If your loved one starts having trouble keeping a checkbook or becomes confused about money, someone must act as money manager. If that someone is you, here’s what you should know.
Plan ahead. If your loved one is still writing checks and using an ATM, now is the time to discuss adding a trusted family member or friend of their choosing to the checking account. This sensible precaution may never be needed but will allow bills to be paid if a health issue, such as a stroke or short-term memory loss, should leave your loved one unable to write checks, comprehend money or use sound financial judgment. If your loved one is in the early days of a progressive disease such as dementia or amyotrophic lateral sclerosis, having a second person on the account is essential. When needed, that person can step in as a money manager to pay bills, make deposits and withdrawals, and monitor the balance to make sure your loved one is not being scammed or financially exploited. Changes to a bank account can be made only when the account holder is fully mentally competent.
If a money manager takes over, he or she should cancel your loved one’s credit cards, PayPal, Venmo, department store cards and other lines of credit.
If mixing family and finances makes your loved one uncomfortable, there are money-management programs that help with bill paying. To find one, contact your local National Association of Area Agencies on Aging.
What Can Go Wrong?
Many people find a joint account to be the easiest way to pay bills and keep track of expenses. But it is not without risk.
- The second person on the account could use the signing or ATM privilege to steal from your loved one’s account.
- Creditors of either person may try to collect debts from the account.
- Money in the account when either person dies belongs to the other account holder. Some states have a "convenience account" that allows a second person on the account to write checks and make deposits and withdrawals, but does not include the right to keep the money remaining after death.
- The money manager is obliged to make decisions that are in the best interest of your loved one.
- Write the reason for the check in the memo field.
- Keep a written record of expenses paid from the account.
- Never borrow from the account.
- Never use the account to pay for anything that benefits your loved one and another person. For example, you may not buy a car to drive your loved one to the doctor and also use it to take yourself to work.
- If you and your loved one previously have agreed in writing that you will be paid for being the primary caregiver, it’s best to ask another trusted family member or friend to be the second on the account. That way you are not writing checks to yourself.
- Some family members are naturally suspicious. An open-book policy establishes transparency and prevents suspicions from taking hold.
Make It Legal
While still healthy, your loved one should choose a trusted family member or friend as the fiduciary — a legal guardian of the assets. The fiduciary will make financial decisions if your loved one became unable to manage money. This can be done only if your loved one is fully competent. Consult a lawyer to draw up the legal documents.
There are four ways to become a fiduciary:
- Power of Attorney (POA). Sometimes called durable power of attorney, POA is a legal document in which one person assigns another the power to make financial decisions on their behalf, should the assignor become unable to make sound decisions. Just as your loved one must be of sound mind to grant power of attorney, he or she must be of sound mind to revoke it. Without power of attorney or a trust the family risks having to go to court later to file for guardianship, which is expensive, time-consuming, public and potentially divisive.
- Trustee. While in sound mind, your loved one transfers assets to a revocable living trust and names a trustee. If, in the future, your loved one loses capacity to make sound financial decisions, the trustee becomes responsible for keeping the trust’s property safe. This may mean putting valuable items in a safe-deposit box, maintaining insurance, paying taxes and making careful investment decisions. As long as your loved one can make decisions and the terms of the trust allow it, he or she can change or end the trust.
- Government fiduciaries. These fiduciaries are appointed by a government agency to manage monthly benefit checks issued by that agency — usually the Social Security Administration or the Department of Veterans Affairs. To manage other money or property belonging to your loved one, you must have power of attorney or court appointment, or be a trustee under a revocable trust.
- Court-appointed guardians. If a court finds that someone cannot manage money or property alone, a hearing is held to appoint a guardian or conservator. The guardian of assets must act in the best interest of the protected person, as well as serve the court and report regularly. Guardians are required to prepare accountings for the court that detail your loved one’s income and assets, and explain how the money is being spent.
Sometimes the best person for the job … isn’t. The person with power of attorney, the partner on the shared checking account, the caregiver or the guardian may be taking money from an incapacitated person. This is called financial exploitation. Common signs are:
- Money or property that seems to be missing
- Sudden changes in the loved one’s spending or savings
- Convoluted explanations
- Taking a lot of money out of the bank without explanation
- Using the ATM frequently
- Sudden excessive gift-giving
- Intercepting visitors or phone calls, and not letting the loved one speak for himself
If you think a relative has been exploited, call the police, sheriff or your local adult protective services agency. You also can alert the bank or credit card company. If your loved one is in a nursing facility, call the long-term care ombudsman and talk to a lawyer.
Help for Fiduciaries
The Consumer Financial Protection Bureau (CFPB) Office for Older Americans will walk fiduciaries through the job, showing them how to spot scams and financial exploitation, and advising on what to do if the loved one is a victim.
The CFPB partnered with the American Bar Association Commission on Law and Aging to produce a series of free booklets, Managing Someone Else’s Money.
Money, even when it belongs to someone else, can bring out the worst in families — particularly siblings who are beginning to reckon with the impending death of a parent or, in the case of dementia or Alzheimer’s, the ongoing loss of the person they were. There is little room for family friction, but it may appear. Tackle the problem before it festers. Reach out to a family counselor, mediator or social worker who consults with families in your situation. A support group will give you a place to vent. The Association for Conflict Resolution has listings of mediators.