Millions of Americans are managing money or property for a family member or friend who is unable to pay bills or make financial decisions. This can be overwhelming, but it's also a great opportunity to help someone they care about, and protect them from scams and exploitation.
The Consumer Financial Protection Bureau's (CFPB) Office of Financial Protection for Older Americans has released four easy-to-understand booklets to help financial caregivers. The Managing Someone Else's Money guides are for agents under powers of attorney, court-appointed guardians, trustees and government-benefit fiduciaries (Social Security representative payees and Veterans Affairs fiduciaries).
The guides help those serving as fiduciaries in three ways:
- They walk them through their duties.
- They tell them how to watch out for scams and financial exploitation and what to do if their loved one is a victim.
- They tell them where to go for help.
The guides can be downloaded from the CFPB website at consumerfinance.gov/managing-someone-elses-money. You can also order free print copies and free bulk orders.
Question: How do I know if there has been a conflict of interest?
Naomi Karp: A conflict of interest happens when you make a decision about money or property that may benefit someone else at the expense of your loved one. For example, it may be a conflict of interest if you use your mom's money to buy a car and then use the car mainly for your own needs. Or you use your dad's money to pay your son to do repair work. One of your duties as a financial caregiver is to act only in the best interest of the person whose money you are managing.
Question: My name is on my mom's checks, but my brother is now executor of her will. What is my responsibility in this regard? I was sick some years ago and not expected to live, so I relinquished my role as executor.
Naomi Karp: A joint account is one way that financial caregivers can assist with managing money. With a joint account, a caregiver can write checks and make deposits on another person's behalf.
But people who open joint accounts or add someone to their account for convenience should be aware of a few things. If the money belongs to the older account holder, is not meant to be a gift to the joint-account holder and isn't meant to change the person's estate plan, there may be some risks.
For example: The family member can withdraw money for his or her own use or mismanage the money, creditors of either person may try to collect debts from the account, and when one account holder dies, the other may get all the money in that account.
So, say the older person has a will and wants all property to be evenly divided among three children; if only one of the children is on the joint account, that person will likely get all remaining money in the account even if that means the money and property isn't evenly divided among the heirs.
An alternative that doesn't create these risks is a "convenience account" that some states have. You still can have a family member write checks and make deposits and withdrawals, but it doesn't change the ownership of the money in the account — and it doesn't give the person the right to keep the money when you die.
You asked about a situation where one person is the joint-account holder and a sibling is the executor. Being an executor means you handle the estate after the person dies. So one person can be a joint-account holder during the parent's life, and another person can be the executor. Talk to a lawyer for more information about joint accounts and estates, particularly because each state's laws are different.
Next page: When a parent resists financial help. »