When an aging loved one names you as their financial power of attorney (POA), you become the point person for managing their money and making financial decisions on their behalf. This sounds straightforward enough but involves a great deal of responsibility.
Many family caregivers struggle to simply understand their aging parents’ finances. Then there is the time and effort involved in reconciling their accounts, monitoring investments, applying for benefits, paying bills and tracking spending for budgeting purposes. On top of all that, your own financial obligations don’t go away while serving as an agent under a POA.
“It just gets so overwhelming,” admits Rosanne Rogé, managing director of R.W. Rogé & Company, a private wealth management firm based in Bohemia, N.Y. “You’re trying to take care of you and your family and now you have your parents, their home and their bills, too.”
Regardless of whether your parents still live in their own home, with family, or in a senior living facility, living expenses and medical expenses are constant occurrences that must be properly accounted for. It’s also likely that they receive income from a variety of sources that might include Social Security, pensions, retirement accounts, investments and annuities. There are plenty of moving parts to keep track of.
An individual who has been granted financial POA has a fiduciary duty, meaning they are obligated to make financial decisions that are in the best interests of the person who appointed them. Acting as POA for an aging loved one can be daunting, but a few simple steps can help you simplify this ongoing commitment.
5 Ways to Simplify Your Job as Financial POA
Notify Financial InstitutionsStart off on the right foot by contacting your loved one’s bank(s), investment firm(s) and other financial institutions to inquire about what you’ll need to do to gain access to their accounts and information. Usually, it’s as simple as showing your ID and a copy of your durable power of attorney document (additional documents may be needed in the case of a springing POA), but sometimes banks give family caregivers the runaround even if they produce a valid POA for finances. For example, some entities insist that clients use their own in-house forms before they’ll grant access. It’s best to research these requirements before a POA must be used and familiarize yourself with what to do if a bank refuses a POA.
If your parents work with a financial advisor, don’t forget to reach out to them, too. Request an initial meeting to go over the current state of their finances and discuss ongoing efforts to keep everything on track.
Keep All Funds SeparateThe number one rule for family caregivers who are helping aging parents manage their finances is to never comingle funds. It may seem easier to keep your money and theirs in one place, but the consequences of this decision can be dire. Not only will this complicate your job of accurately tracking their income and expenses, but it can also leave you vulnerable to accusations of theft and financial elder abuse.
Income from benefits programs, such as Social Security retirement benefits and VA pension payments, is typically direct deposited into a senior’s checking account. Rogé says there should be no issue if you are named on this checking or savings account as financial POA. This enables you to sign as power of attorney for your parent(s), but does not actually transfer ownership of the account.
The same step should be taken with regular bills, too. Contact each company to inform them you have POA for finances. You can elect to receive paperless statements, arrange to have the bills sent to your home address, or you might want to consider setting up a dedicated P.O. box for your parents’ bills and other financial documents to keep them separate from yours.
Use Personal Finance SoftwareOne easy way to organize both your own financial information and that of your parent(s) is to purchase personal finance or money management software, such as Quicken. These programs can give you a big picture view of your loved one’s complete financial situation while keeping it separate from your own personal account. You can enter monthly bills, set up payment reminders, create custom budgets and much more. Personal finance software or money management sites, such as Mint.com, also have mobile apps for easy access on the go.
Get Smart About Paying BillsThe internet has greatly expanded consumers’ options for tracking, managing and automating bill payments through apps, websites and personal finance software. According to Rogé, arranging for recurring monthly, quarterly and annual bill payments to be automatically deducted from a bank account or charged to a credit card can give peace of mind to an agent under POA for finances. As long as you include these amounts in your budgeting, you won’t have to worry about incurring interest or fees for missing a payment deadline. In addition to paying bills, many of these services can provide digital receipts and records and prepare financial documents for tax purposes.
Hire Professional AssistanceA financial POA can hire a professional such as an elder law attorney, accountant or daily money manager (DMM) to complete their obligations when necessary and appropriate. Fees for those professional services are charged to the principal (the person who signed the power of attorney). The fee agreement should specifically spell out that the principal and/or their estate is responsible for payment.
A daily money manager can provide a wide range of services, including bill paying, record keeping, budgeting, resolving credit disputes, and routine duties such as balancing checkbooks and sorting mail. Although this title has the word “daily” in it, you might only need their help for a few hours each week. DMMs are typically paid hourly and publicized rates range from $75 to $150 an hour. To find a daily money manager, visit the American Association of Daily Money Managers. This decision can take a lot of tasks off a financial POA’s plate—especially if they are also managing an aging loved one’s health care or managing a parent's finances from a distance.
Family caregivers take on a wide range of responsibilities for their loved ones, but being named financial power of attorney is one job that you don’t have to do alone. Getting organized is the first step, and seeking out assistance will help you free up time and energy for other important tasks like seeing to a loved one’s daily care and your own self-care.
Sources: This small profession aims to fill a gap in the financial services world (https://www.cnbc.com/2020/02/06/this-small-profession-aims-to-fill-a-gap-in-financial-services.html)