Safe Banking for Seniors: Choosing a Financial Caregiver

Financial caregivers help you avoid preventable problems, such as missed payments, lapsed insurance or unpaid taxes.

What is a financial caregiver?

A financial caregiver is a person who helps you manage your money and other assets. It’s a collaborative relationship, and it should evolve as your needs change. At first, a financial caregiver will assist you with everyday matters. Then they'll take on more responsibility, based on the kind of support you'll need later in life.

Why should you have a financial caregiver?

A financial caregiver will:

  • Help you with day-to-day finances 
  • Plan for your future financial needs
  • Identify benefits for which you may be eligible
  • Protect you from financial exploitation
  • Serve as your liaison with your bank, brokerage firm, attorney and other professionals

Who's a good choice?

You'll want to consider your decision seriously. Make sure that your financial caregiver is:

  • Someone you know well and trust
  • Someone with the knowledge and common sense to do things right
  • Someone who can interact with family members and financial professionals

Here are some things to consider as you think over whom you want to handle your money:

  • Evaluate the advice—financial and otherwise—they have given you in the past
  • Weigh how they manage their own finances
  • Ask your banker and lawyer what to consider as you make your choice

Who's a poor choice?

Not everyone will make a good financial caregiver. Do not pick:

  • Someone who intimidates you or makes you uneasy
  • Someone with serious financial, legal or health problems
  • Someone with known addictions
  • Someone who wants to control or limit your relationships with others
  • Hired health caregivers or other in-home workers

An evolving relationship

You'll want to start slowly in this relationship. Take it step by step and test out your decision over time:

  • Begin by asking them for advice on specific issues
  • Have them get third-party notification for bank accounts, brokerage accounts and insurance policies
  • Gradually transfer more responsibility to them

Informal arrangements

In the beginning, you can ask them for help with specific tasks like:

  • Reviewing statements and preparing checks
  • Organizing your financial records
  • Filing your tax return

You don't want to keep your financial caregiving situation informal for too long. You'll need more help later, and without a formal arrangement, there's:

  • No authority to handle your finances if you're incapacitated
  • No fiduciary responsibility to act in your best interest
  • No legal record of your relationship

Formal caregiving arrangements

Financial caregivers are fiduciaries. A fiduciary has an obligation to act in another person's best interest. After you choose the right person to be your financial caregiver, ask them to be one of the following:

  • Agent with power of attorney
  • Trustee for a revocable living trust

You can also select them to be your:

  • Social Security representative payee
  • Veteran Affairs (VA) fiduciary

Power of attorney

Power of attorney gives someone the legal authority to act as your agent. When you do this:

  • Specify the agent's powers in a legal document
  • Continue to make decisions independently as long as you’re able

When you reach the point that someone else needs to make your financial decisions, then your agent assumes the powers you've granted.

Revocable living trust

In a revocable living trust, a trustee has the legal authority to manage and distribute the trust assets. They must do this the way that's spelled out in your trust agreement. These trusts work as follows:

  • You can change the trustee or revoke the trust, provided you're able to do so.
  • Upon your death, the trust becomes irrevocable.

Social Security representative payee

If you can’t manage your Social Security benefits, you need a representative payee. They're someone who manages only your Social Security benefits. This person is generally a family member or friend. To become your representative payee, they:

  • Must apply and be approved by the Social Security Administration (SSA)
  • Must use the benefits exclusively for you
  • Must keep detailed records of how the benefits were spent

Your bank will help set up the appropriate account.

Veterans Affairs fiduciary

If you're a veteran and can't manage your benefits, you need a VA fiduciary. They're someone who manages only your benefit checks from the VA. This person is generally a family member or friend. To become your fiduciary, they:

  • Must apply and be approved by VA
  • Must use benefits exclusively for you

Your bank will help set up the appropriate account.

Should you have a joint account?

There are several reasons why it's not a good idea to have a joint bank account with your financial caregiver. It poses some serious risks:

  • Caregiver has no fiduciary responsibility to use the assets for your benefit
  • Joint account holder can empty the account 
  • Joint account holder’s debts can be collected from this account
  • Joint accounts can complicate estate planning

If you must have a joint account, you can limit some of these risks. You can create a limited balance joint account and make it completely separate from your main account. Then use it only for paying specific bills.

Managing risks with financial caregivers

After you've named a financial caregiver, you still need to be vigilant. There are a few reasons why:

  • Unscrupulous caregivers may violate the trust you place in them
  • You may not be aware anything is wrong
  • If you find out something is wrong, you'll want to understand the situation fully—as early as possible

Best practices to stay safe

How can you balance the benefits with the risks? Take your time and follow these rules of thumb:

  • Be skeptical
  • Get outside advice—from your bank, attorney, accountant, family and friends
  • Take action when required
  • Don't blame yourself

Should you have one financial caregiver, or two?

You may think that two caregivers provide checks and balances. However, many have found that it creates confusion.

To avoid hard feelings, you can use one person for Power of Attorney for your finances and another person for your healthcare.

How your bank can help

Your bank can serve you as an additional layer of protection for your finances. They can:

  • Alert you to suspicious activity
  • Help you review statements
  • Answer your questions about financial matters
  • Assist your agent or representative in handling your accounts

The bottom line

A financial caregiver can ensure that your money is used as you want it to be and help you avoid fraud. Yet it depends on both of you to make your relationship work. You need to choose the right person for the right tasks. Then keep a close eye on your finances. Check in regularly and discuss your finances with other trusted advisers. Together, these best practices will strengthen your financial security.

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