As you read through this blog, I would like you to think about the options presented. With that in mind it is usually our recommendation to use a Durable Power of Attorney. There are some circumstances where one of the following options could work well or even better (in the case of guardianship for example) but a Durable Power of Attorney is usually sufficient for most estate planning situations. Of course, this does go into the realm of estate planning and it’s always good to consult with an attorney. Speaking of attorneys, most will advise you not to set up a joint account in the manner addressed below.
Should you consider a financial caregiver?
Age and poor health can quickly impair a person’s ability to deal with the life’s many issues, including money. There are many avenues you may decide to take for a loved one (or you may recognize that you desire some assistance yourself). Below we cover a variety of arrangements for help at various levels of need and formality.
Also note that laws vary from state to state, but here we look at some general guidelines. As with any legal issue, please consider consulting with an attorney that specializes in such matters when you are making these decisions.
Informal financial caregiving
If you have an elderly relative who is need of help, yet is still highly functioning, one option is to appoint a conversation partner. This allows a trusted friend or relative to oversee someone’s finances. He or she could receive duplicate bank and brokerage statements and join the elder person when they visit their financial advisor.
You could also consider appointing a trusted contact person who would be someone your advisor or bank can reach out to in the event of certain circumstances, such as suspected fraud.
Another option at this level is to establish a convenience account. This is not a joint account, but it allows an assistant to help an individual deposit funds, withdraw money, and write checks. At the account owner’s death, the helper will not receive the funds in the account. But there are pitfalls to these accounts, as we’ll mention below.
Formal financial caregiving
You may formally establish a joint account for someone who needs assistance with their financial affairs, but there are downsides to this. Yes, the helper can quickly pay bills and manage financial affairs, but they could also steal from the account. Creditors of either person could access the account, too.
Joint tenants with rights of survivorship allows the survivor to take ownership of the account. This could quickly cause conflicts with heirs and thwart the wishes of the deceased.
Can you set up the account as tenants in common? That is a possible solution, as the assets then would pass to the estate of the deceased and not the financial caregiver named on the joint account.
A power of attorney gives someone the legal authority to make decisions about an individual’s finances and/or property.
Might an older or infirm person need a guardian? If a person doesn’t have a power of attorney, a court can name a guardian or conservator to manage their finances and health care decisions, if the court decides they are unable to manage decisions by themselves.
A trustee is given authority only over assets that are in a trust, such as a revocable living trust. Similar to a will, the trust will stipulate who receives the assets in the trust when the owner dies.
You might find yourself in the role of court-appointed guardian over someone in your family. Such guardians, conservators and trustees are considered fiduciaries. It’s a high standard. It means the financial caregiver must manage a person’s finances for that person’s benefit. They promise they will be acting on the other person’s behalf and must always put that person’s interests first.
The fiduciary standard includes:
- Carefully managing the person’s finances
- Keeping their finances and property separate from the caregiver’s own finances
- Always maintaining good records, including recording the reason for any payment in the memo field of the check
- You cannot borrow from the account.
- Are you being paid? Do not pay yourself by withdrawing from the account. Have another person write the check for payment.
If you fail to meet the high standards of a fiduciary, you could be removed, sued, forced to repay money, or even have criminal charges brought against you.
Financial exploitation and elder abuse
Unfortunately, sometimes those appointed to care for the elderly will take advantage of them. Here are some of the signs to watch out for with the older people among your family and friends.
- An outside party, friend, or close relative notices or believes that some money or property is missing.
- Excessive gift giving suddenly takes place.
- The person whose finances are being managed says that some money or property is missing.
- There is a sudden change in spending or savings. This might include heavy ATM usage, large unexplained wire transfers, purchases of items that don’t seem necessary, bills that go unpaid, names are added to bank and brokerage accounts, or changes in beneficiaries are made without explanation.
- A relative, caregiver, friend, or someone else blocks visitors or phone calls, or seems to be controlling decisions.
Questions you might ask before naming a caregiver
As you think through persons who might fit the role of financial caregiver, ask yourself or the person who is going to be assisted: Am I comfortable sharing my wishes with them? Will they carry out my wishes? Do I trust this person? Will they act in my best interest? Will they manage my affairs correctly? Will they keep proper records and keep their money separate from mine?
Appointing a financial caregiver is not a responsibility that should be taken lightly. Choose the right person. If you answered “Maybe” or “No” to some of these questions, consider asking someone else. (Sources: Consumer Financial Protection Bureau, AARP)
If you have additional questions, we’d be happy to speak with you. That’s what we’re here for.
I trust you’ve found this review to be educational and insightful. If you have any questions or would like to discuss any matters, please feel free to give me or any of my team members a call.
As always, thank you for the trust, confidence, and the opportunity to serve as your financial advisor.