What You Need to Know About Financial Caregiving

There are nearly 48 million caregivers in the U.S. who are providing unpaid care to an adult, according to AARP. They’re preparing meals, providing transportation, and offering other types of physical and emotional support. While juggling those responsibilities, they often have to take on the additional role of financial caregiver.

In fact, caregivers are more likely to help loved ones with money matters than to provide hands-on care. A survey by Merrill and Age Wave found that 92% of caregivers said they provide financial caregiving versus 64% who said they provide physical care.

There’s a good chance that many people who find themselves in the role of financial caregiver aren’t prepared. They might not have had conversations to get the details of their loved ones’ finances. They might not have the legal authority to provide financial caregiving. They might not even know where to begin when it comes to managing someone else’s finances. 

Fortunately, if you’re already a financial caregiver, or if you’re soon to become one, you don’t have to figure out everything on your own. This step-by-step guide will walk you through the process. Here’s what you need to know about being a financial caregiver.

What is financial caregiving?

Financial caregiving is a type of caregiving that involves helping someone manage daily money matters because age, health issues or cognitive decline has made it difficult for that person to handle financial tasks on his or her own. It can include overseeing bill payments, keeping tabs on spending, handling insurance claims, negotiating with lenders, making investment decisions, preparing tax returns and more. Financial caregiving also can include assisting with the cost of care for a loved one.

Many caregivers who help manage a loved one's finances report that it is time consuming, according to AARP's Caregiving in the U.S. report. Those with loved ones who have greater care needs are more likely to report that managing finances is very time consuming. In other words, financial caregiving duties tend to increase as hands-on care needs increase.

Not only is financial caregiving time consuming, it can be challenging managing someone else's money. The person who needs help might be reluctant to accept help. They might be unwilling to share details about their finances. Even in best-case scenarios where the person who needs assistance is cooperative, it still can be incredibly stressful ensuring someone else's financial well-being. Even small mistakes can have big consequences.

Steps to take to manage someone else's money

• Get power of attorney
• Get power of attorney for health care
• Notify financial institutions about your POA status
• Gather information about your parent’s finances
• Offer to help with financial tasks
• Bring in a third party to help with a reluctant parent
• Monitor financial accounts
• Keep tabs on your parent’s giving
• Limit your parent’s access to cash and credit
• Keep detailed records

Get power of attorney

The first thing you need to do as a financial caregiver is to be appointed your loved one’s power of attorney. This will allow you to legally access your loved one’s financial accounts and make transactions. 

Maybe you’ve already been accessing your loved one’s accounts online. Even if that person has given you permission to do this, you’re walking a fine line. “From a practical standpoint, people are doing this all of the time,” says elder law attorney Cathy Sikorski. “From a legal standpoint, it’s a question mark.” Proving that you’re making financial transactions with your loved one’s permission can be difficult. Plus, you won’t be able to sign anything – such as a check –  if you’re not the power of attorney. 

How to get POA: Encourage your loved oneto meet with an elder law or estate planning attorney to have a power of attorney document drafted to appoint you or a trusted friend or family member to make financial decisions once your loved oneis no longer able to make decisions on his or her own. There are lower-cost, DIY power of attorney documents available online. But Sikorski cautions against using these because the language in a power of attorney document must meet state requirements. “It’s so complex now,” she says. “You can’t possibly get online what you can get with talking with an elder lawyer or estate lawyer.”

[ Read: The Pros and Cons of DIY Financial Power of Attorney Forms ]

It’s important that your loved onedoes this while he or she is still mentally competent enough to sign the document. Otherwise, you will have to go through a potentially lengthy and expensive court process to prove your loved oneis no longer competent and to be appointed conservator or guardian.

Your loved oneshould opt for a durable power of attorney – which takes effect immediately – rather than a springing power of attorney that will only take effect if your loved one becomes incapacitated, Sikorski says. With a springing power of attorney, you won’t be able to act as your loved one’s agent until you jump through hoops to prove that he or she is no longer competent.  

If your loved oneis worried about giving you powers that take effect immediately, let that person know that you won’t really have power unless you have the actual power of attorney document. Your loved onecould store the document someplace safe and tell you when and how you’d be allowed to access it.

Get power of attorney for health care

In addition to a financial power of attorney, your loved one should have a health care power of attorney document that names a health care proxy or agent to make health care decisions for him if he can’t.  Often, a health care power of attorney is included in a living will or advance health care directive, which spells out what sort of end-of-life medical care a person does or does not want. Even if you are your loved one’s financial power of attorney, you can’t make health care decisions unless you’ve been appointed your loved one’s health care agent. 

How to get a health care POA: An attorney can draft a living will that will allow your loved oneto name a health care agent and provide instructions for end-of-life treatment. If your loved oneis reluctant to make a decision about end-of-life medical care (in other words, whether he or she wants to be kept on life support), an attorney can draft a simple health care power of attorney document that will allow your loved one to appoint a health care agent. 

Sikorski says that it’s not essential that an attorney draft a living will or health care power of attorney. DIY options could suffice. The American Bar Association has a free downloadable power of attorney for health care form that meets the requirements of most states.

Notify financial institutions about your POA status

If your loved one has named you power of attorney, you can’t simply tell your loved one’s financial institutions about your status and expect to be granted access to accounts. You must have the power of attorney document. However, you don’t want to give the original document to financial institutions. “They can look at it, they can touch it, they can dance with it,” Sikorski says. “Then they can make a copy of it and give it back.”

Also, you can make copies to send to financial institutions. Some might require that those copies be notarized. And some might have their own forms for you to complete in addition to submitting the POA document you have. Institutions and agencies that will require proof of your POA status include banks, credit card issuers, investment firms and insurance companies.  

The Social Security Administration does not recognize POA designations, so you must apply to become your loved one’s representative payee if you need to manage Social Security benefits. Medicare has a form to appoint an authorized representative. If your loved one is unable to complete the form, you can complete it if you have legal documentation such as power of attorney. If your loved one receives veterans benefits, the VA requires medical documentation or a court ruling that your loved one is unable to manage his or her financial affairs. The VA will then appoint a fiduciary to oversee management of benefits. The fiduciary usually is someone chosen by the beneficiary, so your loved one can choose you. 

[ Read: A Financial Caregiver’s Guide to Social Security Benefits ]

Gather information about your loved one’s finances

Ideally, you should have detailed conversations with loved ones about their finances before an emergency requires you to step in and help. This will help ensure that essential legal documents are in place and that there is a plan for emergencies.

If your loved ones are reluctant to talk, let them know you need to gather information about their finances so you can help them in case of an emergency. If they’re not comfortable telling you this information, ask them to write it down and put it someplace safe where you can access it. You need to know the following if you become a financial caregiver:

• Sources of income, such as a pension, retirement savings and Social Security benefits. Find out if payments are made by check, direct deposit or by self-directed withdrawals in the case of retirement savings.
• Where assets are held. Find out at which banks and financial institutions your loved on has accounts and how to access those accounts. If your loved one has accounts at multiple financial institutions, consider consolidating those assets into one bank and one investment firm.
• Monthly expenses. In addition to finding out what bills are paid each month, you need to know how those bills are paid.
• Types and amounts of debts owed. Is there a mortgage, auto loan, personal loan, business loan, credit card debt or medical debt?
• Types of insurance policies, which companies issued the policies and how the premiums are paid.

You’ll also need to know your loved one’s Social Security number, Medicare or Medicaid number, driver’s license number, military ID and other personal information if you have to manage your loved one’s finances. Store this information in a safe place that can only be accessed by you or others authorized to see it.

Offer to help with financial tasks

If your loved one’s financial decision-making ability and money management skills have declined, you can’t just step in and take over, says Linda Fodrini-Johnson, a professional geriatric care manager and consultant who has been helping families with elder care issues for 34 years. “You’re going to get resistance,” she says.

Instead, ease your way in by offering to help with a few financial tasks. For example, you could offer to help file tax returns – a task most people would be happy to hand over to someone else. You could offer to help research Medicare options during open enrollment season in the fall to see if there's a better or more affordable plan available. Or you could help your loved one set up automatic bill payments. “If you start small with something that rewards your parent – that saves them money – you’re more likely to have success,” Fodrini-Johnson says. 

Bring in a third party to help

If your loved one needs assistance but is reluctant to share information with you or give you access to accounts, bringing in a third party can help. A geriatric care manager – also called an aging life care expert – such as Fodrini-Johnson can play the role of mediator and help families develop strategies for getting through to reluctant parents. You can find an aging life care expert through the Aging Life Care Association.

If you can’t afford to hire a professional, reach out to someone your loved one trusts – such as a friend, family member, doctor or clergy member. That person might have more luck persuading your parent to let you step in and help. 

If your loved one has memory or mental health problems, or is making serious money missteps but refuses to let you help, you might have to play detective to figure out where your loved one has accounts. Then, if you have power of attorney, you can call or visit your loved one’s financial institutions and let them know you need to exercise your power to protect your loved one, Fodrini-Johnson says. 

[ Read: 5 Ways to Get Reluctant Parents to Talk About Their Finances ]

Monitor financial accounts

Once you know details of your loved one’s finances and have access to accounts, you need to monitor those accounts. Set up online accounts if your parent hasn’t already, including a my Social Security account to keep tabs on Social Security benefits. Then sign up to receive text or email alerts for transactions on bank and credit card accounts to keep track of your loved one’s spending and to quickly catch unusual activity.

Also, get a free copy of your parent’s credit report at AnnualCreditReport.com to get a list of all the lines of credit your parent has and to check for signs of identity theft, such as loans your parent didn’t authorize. Sign your loved one up for credit monitoring to get notifications when there are changes to his or her credit reports.

Better yet, take advantage of a comprehensive safe money monitoring service such as Carefull. Carefull can be linked to bank, credit card and investment accounts to monitor them 24/7 and alert you to unusual transactions, signs of fraud and common money mistakes. It also provides credit and identity monitoring and up to $1 million in identity theft insurance.

Keep tabs on your loved one’s giving

Pay attention to whether your loved one is getting frequent solicitations for donations in the mail. It can be a sign that your loved one’s generosity has landed him or her on mailing lists, and the requests will keep coming.

To limit solicitations, register your loved one at DMAchoice.org to stop receiving marketing mail. If your parent is adamant about giving, come up with a list of organizations your parent feels most strongly about supporting and create a budget for giving. Tell your parent to reference that list whenever he or she gets a call or request in the mail. If the organization that is asking for money isn’t on the list, tell your parent to toss the letter or politely decline the request.

Limit your loved one’s access to cash and credit

If your loved one’s financial decision-making ability has declined, she could easily mismanage the money she has. To protect your loved one from financial ruin, consider limiting her access to cash. 

Accredited financial counselor Vivian Gentry is a court-appointed guardian for one client and a Social Security representative payee for eight clients. To limit her clients’ access to cash, she has two accounts set up for each client. Benefit checks are deposited into one account, then she moves enough cash for expenses each month into a spending account. You could use that method, or give your loved one a cash allowance or a prepaid debit card to prevent them from blowing through all of their cash.

If your parent has multiple credit cards, Fodrini-Johnson recommends paring them down to just one or two to reduce the risk that cards are stolen or that your loved one uses them irresponsibly. Use your power of attorney to close accounts that aren’t being used or to transfer balances. 

Keep detailed records

You should keep detailed records of how you spend your loved one’s money as a financial caregiver. This will help if you are your loved one’s representative payee for Social Security because you’ll have to file an annual report with the Social Security Administration. And it can help when filing tax returns for a loved one.

You also want to keep records to be transparent if you have siblings, Fodrini-Johnson says. In fact, you should send your siblings a statement at least once a year or keep a spreadsheet on a cloud storage service such as Dropbox that your siblings can access.

If you’re paying yourself as part of an agreement to be a caregiver, you need to document your rate and the hours of care you’re providing. Again, this is to prevent suspicion among siblings that you might be mishandling your loved one’s finances. 

Protect your finances

Being a financial caregiver can put a strain on your finances, but you might be able to limit the impact. For starters, ask siblings if they’re willing to chip in to help cover costs so you don’t have to bear all of the burden.

Visit BenefitsCheckUp.org to see if your loved one qualifies for benefits programs that can help save money on medications, health care, housing, food and more. Find out if your loved onehas long-term care insurance that will help cover the cost of care at home, in an assisted living facility or nursing home. Medicare does not pay for long-term care, but Medicaid does. If your loved one has limited income and assets, he might qualify for Medicaid coverage for long-term care in skilled nursing facilities or at home. You might even qualify to get reimbursed through Medicaid if you’re the one providing care for your loved one, Sikorski said. 

Working with an elder law attorney, financial planner or aging life care expert can help you identify strategies you can use to limit your out-of-pocket costs as a caregiver. Don’t hesitate to reach out for help – the benefits could greatly outweigh the upfront cost of working with a professional.

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