Basics for Financial Caregivers
November 21, 2016If you’ve ever had to manage someone else’s money, you know it can be highly stressful. The responsibilities for managing a parent or other family member’s finances may have fallen on your shoulders suddenly or perhaps you had time to prepare to be a financial caretaker. It might be a responsibility you don’t even want or feel equipped to handle. Here are some resources to learn more about what your responsibilities entail and where you can turn for help.
What it means to be a fiduciary
Whether you have a power of attorney for finances or are a court-appointed guardian, a trustee, or a government fiduciary, you are required to act in the best interest of the person whose money you are managing. That’s called being a “fiduciary,” and it comes from the Latin word, “fiducia,” meaning trust. A fiduciary must act for the benefit of another person in a financial relationship and not for their own personal gain. The four basic duties of a fiduciary for a parent (or other person) are:
- Act in your parent’s best interest;
- Manage your parent’s money and property carefully;
- Keep your parent’s money and property separate; and
- Keep good records.
The first thing you must do is clearly understand the scope of your new position. Practically speaking, you’ll need to be very careful to follow the rules. For help, the Consumer Financial Protection Bureau (CFPB) offers guides for four types of fiduciaries managing someone else’s money. They can all be downloaded here.
What’s a power of attorney?
A power of attorney for finances is a legal document that gives someone (called the “agent”) the legal authority to make decisions about your money and property. Generally, that legal authority kicks in when the person who granted it is sick or injured. CFPB help for agents under power of attorney can be downloaded here.
What’s a court-appointed guardian?
If a parent or other family member with diminished capacity has not made advance plans via a power of attorney and a judge finds that the person cannot manage their money and property alone, it may be necessary to ask the courts to intervene. Different states have different names for this, but the person appointed to take financial authority is often called a conservator or guardian. CFPB help for court-appointed guardians of property or conservators can be downloaded here.
What is a trustee?
A trust is a fiduciary relationship in which a person gives another person, the trustee, the right to hold title to property or assets for the benefit of a beneficiary (or beneficiaries). The grantor (e.g., your parent or other family member who sets up the trust) transfers money and property into the trust, which lays out the circumstances under which a trustee can step in to manage property and pay bills when the grantor is no longer capable. CFPB help for trustees under revocable living trusts can be downloaded here.
What is a government fiduciary?
A government agency may appoint someone to manage someone’s benefits if that person needs help. That person only manages the recipient’s benefits checks but not other financial affairs. The Social Security Administration calls that person a representative payee. The Department of Veterans Affairs calls that person a VA fiduciary. CFPB help for representative payees and VA fiduciaries can be downloaded here.
Look for signs of financial scams, fraud or abuse
Be on the lookout for sneaky business when you take over the finances of an older parent or family member, especially if it’s sudden or unexpected. Do you or your parent think that there is some money missing? Has your parent tried to send money to someone you don’t know? Are they not able to pay a bill they would normally pay, such as for the mortgage or electricity? Has a caregiver been informally handling their money or bills without full disclosure or legal authority?
Saying “yes” to any of those questions could indicate potential problems. As a fiduciary for your parent, be aware of financial scams and take steps to prevent them. Download the CFPB’s guide to preventing financial exploitation here.
Managing money for a parent or family member can feel like a huge responsibility, but it’s one you don’t have to face alone. Local and state agencies can also help provide resources, referrals, best practices and training. Start with the CFPB guides mentioned here and your employee assistance program to steer you in the right direction.
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