One of my good friends recently asked me to go to a Janet Jackson concert with her. I weighed the thrill of dancing along with Janet to the memorized choreography of “Miss You Much” versus a good night’s sleep. A good night’s sleep won. I think this means I am middle-aged. Being middle-aged also means I am experiencing more challenging adult situations, such as caring for loved ones, be it parents, aunts, uncles or life-long friends getting sick, becoming disabled or experiencing cognitive declines.
Often the first thing that comes to mind with caregiving is health care, but do not neglect financial caregiving. The responsibility is daunting, as there is a network of unfamiliar rules and guidelines to navigate.
Thankfully there are many resources to help map out options and steps to take. Lisa Schifferle of the Consumer Financial Protection Bureau recently spoke at an International Foundation webcast, Considering a Financial Caregiver? Know Your Options, and helped simplify the many options for financial caregiving.
Informal Caregiving Options
You’re probably familiar with the term “power of attorney” and “fiduciary.” But there are many other options to help a loved one with their finances before getting into legal arrangements. To begin, there is the conversation partner. This is an official term to describe what you might be doing already: helping on an as-needed basis or simply talking with someone about their finances. It does not involve giving up control. It’s a first step towards incorporating financial issues into a trusted relationship.
Another informal option is establishing a trusted contact. Brokerage accounts are required to offer a trusted contact, and many other financial institutions are allowing for that role. This is someone the financial institution or brokerage may reach out to if they suspect the account holder may be getting scammed based on unusual activity. A trusted contact doesn’t have control of the money. Some financial institutions might call this role an emergency contact.
A third informal option is a convenience account, sometimes called an agency account. This escalates involvement beyond monitoring. The money belongs only to the account holder, but they can name someone to deposit or withdraw money. It’s different than a joint account in that the money is not jointly owned—It stays with the account holder. If the account holder were to die, the “agent” named in the convenience account would not have any claim to the money in the account—nor would they be liable for the person’s debts. In a joint account, the money (or debt) is shared.
Formal Caregivers (AKA Fiduciaries)
For more than occasional help, it’s time to formalize things. The informal approaches might have already helped those in need of assistance to answer key questions to consider when asking someone to be a fiduciary. Questions such as: Do you trust them? Are you comfortable sharing your wishes, and will those wishes be honored? Are they willing and able to take on the responsibility? Will they make decisions in your best interests? Are they organized? Do they have addictions that would distort their judgements?
A fiduciary is anyone named to manage money or property for someone else. A power of attorney (POA), the most common fiduciary, is often created in a will or trust. POA gives you control to name someone to manage your finances. While the context of this blog is elder care, this is ideally something to do as a healthy adult. Should you become unable to make financial decisions (for instance, if you get into a car accident on the way to work), without a POA, the courts may assign someone, called a guardian or conservator, to act on your behalf. This creates a tremendous burden on your loved ones at an incredibly stressful time. Keep in mind that naming a POA doesn’t mean you give up immediate control of your money. It only takes effect when you are no longer able to manage your finances.
More formalized arrangements, including a representative payee and a VA fiduciary, were outlined in the webcast. Schifferle offered numerous free resources that walk through all the considerations for these various roles. Some of those resources include consumerfinance.gov/olderamericans as well as www.consumerfinance.gov/msem for managing someone else’s money.
Make sure you take control of your own finances and identify formal and informal financial caregivers, and stay informed to help loved ones navigate their own journeys.
