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Be cautious before helping seniors with their finances

By Sally Herigstad · Bankrate.com
Wednesday, February 15, 2017
Posted: 5 am ET
Cultura RM Exclusive/Liam Norris/Getty Images

Cultura RM Exclusive/Liam Norris/Getty Images

Helping someone in need with their finances may seem altruistic and may even tap into your inner hero, but if you're not careful, you could find yourself in hot water.

Lending a helping hand with someone's finances sounds easy enough. Your mom, aunt, a neighbor or even someone for whom you provide home health care may ask you to write a few checks out of her checkbook because she’s having trouble seeing her bills. Or she wants you to pick a few things up at the store and hands over some cash or maybe even her debit card. Sure, you'll help out a bit! You probably expect everyone to understand your good intentions -- and even thank you for your trouble.

Unfortunately, it may turn out differently. Unless you are an only child helping your parent, when you start writing checks and bandying about a senior’s credit card, someone’s likely to get suspicious -- and not without reason.

Elder law attorney Patrick Simasko, principal at Simasko Law in Mount Clemens, Michigan, confronts suspicions of financial elder abuse and actual abuse almost daily.

"A nice lady needs help paying her bills and her kids aren't available, so she asks a neighbor or caregiver. Once the kids find out a neighbor or caregiver is involved with their mom’s finances, they immediately jump to the conclusion that the neighbor is stealing all their mom's money," says Simasko.

Sometimes they’re right. "It happened to one of my clients today," Simasko says. "Her husband died a few years ago, so she attends a grief support group. Another member of the support group just conned her out of $10,000. Then a cousin showed up on her doorstep that she hasn't seen in five years who's now asking to borrow $25,000."

Questions to ask before you get involved

Just because a senior asks for your assistance, doesn't mean you should. There’s more to helping with finances than writing a check to the utility company. Ask yourself:

  1. Is it really simple?
    Once you get involved, you may find a lot more going on. A senior may already be in trouble. She may be paying some bills twice or some not at all, or donating money to questionable organizations and people. There may be more bills than cash available. The senior may need someone to sort things out and make tough decisions.
  2. How much help is needed?
    When a senior is still sharp, avoid taking over too much, too soon. Many elderly people are as competent as ever, or need only some occasional advice to keep in control of their own finances. Jeffrey Sklar, managing partner of Sklar, Heyman, Hirshfield & Kantor, a CPA firm, has extensive experience organizing finances for senior clients. "If the senior is housebound but mentally stable, they should take an active role in their finances," says Sklar.
  3. Is a closer relative more appropriate?
    In some cases, you may not be the most appropriate person to take over. A senior neighbor, for example, may ask you to help because you're nearby. However, if she has grown children in another state, think about how it looks to them when they discover you have access to their mom's checking account. Ask if a closer relative should do it. With online banking and electronic bills, an adult child can pay bills from anywhere in the world just as easily as you can.
  4. Do you have the time and capacity?
    If you don't have the time, and are not ready to tackle a complex process with legal implications, do everyone a favor: Decline.

Some help is easy, legal

If the senior needs only limited help, such as sorting out an insurance bill, you can do that without taking special legal steps. "You can get the elder person's permission and call in representing them. There is nothing illegal about this practice, and it actually falls within the terms and conditions of many companies," says Jordan Wolff, owner of Shrinkabill.com and a certified trust and financial adviser.

For minor financial chores, you can be added as an authorized user on a bank or card account. Wolff says, "It is typically a simple process that takes no more than 15 minutes. The senior can add you to his checking account so you can legally sign your own name on the checks."

For anything you do on a senior's behalf, Sklar says: "First, always document the authority that the senior gives you. This protects both parties and shows both are consenting to the relationship."

Getting legal authority

The next step up the ladder of legal involvement is power of attorney. That grants the holder authority to execute a variety of transactions. While you don't absolutely need an attorney to set up a power of attorney (POA), you're throwing the dice if you just grab some online forms and instructions.

If you have any doubts about the senior's competency, or if you think someone may challenge the POA, be sure to see an attorney in your area. You should also get competent, local legal advice if you're not sure what type of POA to get, as there are several kinds, or what it should cover.

If you want to get guardianship, also known as a conservatorship, of the senior, you will need an attorney. Guardianship is what gives you the right to take full control of another's finances and is usually reserved for someone who is incapacitated. That includes handling Social Security benefits, bank accounts, retirement accounts, and anything related to financing and health decisions. A court hearing will be held where you must present medical records and have an attorney present.

Best practices for helping with finances

Once you have the proper permissions in place, you should try to minimize risk for the senior and maximize financial accountability.

  • For monthly bills such as telephone, utilities and even credit cards, Sklar suggests contacting providers and arranging for payments to be directly debited from the senior's bank account. That ensures the lights will stay on while providing a good audit trail.
  • Never sign the senior’s name on checks or credit card purchases. That’s a shortcut, but it can backfire.
  • Scrupulously separate personal finances. Don’t add so much as a candy bar for yourself on the senior’s bill.
  • If you have a power of attorney or conservatorship, you should sign your own name, followed by “POA” or other designation that shows you have authority to sign checks.

Document, document, document

Regardless of the level of authority you have to help a senior or take over their finances, it's crucial that you keep good records to protect yourself.

"I always inform POAs to keep receipts on everything and never ever combine their money with the individual's money. If the person they are taking care of doesn’t have a credit card and the POA uses their own card to pay for things, it's important to keep track of the purchases and payments. It's a good idea to use only one credit card just for their purchases," says Simasko.

When you are entrusted with so much responsibility, it's tempting to rationalize deviations from following the rules. "Don’t borrow money from them," Simasko warns. "The temptation is huge in many situations, especially if you think you deserve it. Sometimes POAs think they deserve the money because the individual's family is never involved or because they plan on paying it back when they receive their next paycheck. This is called financial exploitation, and it is a criminal act, and you can get into a lot of trouble."

Communicate with family members

If a senior has adult children or other close family members, you and the senior should keep them informed. Transparency builds trust. Secrecy only makes people suspect the worst. Monthly reports to at least one other person are a good idea.

"It is always in the best interest of all parties to document everything and make sure that all members are apprised," says Sklar. "The senior should let the family know what is happening. The adult children of the senior should check with their parents to see what is happening with parents and finances."

If there are no family members, or if you believe the adult children are trying to rip off or scam their parents, the best you can do is to be doubly careful to document instructions from the senior and all the decisions and actions you take. If you think the senior has already been scammed or stolen from, contact adult protective services or the local police department.

If you follow the rules and have proper documentation, you should be able to dispel and suspicion and do well helping someone else, without getting in trouble yourself.

See related: Detecting, preventing senior card fraud, abuse, Infographic: The face of senior card debt, Elder financial abuse: How families can cope

Editor's note: This story, "Be cautious before helping seniors with their finances" was posted originally on CreditCards.com.

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