can be instrumental in preventing them
- Can alert you to possible fraud
- Do not provide actual access to the accounts, so assets can’t be sold or money moved between accounts.
What you’re looking for is a tipping point, a signal that the senior needs more help than an informal arrangement can provide.
FINANCIAL CAREGIVER AS FIDUCIARY
A defining difference between someone who acts as an informal financial caregiver and one with legal authority to act on a senior’s behalf is that the one with legal standing is a fiduciary. That person has an obligation to act in the senior’s best interest. This includes:
- Managing money and other assets wisely
- Eliminating unnecessary costs
- Being alert to threats to the senior’s assets
POWER OF ATTORNEY
One way to formalize your arrangement with the senior is to have him or her (the principal) establish a Power of Attorney naming you as the agent who is authorized to act on their behalf in legal and financial matters.
The powers you have as an agent depend on what’s specified in the legal document that’s been created by the senior’s attorney. The powers can be broad — called a general power — or quite limited, such as just managing rental property or paying bills from designated accounts.
A durable power of attorney is the most common type, in part because it is the most flexible. Your authority as agent continues after the principal becomes mentally incapacitated, if that happens, or is simply too old to manage alone.
A durable power of attorney ends when the principal revokes it or dies.
Responsibilities as agent
- Manage bank and other financial accounts prudently and maintain accurate records
- Confirm that all benefits are being received
- Evaluate and plan for principal’s current and future financial needs
If you are acting as a financial caregiver, you’ll want to create a balance between following your best instincts in meeting the needs of the senior you’re helping, and living up to the fiduciary obligations of your position. There can be legal consequences for violating fiduciary and legal responsibilities.
A good starting point for the information you need is the Consumer Financial Protection Bureau, which has published a series of free, downloadable guides (http://www.consumerfinance.gov/blog/managing-someone-elses-money/).
Seek professional advice when you’re not sure what to do. Your bank is a great resource, as are legal and tax advisers.
WHEN YOU SUSPECT A PROBLEM
If you suspect that the senior has been the victim of fraud or abuse, you don’t have to deal with it by yourself. You can enlist the help of the senior’s bank or consult an elder-law attorney. If necessary, contact specialized resources, including the local office of Adult Protective Services and the National Center on Elder Abuse at www.ncea.aoa. gov/Stop_Abuse/Get_Help/Report/index.aspx
EARNING A SENIOR’S TRUST
Sometimes the greatest challenge of being a financial caregiver is earning and keeping a senior’s trust. But having it is essential to effectively doing your job.
- Be sensitive to the senior’s desires and needs—which are not always the same. As financial caregiver, you may have to walk a fine line if a senior’s wishes aren’t consistent with sound money management from your perspective.
- Your primary responsibility is to provide for the senior’s financial needs. If wants and needs conflict, it will probably fall to you to resolve the conflict.
- If you’re the senior’s child, grandchild or sibling, one approach may be to involve other family members and get their support and agreement so that you’re more confident taking the position you think is right.
- Probably the most important way to gain trust is to respect a senior’s independence as long as possible, even if it means your view on how things should be done doesn’t prevail all the time.
HOW THE BANK CAN HELP
The bank can be a financial caregiver’s most important counselor. A bank may:
- Collaborate on establishing appropriate accounts
- Provide guidance on decision making
- Monitor account use
- Provide alerts to help you recognize and prevent fraud
The information above was adapted from a presentation provided by the American Bankers Association.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.
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