Most of us recognize that legal means exist to assume control over an aging parent’s finances when their health declines. We use a legal document called a Durable Power of Attorney for that, so the aging parent will appoint someone to manage money if they become impaired. But that can quickly become a problem.
One of the most common issues we see at AgingParents.com, where we consult with families with aging loved ones, is about control over the elders’ money. A favorite son, who is not good with managing finances himself, is appointed just because the aging parent thinks he should be on the document. He helps himself to Mom’s bank account and siblings get outraged and accusatory. Unfortunately, this power to control another’s money is not hard to get, particularly as a person ages, has memory loss and may be easily manipulated. A predatory person can persuade an elder to revoke a prior, safe and valid document and then sign a new one with the predator’s name as agent.
The document we call a power of attorney can be revoked at any time the aging person is still competent. That capacity to understand what it means to change such an important legal document is an issue in itself. First, we need to understand that this document is not routinely monitored by any court nor any legal process. One can obtain it free from the internet. An elder’s notarized signature is all that is technically required to put it to immediate use, as long as the document says it is effective upon signing. In the right hands, this is a helpful tool to protect vulnerable aging parents from financial abuse. In the wrong hands, it is a easy-to-get license to steal.
However, looking at this from the view of how to manage an aging parent’s finances properly there are basics everyone honestly doing this job should know.
Four Rules To Follow
- Use it only for the benefit of and for the best interests of the person who signed it. It is not a personal piggy bank as some appointees we see using it. They think with the legal power they have over the elder’s money, they can do whatever they want with it.
- Be cautious with all spending. Of course, paying bills and providing for the aging loved one’s needs comes first. The appointee (aka “agent”)may have to also sell property, open or close accounts, pay debts, file a lawsuit, or make investments to protect the funds, and other matters. Conserve assets.
- Do not mix your own money with that of the aging person who appointed you. If your name is on Mom’s bank account, for example, do not use that bank account for your own bills or expenses. Keep your own money completely separate in a different account and use only that one for your own needs.
- Keep good records. Money leaves a trail. If anyone were to question you about what you, the agent, did with the elder’s money, you will have good bookkeeping to help you answer anything you are asked. Update any other siblings or family regularly with reports or spreadsheets at regular intervals. Transparency can avoid nasty fights.
If you are the appointed person and you follow these rules, you are doing this correctly. If someone connected to your aging parent or other loved one appears to have manipulated them, is improperly taking their funds for personal use using a Durable Power of Attorney, it is possible to have them removed. This takes legal action. Get appropriate advice from an attorney who specializes in this area of the law. Courts can help stop the abuse by a manipulator.
A free pamphlet from the Consumer Financial Protection Bureau provides more detail on this subject.
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