Managing a Loved One's Money

Naomi Karp from the Consumer Financial Protection Bureau offers advice on avoiding scams and financial exploitation

Question: My mom moved in with us a little more than a year ago due to physical needs, and until recently seemed mentally sharp enough to manage her finances. Now that's slipping — two overdrawn accounts in one week, confusion over which account she used to write a check, etc. I want to help her manage her finances (and don't want creditors calling our house), but she is resisting mightily. She wants to prove she's competent to do it herself and is totally in denial when presented with evidence to the contrary. How can I persuade her that it would be a good idea to let me be involved in managing her money?

Naomi Karp: This is a really tough one. Just as many older people resist giving up driving, they also fight giving up their "financial driver's license." Unfortunately, when people develop even mild cognitive impairment, their ability to handle finances is impaired.

One thing you might do is try to convince your mother that, as a first step, you help her with bill paying. She wouldn't give up her own management of finances; she would just be getting some help. That way you could monitor how things are going.

There are also money-management programs that help with bill paying, if you think having a neutral third party would help. To find one, contact your local Area Agency on Aging through

But if your mom has a progressive condition and is likely to continue to decline, it may be important for her to designate someone to handle her finances now, while she still has the capacity to make a power of attorney or a trust. Perhaps having a trusted professional, such as her primary care physician or a family lawyer, make the suggestion would make it more likely to happen.

It's best to make a private arrangement, such as a power of attorney or a trust, rather than having to go to court later to file for guardianship, which is expensive, time-consuming and public. Try to have your mom get some legal advice about the best arrangement for her.

Question: After my mom died, my sister took everything, even money that was in probate. Selfish, but she will get her just reward in the end.

Naomi Karp: Sadly, family members, neighbors, friends, caregivers and other trusted people may take advantage of an incapacitated person. We call this financial exploitation.

Unfortunately, sometimes the perpetrator is an agent under a power of attorney or a guardian or has some other authority to handle the person's money — and that may make it easier for them to take money without permission.

The best preventive measures are to be sure that your loved one only gives the power to handle his money to someone he really trusts. And even then, he should make sure other family members and friends know that the person will be managing his money so they can keep an eye out.

Next page: Know the signs of financial exploitation. »

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