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Tips for taking over the finances of an elderly loved one

by Ben Luthi
June 14, 2018

Tips for taking over the finances of an elderly loved one

by Ben Luthi
June 14, 2018

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When a loved ones get older, their physical health isn't the only thing at risk of deteriorating. If their mental health declines, they may have trouble managing their money on a day-to-day basis, and could even become vulnerable to scams or identity theft.

Here are five steps for managing elderly finances you can start taking now to protect your elderly loved one from financial missteps.

1. Start a conversation

Some people resist the idea that they're losing it as they get older. Instead of forcing the issue, sit down with your elderly loved one and talk things through.

"Make sure that those conversations are happening before something happens," says Roger Whitney, CFP®, a financial advisor and host of the podcast Retirement Answer Man.

Whitney also recommends getting a list of contact information for their bank and investment advisor. "That sets the stage so you know who you should call and who the players are," he adds.

Help your loved one understand the context of what you're trying to do. It's not a matter of control. Rather, you love them and want to protect them from potential harm.

2. Determine the best route

If your loved one agrees to your offer, some financial decisions may require that you make things official. Here are a few options that may apply to your situation:

Power of attorney

This is a legal document that gives you legal authority to make decisions about your loved one's money and property. Your loved one can revoke this authority at any time and can still make decisions for themselves.

Your authority under a power of attorney is limited to what the document outlines. Unless your loved one revokes the power of attorney, it ends when they die.

Guardian of property

If a court of law has determined that your loved one can't manage their finances or property on their own, it may directly appoint you as a guardian of property. At the same time, it may appoint you as a guardian of the person, which means you also make health and other personal decisions for your loved one.

With this appointment, you not only have a responsibility to your loved one but also to the court. This means that you may need to make regular reports to the court and be ready to answer questions if they arise. Your responsibility as a guardian of property ends when the court relieves you of your duties.

Living trust trustee

Your loved one can create a revocable living trust with some or all of their assets and give you legal authority to make decisions regarding the trust.

You can't make decisions about money or property outside of the trust, and you can only make decisions about assets in the trust once your loved one no longer has the capacity to do so. Your authority as a living trust trustee ends when your loved one ends the trust or names a new trustee.

Representative payee or VA fiduciary

If your loved one receives benefits from the federal or state government, such as Social Security income, a government agency may appoint you as a representative payee or VA fiduciary (the latter applies to Veterans Affairs only).

This designation gives you the authority to manage the benefit checks that come from the government agency that appointed you and to make sure the money goes to take care of your loved one's needs. It doesn't, however, give you authority over any of your loved one's other financial assets.

3. Understand the responsibility of managing elderly finances

By taking one of the previously mentioned routes to legally assume control of your loved one's finances, you become a fiduciary. This means that you're legally bound to act in their best interests.

After all, it's still their money whether they have the capacity to manage it or not. You should also avoid mixing your assets with those of your loved one and try to involve them in as many decisions as possible.

"There could be a natural conflict of interest," says Whitney, especially if you're the child and you may receive an inheritance if your parent dies. In this situations, it's critical to avoid doing anything that causes you to benefit personally.

"You have to set aside any of your personal beliefs or desires because you're supposed to act as you feel [your loved one] would," says Whitney.

What's more, if you act contrary to your responsibility as a fiduciary, you could be removed, sued or have to repay the money you used for your own benefit.

4. Coach them to avoid scams

"Any scam is going to be played off of emotions," says Whitney. So even people who aren't struggling mentally can fall victim.

For example, a scammer may call your loved one posing as a grandchild in trouble who needs money. Or, your loved one may get a call from someone posing as law enforcement needing money to mount an investigation, engendering fear.

To help your loved one avoid scams, position yourself in a way so that you can help without threatening their autonomy. "You want to be non-intrusive," says Whitney. "You want to be their counselor, not take over for them."

For example, ask that your loved one counsel with you before making any big money decisions. This can help extract them from the emotional situation. Another way to help is to remain behind the scenes.

"Get copies of their major account statements so you can notice big money movements," says Whitney. "That way, it can prompt a conversation."

Here are some other tips you can share with your elderly loved one to help them avoid scams:

  • If the person is posing as a grandchild or other family member, ask them a question that only they would know the answer to.
  • Reach out to their parents or another close family member before sending money.
  • Understand that law enforcement will never ask for money.
  • Look for red flags. For example, some scammers may ask for gift cards instead of cash.

5. Respect their wishes

Again, it's important to understand whose money you're managing. Even if you think you're doing what's in their best interest, it's not up to you to decide what their best interests are.

This means potentially stepping back if that's what they want. You're just helping; you're not in control. Assure your loved one from the start that they can cancel everything if they wish. Help them understand the rights and authority they maintain throughout the process.

Summary

Watching an elderly loved one struggle mentally or fall victim to scams can be devastating to a family. Helping with the finances of an elderly loved one can provide peace of mind for everyone involved.

Just be sure that you go about it the right way to avoid damaging your relationship. Also, if you're given legal authority to manage money and property, understand your legal obligations and the penalties involved if you don't live up to them.

 

 

This article was written by Ben Luthi from Money Under 30 and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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