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Managing a Loved One's Money

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

Here are some common signs of financial exploitation:

  • Money or property seems to be missing.
  • Sudden changes in spending or savings, such as taking a lot of money out of the bank without explanation or using the ATM a lot (especially someone who doesn't usually use it), or making new or unusual gifts for family members or a "new best friend."
  • A relative or caregiver keeps someone from having visitors or phone calls and doesn't let the person speak for himself. If you think a relative has been exploited, call the police, sheriff or your local adult protective services agency. You can also alert the bank or credit card company, call the long-term care ombudsman if the person is in a nursing facility, and talk to a lawyer.

For more information about financial exploitation and what to do about it, check out our Managing Someone Else's Money guides and also our Money Smart for Older Americans guide on preventing financial exploitation.

Question: At what point is it better to have a guardianship of a parent instead of power of attorney?

Naomi Karp: Planning in advance is optimal. If your family member created a power of attorney or trust then you probably won't need a guardianship. However, if the person becomes incapacitated and doesn't have either than a family member may need to file for guardianship.

In some cases, the person's only income may be Social Security or veterans benefits. In this case, the Social Security Administration or the Department of Veterans Affairs can appoint someone to receive checks and spend it on the person's care.

Question: What do you do if you've been appointed guardian, but your siblings act suspiciously and think that the money is being mismanaged?

Naomi Karp: If you are the guardian, you'll have to realize that not all family members may agree with your decisions about your parent's money. Sometimes, sibling rivalry going back many years might still cause tension when parents become sick or incapacitated. To help avoid friction, make sure you do your job as the guardian very well by carrying our all of your duties.

The CFPB's Managing Someone Else's Money guide for guardians of property tells you what your duties are and how to be sure you do the right thing.

Sharing information may help, too. For example, if you are a guardian, you will have to prepare accountings for the court about your dad's income and assets and how you spent the money. Unless your dad told you not to, it's often a good idea to share information and deal with questions about a decision when it happens than to deal with resentment that builds up over time. The court can tell you whether you are required to share accountings. Some family members or friends may not have your parent's best interest at heart. If that's the case, it may be better not to share the information or to ask the court not to share it. Use your best judgment.

Sometimes a family counselor or a mediator may be able to help when you have a lot of family friction over your parents' money. The Association for Conflict Resolution has listings of mediators. See the Where to Go for Help section of the CFPB's guides.

Next page: Protecting a loved one's money while he or she is in a nursing home. »

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