Every day, millions of people serve as financial caregivers for their loved ones. In fact, according to the Caregiver Action Network, more than 90 million Americans care for a loved one living with a disability, disease, or experiencing reduced financial capability as a result of aging. An important and complex task, the role of financial caregiver is to maintain the best quality of life possible for your loved one and prepare their finances for current, future, and unexpected expenditures.
Unfortunately, taking on this role comes with emotional and financial strains for which most adults are not prepared. So, what exactly should you know as a financial caregiver?
- Learn the rights and restrictions that apply to your role. Financial caregivers, such as those with a power of attorney, trustees, and federal benefits fiduciaries, are fiduciaries with a duty to act and make decisions on their loved one’s behalf. Learn the legal responsibilities of your assigned authority to execute your role better (see below).
- Manage money and other assets wisely. Financial caregivers may be in charge of daily, unexpected and future expense their loved one may incur. Especially if the beneficiary has a fixed income or limited finances, it is vital that caregivers minimize unnecessary costs and budget accordingly to ensure all money is allocated correctly.
- Recognize danger signs. Seniors have become large targets for financial abuse and fraud. Make sure to stay alert to signs of scams or identity theft that may put your loved one’s assets in peril.
- Keep careful records. When acting as a financial agent, proper documentation is not only encouraged but required. Make sure you keep well-organized financial records, including up-to-date lists of assets and debts and a streamline of all financial transactions.
- Stay informed. Monitor changes in the economic status of the beneficiary and take appropriate action, as needed. Also, be sure to stay up to date on changes in the laws affecting seniors.
- Seek professional advice. Consult a banker or other professional advisors when you’re not sure what to do.
Financial Caregiver Roles and Responsibilities
Power of Attorney (POA)
Your loved one designates you as a POA and gives you the authority to act and make decisions on their behalf, including managing and having access to their bank and other financial accounts. Authority continues if loved one becomes incapacitated and ends when power is revoked or loved one dies.
Authority is given once you are named as trustee or co-trustee of a revocable living trust. As a trustee your authority applies only to the property noted in the trust, authorizing you to protect, manage and distribute the trust’s assets as directed in the trust document. Authority continues after the death of the trust creator or grantor.
Federal Benefits Fiduciary
A federal benefits fiduciary is appointed to accept and delegate federal government benefit payments, such as Social Security and Veterans Affairs benefits, in the beneficiary’s best interest. The beneficiary receives funds through an account set up solely for this purpose. As a representative payee for Social Security benefits or a VA fiduciary for VA benefits, you are required to keep detailed records of all related transactions and file annual reports detailing benefit use.
Caring for your loved one is an important and complex task. Organization is critical, and by planning and ensuring you have access to essential documents, you can make the process a bit easier. The Caregiver Action Network (CAN) offers a document checklist you can use as a starting point for what you will need to manage your recipient’s finances.
If you find yourself unexpectedly in the role of a financial caregiver, to the best of your ability, review any papers or documents you can find in the person’s possession. The goal is to get a handle on what the person has – if you don’t already know – and where it is. Then, seek out professional financial and legal advice from persons you trust. Speaking with an expert will help ensure you aren’t leaving your loved one’s financial future to chance.
Source: American Bankers Association, News to Use, August 2017.