Friday, November 16, 2018

Managing Someone Else’s Money

Many children or trusted friends of older adults wind up managing their assets, but many don’t know if they’re doing a good job. Here’s an overview to get you on the right track.




A lot of older Americans wind up needing assistance with their financial assets, according to researchers. The skill needed to manage money is different from most daily functions because it relies on cognitive skills.

“Most older adults want to live independently for as long as possible. The problem is, it’s hard to live independently if you have difficulty managing your medications or finances,” said study coauthor Dr. Alex Smith of the University of California at San Francisco.

Many Seniors Need Help with Money


Smith and his colleagues analyzed data on 9,434 men and women available from the long-term U.S. Health and Retirement Study. Over 10 years, they found that 2,824 people, or 30 percent, developed difficulty managing their finances. Approximately a third of the original group died before demonstrating difficulty.

Among people at the relatively young age of 65 to 69 when the study began, nearly a quarter (23 percent) developed problems over the next decade.

“We don’t help people anticipate the fact that they may lose these abilities,” said Dr. Holly Holmes of the University of Texas Health Science Center at Houston, who wasn’t involved with the study. “We assess them when the abilities are already gone, and people often don’t have a plan in place. We rarely counsel 65-year-olds about their risk and how to plan for it.”

What the study couldn’t measure was loss of function about which the participants were unaware, since the answers were self-reported. “The elephant in the room is that this study covers self-reported losses of function, so the rates are actually much higher for those who don’t realize they’ve lost their abilities,” according to Dr. Mark Lachs, director of Cornell University’s Center for Aging Research in New York City.

Free Guides for Fiduciaries


The Consumer Financial Protection Bureau provides guides tailored to the needs of four different fiduciary capacities:




Additionally, because fiduciary powers and duties vary from state to state, there are six state-specific money management guides. The six states (Arizona, Florida, Georgia, Illinois, Oregon and Virginia) have high populations of older adults. They also offer set of tips and templates for creating your own state-specific version.

Each guide is available as a PDF or can be ordered for free in quantities up to 200. 

What Caregivers Should Know


If you’re the one who steps in to help a loved one manage their money, there are many things you should know. One caveat is that it’s always easier to plan ahead. If your loved one is using the ATM and balancing their checkbook now, it may be possible to add a trusted name to their checking account. In the event of stroke or another emergency, that person can step in. It’s essential to have another name on the account if the loved one has been diagnosed with a progressive disease, such as dementia.

Although a joint account is usually the easiest way to make payments and track expenses, there is risk involved. Most fraud on older adults is committed by a family member (see sidebar). Creditors of either person can try to collect from the account. If either person dies, the money automatically belongs to the other account holder. Some banks will allow you to have a convenience account that allows another person to write checks and make deposits and withdrawals, but will not give them ownership in the event of death of the other account holder.

A caregiver can also help set up automatic, online payments for telephone, cable, utilities, mortgage, credit card and other payments. It’s wise to make a simple budget to monitor income and expenses.

Investments and bank accounts should also be monitored. Mint is one free resource that is both easy to use and capable of aggregating investment and banking information along with having a robust budget platform.

In the event that your loved one is uncomfortable allowing a friend or family member access to financial information, money-management programs can help. Find one at the National Association of Area Agencies on Aging.

Transparency 


Whoever is managing the money should be transparent and above reproach. Decisions should be made in the exclusive best interest of the account holder. Here are some guidelines for caregivers who manage money:

  • Always act in the best interest of your loved one.
  • Use the memo field to record what every check is for.
  • Never, ever borrow from the account.
  • Do not use the account to pay for anything that also benefits someone else. For example, your loved one’s account shouldn’t fund a car purchase that will take her to the doctor but also transport you to work.
  • An open-book policy is the best for establishing trust. Give other family members access to the books, and provide bank statements to assure them you are being a good steward.


Financial Fraud Often Committed by Family Member


About 1 in 20 older adults reports being financially abused by a family member in any given year, according to research funded by the U.S. Justice Department. It may involve stealing money or taking over assets without permission. Financial exploitation causes seniors to lose almost $36.5 billion per year, according to one estimate from financial services firm True Link Financial. Many of these cases never are brought to court because families don’t want to air their dirty laundry or send a member to jail.

Money is only part of what is lost when the perpetrator is a family member or trusted caregiver. Some people lose their home, says Kathleen Quinn, a senior advisor and past director of National Adult Protective Services Association. Being victimized by someone trusted can lead the older adult to lose their ability to count on others, making her withdrawn and vulnerable to further victimization. Studies show financial abuse raises the risk for depression and suicide. “This is obviously about more than just money,” says Sarah Barnard, a social worker who manages an elder abuse prevention program at WISE & Healthy Aging, a nonprofit social services organization in Santa Monica, California.

If you suspect someone is financially abusing someone you love, contact Adult Protective Services, local law enforcement or the senior’s financial institution.

Making It Legal


Your loved one should choose someone they trust to be the legal guardian of their assets, or fiduciary, while she is still healthy. This can only be done while the person is still completely competent. There are four ways to become a fiduciary:


  1. Power of Attorney (POA). A durable power of attorney assigns power to another to make financial decisions in the event of incapacitation. POA must be granted when your loved one is of sound mind, and it can only be revoked in sound mind. If no one has a POA or trust, the family may have to spend time and money in court to file for guardianship.
  2. Trustee. In sound mind, your loved one can elect to transfer assets to a revocable living trust and name a trustee. If she becomes unable to make sound decisions in the future, the trustee acts to keep the trust’s property safe. This can include moving items to a safe-deposit box, maintaining insurance policies, making careful investment decisions and paying taxes. Because it is revocable, as long as your loved one is of sound mind and the trust allows, she can elect to change or terminate the trust.
  3. Government fiduciaries. Appointed by a government agency, these fiduciaries manage monthly benefit checks, such as Social Security or military pension payments.
  4. Court-appointed guardians.  A court may step in and appoint a guardian or conservator if it finds that someone cannot manage their money or property alone. The guardian is required to act in the best interest of the protected person, in addition to reporting regularly to the court. Guardians must prepare accountings of income and assets, along with details about how the money is being spent.


What to Do about Conflicts


Money has the amazing ability to create conflict, even among the most civil of families. Siblings are particularly vulnerable to its temptations as they deal with the ongoing loss of a parent to dementia or impending death. Nip this problem in the bud by reaching out to siblings and other interested parties before they voice a complaint. Offer to show them the record books, explain purchases, and answer any questions. If they aren’t satisfied, ask a family counselor, mediator or social worker who consults with families in your situation to step in. A list of mediators is available from The Association for Conflict Resolution.

If there is no one who wants to take over a loved one’s finances, or if the family dynamics don’t favor that solution, your best bet may be to consider a daily money manager/management (DMM) program. These versatile programs can do everything from reminding someone to pay a bill to taking over financial management. Daily money managers pay bills, balance checkbooks, maintain a budget, organize bank statements, track receipts and tax return documents, and even figure out medical bills. Start your search at the American Association of Daily Money Managers, which has an ethical code for members.

Remember to take your time and use caution when hiring a DMM, because they are not regulated by law. Get referrals, and ask the following questions:


  • What is your experience as a daily money manager?
  • What are your credentials?
  • How much do you charge, and what is included in the fee?
  • Is there a minimum charge per visit? a minimum of visits per month?
  • Can you provide references?
  • What will happen if you get sick or go on vacation?
  • Are you bonded and insured?
  • Will you work with your client’s professional advisors, such as her lawyer and accountant?


Remember to monitor accounts, even when you’ve hired a money manager, even though it’s annoying.

Click below for the other articles in the November 2018 Senior Spirit