The older we get, the greater the chances we will need help with tasks we were previously able to do on our own. But it’s not just age that can make us more reliant on others—illness, injury, and disability can also limit what we’re capable of handling.
Often, the role of caregiver falls to one’s spouse or child. It’s a difficult role by nature, and it can be particularly tough for members of the “sandwich generation” who are simultaneously raising their own children at home.
When we think of caregiving, we think of a lot of physical duties. But today, we want to shine a light on financial caregiving—when a person manages the personal finances of another person who is elderly and/or seriously ill. These tasks may be as simple as paying bills and checking financial accounts for errors, but they can also involve more challenging work such as managing trusts. These responsibilities might fall to you as part of a plan; unfortunately, many people are simply thrust into the situation and struggle to understand what needs to be done.
Today, I’m going to talk to you about financial caregiving. If you’re currently a financial caregiver, or you believe you could become one in the future, you’ll want to read on to better understand the role and the responsibilities.
The information and analysis contained within this article appears for your consideration, but it does not constitute individualized financial advice. Always act at your own discretion.
Featured Financial Products
Table of Contents
Types of Financial Caregivers
“Financial caregiver” is something of an umbrella term that covers several roles.
Depending on the type of caregiver, that person has varying levels of control when it comes to the other person’s finances.
Let’s review some of the most popular types.
Power of Attorney
A person with power of attorney (POA) has the most legal authority. Someone with POA can make financial decisions on behalf of another person.
This term is also broken down into various types, including durable POA, where the agreement becomes effective upon signing; springing POA, in which an agreement becomes active when the other person is no longer able to be trusted to make sound decisions; and health care POA, which grants a person the power to make health care decisions on someone else’s behalf.
POA does have one noteworthy shortcoming: It’s not valid after death. This is a good time to remind you that you’ll need to make legal and financial contingencies for the event of death that are separate from caregiving plans.
Related: What to Do Before Your Spouse Passes Away
Convenience Account Signer
The convenience account signer has less authority than someone with POA but more power than a trusted contact person, which I’ll talk about momentarily.
This person has the ability to make deposits, withdrawals, and write checks. While that sounds like having a joint account, it’s actually different; here, the convenience account signer does not have any current claim to the money in the account, and they won’t necessarily inherit it, either.
Related: What Is the Rule of 55 for 401(k) Withdrawals?
Trustee
Some people choose to put their money and/or property into a trust. The person assigned as trustee can manage money or property in that trust, but not other assets.
Related: REITs vs Private Placements: An Investment Guide
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
Trusted Contact Person
A trusted contact person can be added to someone’s bank and/or brokerage accounts. A financial institution may contact a trusted account person for a number of reasons, including to confirm the account holder’s contact information, confirm whether the account holder is experiencing a health event, or to find out how to reach the account holder (if, say, they changed your address but didn’t tell their financial institution).
Financial institutions might also contact a trusted contact person if it appears the account holder is being scammed.
That said, a trusted contact person does not have access to money or assets in accounts.
Financial Caregiving Tips
Everyone’s finances are unique, so a financial caregiver’s tasks will vary. If the person’s finances aren’t simplistic, you will likely want to partner with a financial professional.
Whether or not you seek help, these are some of the tasks that should be on your to-do list.
Make Young and the Invested your preferred news source on Google
Simply go to your preferences page and select the ✓ box for Young and the Invested. Once you’ve made this update, you’ll see Young and the Invested show up more often in Google’s “Top Stories” feed, as well as in a dedicated “From Your Sources” section on Google’s search results page.
Help Them Budget
Create a list of all income and expenses.
Income may include:
–Retirement account distributions
–Pension payments
–Social Security benefits
–Annuity payments
–And more
Expenses may include:
–Mortgage or rent payments
–Utilities
–Transportation
–Insurance
–Uncovered medical expenses
–Other standard costs.
You can then help the person create a budget that covers all of their fixed and variable expenses. Automate bills whenever possible. When automation isn’t possible, make calendar reminders for payments to be made.
Older adults sometimes struggle to get out of saving mode, even when it’s clear they need to spend more. So you also might need to help the person change their savings habits.
Related: Budgeting in Retirement: Our Step-by-Step Guide
Featured Financial Products
Create a Financial Inventory
Don’t leave any important financial information up to memory. Create a financial inventory of bank accounts, insurance policies, credit cards, loans, annuities, and more. Make sure a beneficiary is listed wherever applicable.
Failure to create a financial inventory and check for beneficiaries could mean your loved one’s money and other assets go unclaimed. This happens more frequently than you might think; in the U.S., billions of dollars of life insurance currently sits unclaimed.
Keep Detailed Records
Keep detailed records of where and why money has moved out of the person’s financial accounts. Additionally, carefully track any money of your own that you’ve spent on the person.
You don’t want to leave any dollar unaccounted for. That’s in large part because it’s simply the responsible and right thing to do. But you also want to cover yourself, lest you be accused of stealing money.
When it comes to financial records, spreadsheets are your friend. A financial advisor is your best friend.
Related: Want to Retire Early? Don’t Make These Mistakes
Plan for Taxes
You’ll need to file the person’s taxes (or more likely, find a professional to do so).
Taxation of senior citizens doesn’t end when they retire. They’re levied on withdrawals from tax-deferred retirement accounts, even for required minimum distributions (RMDs). Social Security is taxable at the federal level; it’s usually not taxed at the state level, but eight states still tax Social Security benefits.
Other common taxable income to look out for is income from annuities, real estate, and selling assets from taxable brokerage accounts.
The good news? There are special tax breaks for seniors the person might be able to claim.
Related: How Is Your Retirement Income Taxed?
Evaluate Their Living Situation
There are several reasons you should talk to your loved one about whether their current living situation still makes sense:
–To start, housing is one of the biggest expenses in most people’s budgets. If they are currently living in a too-big home, it might make sense to downsize their home to something more affordable.
–They also might want to move closer to where you live or even move in with you or another family member.
–If their health is quickly deteriorating, a nursing home or another specialized facility might make the most sense.
Related: Should Retirees Move? 10 Considerations
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
Understand Their Medicare Coverage
There is a good chance your parents or whoever else you’re the financial caregiver for is using Medicare. It’s important for you to understand what their health insurance will pay for and what it won’t.
If your loved one has Medicare, it’s either Original Medicare or Medicare Advantage. Coverage is different depending on which type they chose (and if a Medicare Advantage plan, the specific plan they chose).
Often, Medicare Advantage will pay for several expenses Original Medicare doesn’t cover, such as dental and eye exams. On the flip side, while Original Medicare users can go to any doctor or hospital that accepts Medicare anywhere in the country, Medicare Advantage plans typically only let people use doctors and providers within the plan’s network and service area for non-emergency care. (In other words, if they use an uncovered doctor or hospital, it could become pricey.)
If the person is old enough for Medicare but hasn’t yet applied, you should help them enroll as soon as possible, lest they be forced to pay Medicare’s late enrollment penalty.
Understanding Medicare now can save you a headache later when medical bills start rolling in. For more information on the different parts of Medicare, consider checking out our guide to types of Medicare coverage.
Related: Medicare FAQs: Your Questions Answered
Avoid Combining Assets
While some people might suggest getting joint accounts and commingling your assets, it’s actually easier to keep everything separate to prove you aren’t exploiting, say, a parent or trying to steal anything from them.
Commingling can have other unintended, negative effects. For example, if you have a teenager and they apply for collegiate financial aid, the funds in a joint account would be included in your assets. Those funds would also count as yours if you were getting a divorce.
Related: 10 Frugal Habits That Make Retirees’ Lives Better
Featured Financial Products
Don’t Forsake Your Own Financial Security
One of the most important elements of becoming a financial caregiver is to not forsake your own financial security.
You’ll likely spend both a lot of time and money on the person you’re financially caregiving for. Make sure your own finances are protected and that nobody can claim they belong to someone else. Be cautious about signing any contracts for services on behalf of another person; if you agree to be the responsible party, you might end up liable for the expense.
Does your caregiving go beyond just the financial realm? You might be able to get paid for your caregiving through a state Medicaid program if the person you’re helping already receives Medicaid. Additionally, several programs help veterans pay for caregivers (even when the caregiver is a family member).
Is the person not on Medicaid or a veteran? Some long-term care insurance policies let families be paid for caregiving.
In short: If caregiving is putting your own financial wellness at risk, don’t hesitate to see if you can get paid for your time.
Related: You May Want to Skip These Popular Retirement Rules
Want to talk more about your financial goals or concerns? Our services include comprehensive financial planning, investment management, estate planning, taxes, and more! Schedule a call with Riley to discuss what you need, and what we can do for you.
Related: 15 Best Long-Term Stocks to Buy and Hold Forever
As even novice investors probably know, funds—whether they’re mutual funds or exchange-traded funds (ETFs)—are the simplest and easiest ways to invest in the stock market. But the best long-term stocks also offer many investors a way to stay “invested” intellectually—by following companies they believe in. They also provide investors with the potential for outperformance.
So if you’re looking for a starting point for your own portfolio, look no further. Check out our list of the best long-term stocks for buy-and-hold investors.
Related: Mega-Yielding Funds You’ve Never Heard Of
You’ve assuredly heard of mutual funds and exchange-traded funds (ETFs). But how much do you know about closed-end funds (CEFs)?
If the answer is “not much,” don’t worry—they get a fraction of the attention of those other investment funds. But you should also learn more about them. That’s because CEFs have a host of enticing characteristics, including that they frequently pay mammoth yields. Check out our list of the best CEFs, many of which pay in the high-single and even double digits.
Please Don’t Forget to Like, Follow and Comment
Did you find this article helpful? We’d love to hear your thoughts! Leave a comment with the box on the left-hand side of the screen and share your thoughts.
Also, do you want to stay up-to-date on our latest content?
1. Follow us by clicking the [+ Follow] button above,
2. Subscribe to Retire With Riley, our free weekly retirement planning newsletter, and
3. Give the article a Thumbs Up on the top-left side of the screen.
4. And lastly, if you think this information would benefit your friends and family, don’t hesitate to share it with them!
