Caregivers: Fumble Mom's Money, Go to Jail
Four new guides show you how to manage your parents' financial affairs wisely
By Andrea Coombes | MarketWatch | August 25, 2014
The word "fiduciary" gets thrown around a lot in the world of financial advice. But some of the 42 million Americans who are taking responsibility for their relatives may not realize that they, too, may fall into that category.
Maybe you have power of attorney or you've been named as the trustee under a revocable living trust? These are just two situations where you'll likely need to follow the rules that govern fiduciaries.
What is a Fiduciary?
In the financial-services world, being a fiduciary essentially means that you must act in your client's best interest; in the caregiving context, it means you have to do the same for your aging relative.
(MORE: How Aging Impacts Our Financial Decisions)
Confused? To help you, the Consumer Financial Protection Bureau (CFPB) on Tuesday published four guides aimed at helping caregivers understand how to best perform the task of managing someone else's finances, including a description of the duties of a fiduciary. As one of the guides sums it up, "The law requires you to manage [your family member's] money and property for her benefit, not yours" and to keep the family member's property separate from your own.
Though the tone of the guides is generally encouraging, the materials also include this warning: "If you do not meet these standards, you could be removed as a fiduciary, sued, or have to repay money. It is even possible that the police or sheriff could investigate you and you could go to jail."
(MORE: How to Protect Your Parents From Financial Fraud)
There's a guide for each of the following situations:
- People named as a power of attorney
- Trustees of a living revocable trust
- Court-appointed guardians
- People who represent a recipient of Social Security or veteran's benefits.
How Many Caregivers Manage Money?
AARP, the advocacy group for older Americans, estimates that 42.1 million people were caregivers in the U.S. in 2009. And likely some of those caregivers are also taking care of the finances.
"We know that millions of non-professionals manage someone's money because their family member or friend trusted them and appointed them as a fiduciary in a legal document such as a power of attorney or trust," said Nora Eisenhower, assistant director for the CFPB's Office of Older Americans. Millions more have other relevant financial authority, she added.
"These 'lay fiduciaries' take on the task with the best of intentions. But without the knowledge of what this task actually entails, they may not be able to do a good job," Eisenhower said.
The guides also address the issue of financial fraud committed against older Americans, and offer some tips on what to watch for to make sure your elderly relatives are not at risk. Certainly, fraud is a big problem for seniors who may be isolated or dealing with health issues that make it difficult for them to protect themselves.
Ways to Spot Fraud
Some novel approaches are being tried to combat the problem. For example, in September, several federal agencies called for banks to report suspicious activity that might signal the financial exploitation of their older customers.
Doctors can play a part in preventing elder financial abuse, too. MarketWatch.com's Anne Tergesen described last year a program that has trained more than 3,000 doctors nationwide to keep an eye out for financial abuse, including asking questions along the lines of, "Do you have a will? Has anyone asked you to change it?"
The bottom line: understand your obligations if you manage money as part of your caregiving duties and seek information from the CFPB or another source if you need help understanding your responsibilities.
This article appeared originally on MarketWatch.com. Andrea Coombes is a personal-finance writer and editor in San Francisco. She's on Twitter @andreacoombes.
This article is reprinted with permission from MarketWatch.com. © 2013 Dow, Jones & Co., Inc. All Rights Reserved.