Getting older comes with a lot of unique challenges. One such challenge is a decline in mental abilities. When you've had an aging parent who has experienced a decrease in cognitive skills, then you'll know it can make it challenging to do the simplest tasks. For example, remembering to take medication or caring for a pet can be difficult as people age.
Finances are one of the hardest things to manage as people age, and even difficult for young and mentally capable people. In addition, poorly managed finances can have dire consequences, especially if the individual isn't receiving income from a job. Financial caregivers can help older people handle their finances as they age and lose their mental acuity.
We'll further discuss what a financial caregiver is, the different types, the benefits, and limitations of hiring one, and determining which suits you.
What is a Financial Caregiver?
A financial caregiver is an individual or entity appointed to manage the financial affairs of someone unable to do so themselves. Financial caregivers can be family members, friends, or professionals, such as attorneys or financial advisors. Their goal is to ensure financial stability for those who need help managing their bills, investments, and other financial members.
In other words, a financial caregiver manages the assets, investments, property, and other finances of an individual who cannot do so.
Types of Financial Caregivers
There are a few options for financial caregivers; whichever you choose will depend on your needs and circumstances. Usually, the types of financial caregivers go into two categories-- formal and informal.
Informal Financial Caregivers:
Informal financial caregivers typically are trusted family and friends. Therefore, it's an excellent option for those with responsible and trustworthy family members and friends willing to help with their finances. For example, they can help manage bills by setting up automatic payments, handling investments, and whatever else is needed.
There are three types of informal financial caregivers:
- Conversation Partner: Conversation partners are given access to an overview of your finances and can accompany you when you visit your bank or financial advisor.
- Trusted Contact: This allows you to add a trusted contact to your financial institution if any issues arise. For example, whenever your bank believes you are getting scammed, they can contact the specified contact person to resolve the issue.
- Convenience Account: A convenience account lets you add a trusted person to help you deposit and withdraw money and deposit checks. You will still have complete ownership of the funds in the account.
Formal Financial Caregivers
Formal financial caregivers are individuals or entities with expertise in managing finances. They can be attorneys, financial advisors, or even geriatric care managers. Professional caregivers can help manage finances, provide investment advice, and help with estate planning.
Some examples of formal financial caregivers include:
- Guardian: A guardian is given to someone when a court determines they cannot make financial decisions independently and don't have power of attorney.
- Trustee: Trustees make decisions about money or property related to an established trust.
- VA Fiduciary or SSA Representative Payee: This appoints someone to manage the benefits from The Department of Veteran Affairs (VA) or the Social Security Administration (SSA).
Financial caregivers can often be granted Power of Attorney, which legally allows another person to decide about your property or money.
Choosing a Financial Caregiver
Choosing the right financial caregiver is crucial to ensure your finances are well-managed and protected. Here are some factors to consider when choosing a financial caregiver:
- Trustworthiness: Your financial caregiver should be someone you trust and who has your best interests at heart. For example, you can appoint a trustworthy family member or friend as your caregiver.
- Experience: If you choose a professional or formal financial caregiver, look for someone with experience managing finances for seniors. They should also have a good track record and be knowledgeable about the latest financial regulations and laws.
- Fees: If you are hiring a professional financial caregiver, be sure to ask about their fees upfront. Some may charge a flat rate, while others charge an hourly rate.
Benefits and Limitations
Hiring a financial caregiver can provide many benefits, including peace of mind and the assurance that your finances are well-managed. Financial caregivers can also help manage bills, investments, and other financial matters, freeing up your time to focus on other things.
However, there are also limitations to hiring a financial caregiver. One of the most significant limitations is the cost. Professional financial caregivers can be expensive, and their fees can quickly increase. Additionally, some seniors may lose independence when someone else manages their finances.
Nobody wants to feel lost when dealing with their finances in their old age. However, if problems arise, you may be unable to handle them, which can lead to financial losses. Therefore, planning or appointing a financial caregiver is a great way to add financial security to your old age.