A guide to managing someone elseís finances
Friday, March 28th, 2014
Issue 13, Volume 18.
In recognition that millions of Americans act as fiduciaries (i.e., manage money or property) for loved ones, often with no formal training or expertise, the Consumer Financial Protection Bureau (CFPB) has created four, easy-to-understand caregiver guides called "Managing Someone Elseís Money" (at www.consumerfinance.gov).
CFPB Director Richard Cordray notes that there are 50 million older Americans – and millions of aging baby boomers are rapidly approaching retirement. Some 22 million people over 60 have already given someone power of attorney to make their financial decisions, and millions of others – including younger disabled adults – have court-appointed guardians or other fiduciaries.
"In order to protect our seniors, we must educate the caregiver generation," Cordray explains.
Sometimes that means learning more about the financial products and services available to seniors to help them make informed choices. But often, itís the caregivers themselves who must make critical decisions – whether theyíve got power of attorney for a parent with Alzheimerís or have been tapped to manage Social Security benefits for a disabled friend.
The CFPB guides are geared toward people in four different fiduciary capacities:
1. Someone has granted you "power of attorney" to make money and property decisions on his or her behalf.
2. "Court-appointed guardian," where a court appoints you guardian over a personís money and property when they canít manage it themselves.
3. Youíre named as "trustee" under someoneís revocable living trust and have decision-making powers over the trustís assets.
4. "Government fiduciary," where youíve been appointed by the government to manage someoneísSocial Security or Veterans Administration income benefits.
The CFPB cites four main responsibilities for fiduciaries:
1. Act in the personís best interest. For example, a fiduciary shouldnít loan or give the personís money to themselves or others and should avoid other conflicts of interest. The guides provide examples of actions that may pose conflicts.
2. Manage money and property carefully. This includes paying bills on time, protecting unspent funds, investing carefully, and maintaining a list of all monies, properties and debts.
3. Keep your money and property separate. This means paying the personís expenses from his or her own funds, and avoiding joint accounts.
4. Maintain good records. Keep detailed lists of money received or spent on the personís behalf, avoid paying in cash in order to have a record of purchases, and keep all receipts.
The guides walk caregivers through their fiduciary responsibilities and provide practical money-management ideas, such as what sorts of records you should keep, how to interact with banks and other professionals on their behalf, and suggestions for avoiding conflicts with family members and friends who disagree with your actions.
They also provide tips for spotting financial exploitation and avoiding scams. As Cordray notes, seniors "make attractive targets because they often have tangible household wealth – whether it is in retirement savings or home equity – but they may be isolated or lonely or otherwise susceptible to being influenced by a predator in disguise."
Bottom line: Fiduciaries must be trustworthy, honest and act in good faith. If you donít meet these standards you could be removed from the position, sued, forced to repay ill-spent money or possibly even jailed. Thatís why itís important to make sure youíre qualified before accepting the responsibility of watching over someoneís finances.
Jason Alderman directs Visaís financial education programs.†
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