Becoming a financial caregiver: Navigating the complexities with care.

Understanding financial caregiving vs. financial conservatorship.

First and foremost, it’s important to understand what level of financial caregiving is needed. For example, an aging parent may require some extra assistance from their child when it comes to managing their finances and paying bills. Or perhaps they require a bit more.

“Being trustworthy, honest, organized and patient are essential qualities for a financial caregiver,” according to Vanessa Bednara, vice president, private client advisor — Commerce Trust.

Financial caregiving and financial conservatorship are two distinct concepts. Financial caregiving is a consensual role where the individual grants authority to manage their finances, often through a power of attorney link opens in a new window (POA). It’s the act of assisting someone with managing their financial affairs due to illness, age or other circumstances that limit their ability to handle these tasks independently. In contrast, financial conservatorship (or guardianship link opens in a new window in some jurisdictions) is a court-appointed role that removes the individual’s autonomy over their financial decisions.

“To be a caregiver, you need consent — you’re working in concert with the person,” Bednara said. “Often, you’ll see a financial power of attorney coming into play. The conservatorship (or guardianship in some jurisdictions) is much more stringent. It’s court-appointed, and the person loses autonomy. The big difference is the court supervision versus not.”

The choice between these roles depends on the individual’s capacity and willingness to grant consent. The level of caregiving can also change over time as the individual’s needs evolve.

Establishing trust between both parties.

Building and maintaining trust is important to successful financial caregiving. Start by having a conversation with your loved one to determine how they would like their finances to be handled.

“Make them feel comfortable that you’re not pushing or forcing,” Bednara said. “It’s more about honoring their feelings about their money because it’s a big deal to give somebody control.”

The level of transparency can vary depending on the individual’s comfort level, ranging from automatic payments for regular bills to paying bills together or reviewing financial documents together. This open line of communication helps nurture trust, making the individual feel at ease knowing their instructions are being followed as mutually agreed upon.

“Meet them at their comfort level,” Bednara said. “Don’t try to force it on them because then the trust and that rapport won't develop.”

Tips for financial caregivers.

Effective financial caregiving involves several key practices link opens in a new window:

• Talk about finances with the person you’re caring for to get a full picture of their financial situation.
• Involve the individual as much as possible in financial decisions to keep them comfortable and informed, and be sensitive to their need for independence.
• Make a list of all expenses and debts including utilities, mortgage or rent, insurance, real estate taxes and more.
• Document all income, including Social Security, pensions, retirement distributions and more.
• Make a budget that includes income as well as fixed and irregular expenses, such as food, out-of-pocket medical costs or recreation.
• Avoid commingling funds to help prevent legal and ethical complications.
• Become authorized on accounts so that you can speak and make decisions on behalf of the other person. A common way to do this is for them to execute a power of attorney naming you as their agent.
• Maintain detailed records of all financial transactions and decisions to ensure transparency and accountability.
• Don’t forget about taxes — including income taxes, real estate taxes or required minimum distributions from retirement accounts.
• Protect them against financial scams and exploitation, a risk particularly prevalent among the elderly. If the person you’re caring for has cognitive problems, it may make sense to get them a reloadable debit card that you manage, a credit card with a low limit, or an ATM card for a small bank account to limit the financial risk but still give them some independence.

"Since you’re on the front line, it’s part of your duty to protect them against financial exploitation, which the elderly are very vulnerable to,” Bednara said.

Financial caregiving risks and responsibilities.

Managing someone else’s finances can come with significant risks, including financial risks (e.g., losing money or mismanaging funds), legal risks and personal and relational risks (e.g., strained relationships or financial exploitation). Timeliness is also crucial, as missing payments or neglecting financial obligations can have serious consequences.

“The more you can learn about the person’s finances, the better position you’ll be in because you’re able to take action accordingly,” Bednara said.

It’s critical to understand fiduciary responsibility — a legal and ethical obligation to act in the best interest of the individual and prevent any conflicts of interest. Legal documents like a financial power of attorney can also benefit link opens in a new window the caregiver by separating your personal finances from actions you take on behalf of the other person. For example, if you needed to sign a contract or agreement for your loved one, you’d sign as the “agent.” Be cautious about signing contracts or agreements for services on someone else’s behalf; if you sign as the “responsible party” (or as a guarantor/cosigner) you may be on the hook for that expense.

What to do if you’re not up for the challenge.

Not everyone is suited to be a financial caregiver, and that’s okay. Your own personal circumstances may not be conducive to the role, or it simply can become too challenging. But not doing anything also isn’t a great option, so it’s important to explore alternative options.

“You can certainly reach out to a bank, a trust company or someone in the financial realm that can help,” Bednara said.

Navigating financial caregiving with care.

Becoming a financial caregiver is a significant undertaking that requires empathy, patience and a commitment to responsible financial management. By understanding the role, establishing trust and being aware of the associated risks and responsibilities, you can navigate this complex responsibility with care and confidence.

“Have patience and really try to put yourself in their shoes,” Bednara said. “Be empathetic, be patient and just try to meet them where they are at the moment.”