Unfortunately, people tend to become less physically and mentally capable of managing their financial affairs as they get older. They may be vulnerable to financial abuse, which can result in the loss of substantial funds and assets. Elderly people also may simply forget to keep up with their bills, leading to the loss of their home or basic necessities of life. If an elderly loved one mentions that they are struggling in this area, you should not hesitate to take action. Even if they assert that they are able to handle their financial affairs, you should stay alert to signs that they may be less capable than they think.
Note that strange payments or uncharacteristic withdrawals may be a sign of financial abuse or scams.
Some common warning signs include irregularities in checkbooks and bank statements, such as large payments to unknown entities, duplicative entries, or missing documents. If you notice that your loved one is getting mail from collection agencies, or that they are ignoring bills, it may be time to start a tactful conversation with them. Any general signs of forgetfulness, confusion, or uncertainty about the scope of their assets and property may be red flags. If they previously have succumbed to a scam, you should strongly urge them to consider seeking help with managing their finances. This conversation can be challenging for both the elderly person and their loved one, but it can be critical in preserving their assets and ensuring that they conclude their life in security and dignity.
Developing a Strategy
Often, an elderly person will be able to continue managing many of their financial affairs, while requiring help only in some areas. You should discuss the specific areas in which they need help with them and limit your assistance (or the assistance of professionals) to those areas so that they do not lose their sense of independence. If you are concerned that they may be vulnerable to scams, you should research the various types of scams perpetrated against the elderly so that you can recognize warning signs and advise your loved one about them.
If their condition has deteriorated to the extent that they are no longer sure about the current state of their financial affairs, you will want to track down the necessary documents and promptly pay any outstanding bills. You should identify the full scope of their income sources, as well as all of their debts and expenses. If they are spending more than they earn or are accumulating substantial debts, you should work out a strategy to reverse this trend.
Some family members do not have the time and energy to provide the level of assistance that an elderly loved one needs. When this situation arises, they should not hesitate to consult professionals who can assist their loved one. Accountants, investment advisers, and daily money management programs are just some examples of external aids that can make it easier for an elderly person to maintain their financial health.
Financial Instruments to Consider
If an elderly person is struggling with managing a bank account, you can ask them to add you (or another trustworthy person) to the account as a joint account holder. The younger person on the account can help monitor its status and keep up with bills. However, you should make sure that any joint account holder is trustworthy because they will have full authority to withdraw money from the account. If they use their authority irresponsibly, they may deplete the elderly person’s resources. You probably will not want to make someone a joint account holder if they have substantial debts of their own. Creditors may be able to access the money in the account to satisfy judgments. To address these concerns, you may want to keep the elderly person as the sole owner of the account and merely add someone else as an authorized signer. This will protect the money in the account from the younger person’s creditors and require them to act on behalf of the elderly person in all of their activities.
Help a Loved One Manage Their Finances
Add a joint account holder or authorized signer
Set up automatic payments
Name a Social Security representative payee
Draft a financial power of attorney
Keeping up with monthly payments can be challenging for an elderly person. You may be able to help them arrange for automatic payments for recurring expenses related to utilities and other essentials of life. You probably should check the bills from time to time to identify any potential errors. Similarly, you can suggest to your elderly loved one that they make you their representative payee for Social Security benefits. This means that you will receive their benefits and use the money on behalf of your loved one. You will need to provide the Social Security Administration with periodic reports on your use of the benefits.
Finally, you may want to consider discussing a financial power of attorney with your loved one. This is a legally binding document that allows a person to act on behalf of someone else with regard to financial matters. A power of attorney often is durable, which means that it remains in effect if the elderly person loses the capacity to grant this authority to someone else. While a power of attorney can cover all of an elderly person’s financial affairs, it also can be limited to certain areas in which they need more help.