Managing an Older Person’s Money: A Comprehensive Caregiver’s Guide to Finances

Adult children who serve as caregivers for their aging parents face various challenges. These include issues associated with their living environment, medical matters, and financial management assistance. We provide you with this comprehensive caregiver’s guide to assist in managing the finances of an older parent who receives caregiving support from an adult child. In this regard, we take on specific issues related to money management for an older individual that include:

  • How to initiate a discussion about money management
  • Determine the best course for money management
  • Understand responsibilities for senior money management
  • Coach parents to avoid scams
  • Respect the wishes of your parent

How to Initiate a Discussion About Money Management

There are few discussions needed between an adult child and an aging parent than the ones associated with money and financial management. This discussion needs to be balanced between making sure that you convey your concerns to your aging parent about your mother or father’s financial management needs, goals, and objectives and your parent not thinking you are attempting to assume unnecessary or improper control over his or her money.

Roger Whitney, CFP,  a financial advisor and host of the podcast Retirement Answer Man advises: “Make sure that those conversations are happening before something happens.”

When discussing money management and finances with your aging parent, you need to stress that your objective is not to take control over an important aspect of your parent’s life. Rather, you want to do your best to protect your mother or father from harm. (This includes keeping your aging parent safe from scams, a section of this guide in which we provide detailed strategies to guard your mother or father from scammers.)

There are seven tips to bear in mind when broaching the subject of money management with your aging parent, according to a piece from PBS about talking to your older mother or father about money:

  • Identify and process your feelings before inviting your parent to talk
  • Extend a loving invitation to your parent to talk about finances and money management
  • Ask your parent to begin a conversation about finances during a quiet, calm period
  • Speak specifically about your concerns and thoughts
  • Keep individual conversations brief
  • Maintain your parent’s sense of control
  • Strive for progress and not perfection

Determine the Best Course for Money Management

There are different ways in which your older parent’s money and finances can be managed. These include:

  • Financial power of attorney
  • Guardianship and conservatorship
  • Living trust trustee
  • Representative payee or VA fiduciary

Financial Power of Attorney

This legal instrument gives you legal authority to make decisions about your parent’s money and property. Your loved one can revoke this authority at any time and make decisions for himself or herself.

Your authority under a financial power of attorney is limited to what the instrument establishes and sets forth. Unless your loved one revokes the power of attorney, it ends when they die.

Guardianship and Conservatorship

If a court of law has determined that your parent cannot manage their finances or property on his or her own, the court can directly appoint you as you’re the conservator for your parent. At the same time, it may appoint you as a guardian for your mother or father, which means you also make health and other personal decisions for your parent.

With this appointment, you not only have a responsibility to your loved one but also to the court. This means that you may need to make regular reports to the court and be ready to answer questions if they arise. Your responsibility as a property guardian ends when the court relieves you of your duties or when your parent dies.

Living Trust Trustee

Your parent can create a revocable living trust with some or all of their assets. Your parent can then give you legal authority to make decisions regarding the assets in the trust. Your authority as a living trust trustee ends when your parent ends the trust, names a new trustee, or dies.

Representative Payee or VA Fiduciary

Suppose your parent receives benefits from the federal or state government, such as Social Security income. In that case, a government agency may appoint you as a representative payee or VA fiduciary (the latter applies to Veterans Affairs only).

This designation gives you the authority to manage the benefit checks from the government agency that appointed you. You are obligated to make sure the money goes to take care of the needs of your mother or father. It doesn’t, however, give you authority over any of your loved one’s other financial assets unless there is some other type of authorization in place.

Understand Responsibilities for Senior Money Management

By taking one of the previously mentioned routes to assume management of your loved one’s finances legally, you become what is legally known as a fiduciary. This means that you’re legally bound to act in their best interests. Cornell University School of Law defines fiduciary duty as:

When someone has a fiduciary duty to someone else, the person with the duty must act in a way that will benefit someone else, usually financially. The person who has a fiduciary duty is called the fiduciary, and the person to whom the duty is owed is called the principal or the beneficiary. If the fiduciary breaches the fiduciary duties, he or she would need to account for the ill-gotten profit. The beneficiaries are typically entitled to damages.

If you assume a fiduciary position regarding your parent’s finances, you need to always bear in mind that it’s still your mother’s or father’s money. This is the case whether or not your parent has the capacity to manage finances or not. You must also avoid mixing your assets with those of your parent. If your parent is legally competent, you should always try to involve your mother or father in as many decisions as possible.

Remember that if you act contrary to your responsibility as a fiduciary, you could be removed, sued, or have to repay the money you used for your benefit. You could also face criminal charges, depending on the circumstances.

Coach Parent to Avoid Scams

Older individuals are particularly vulnerable to financial scams. An important role of a caregiver for a person in his or her Golden Years is to protect an older individual from financial scams. A key part of that effort is for an adult child in the position of primary caregiver to coach an aging parent about financial scams and how to avoid them.

Bear in mind that older individuals do not need to have some cognitive impairment in order to fall victim to financial scams. Generally speaking, financial scammers prey on an older person’s emotions. Emotional gamesmanship played by scammers runs the gambit from tugging at an older person’s heartstrings to trying to instill a sense of fear in that individual.

There are nine types of financial scams that older Americans are particularly vulnerable to at this juncture in time. These are discussed in turn:

  • Government impersonation scams
  • Sweepstakes scams
  • Illegal robocalls or unsolicited phone calls
  • Computer tech scams
  • Grandparent scams
  • Elder financial abuse or exploitation
  • Romance scams
  • COVID-19 scams
  • Identity theft

Government Impersonation Scams

Government impersonation and similar scams are among the most common that elderly Americans face. A common variation of the scam is an older individual receiving a call from a person purporting to be an agent of the Internal Revenue Service. When such a call is received, the older individual is advised of any number of allegedly pending matters with the IRS that include:

  • The older person owes money for unpaid taxes
  • The older individual’s Social Security number has been suspended as the result of some alleged suspicious or criminal activity

Following these allegations, the older individual is threatened with legal action that can include a lawsuit or even an arrest and criminal prosecution. The target is told that these types of actions only can be avoided if the older person provides sensitive personal information over the phone or sends money to the scammer via a wire transfer or by loading up a gift card.

Keep in mind that there are also Medicare scams that are similar to the IRS fraud just discussed. In the case of Medicare scams an older individual is threatened with the same types of legal sanctions mentioned a moment ago but also the termination of Medicare benefits.

Neither the IRS nor Social Security Administration is going to call a person to demand payment, banking, or other personal information or threaten to send law enforcement to your house if these demands are not met. If someone owes money to the IRS, that individual will get an official letter directly from the agency.

Sweepstakes Scams

Sweepstake scams are widespread and occur often. Typically, a targeted older individual receives a phone call or email saying they’ve won or have been entered to win a prize. These purported prizes can include anything from lottery money to a brand-new car. The kicker is that the older victim is told that they need to pay a fee to either collect the alleged winnings or to up the odds of winning.

These scammers typically pressure an older individual to wire money or put money on a prepaid debit card. In the alternative, the scammer might tell a target that they need to send a check or money order using an overnight delivery service. The bottom line is that if an older person is asked to pay money upfront to claim a prize of some type, that person is in the line of sight of a scam artist.

Illegal Robocalls or Unsolicited Phone Calls

Illegal robot dialers are able to distribute pre-recorded messages. They can also connect anyone who answers the call with a live person. These types of calls tend to “spoof” their telephone numbers as well. Spoofing a telephone number makes it appear to be a call from your local or other familiar area codes.

Commonly, these types of calls pretending to be from a government agency, bank, or other legitimate agency or business. These calls ask to verify account or personal information, such as credit card numbers, bank accounts, or Social Security numbers.

The easiest way your older parent can avoid these scams is not to answer them in the first instance. In other words, your older parent should refrain from answering calls from unknown telephone numbers. In fact, we are all well-advised to not answer calls from unknown numbers.

The Federal Communications Commission or FCC additionally advises that if you get an inquiry from a company or government agency seeking any type of personal information, don’t provide it. Rather, hang up and call the phone number on your account statement, or from the company’s or agency’s website, to confirm they need something.

Computer Tech Scams

More and more older Americans are using computers and other devices of that nature. As a consequence, they are getting swept up in the net of computer tech scams.

In this illicit scheme, the target receives a call from someone falsely identifying themselves as tech support from some computer company. These calls oftentimes purport to be from a company like Microsoft, Apple, or Dell. The scammer claims that a person’s computer is infected with a virus.

They might request personal information or credit card and bank account numbers to “bill” you for “fixing” the virus. Even sneakier, they can employ “pop-up” windows on your computer screen to trick you into giving them remote access control of your computer and then demand a “ransom” payment to regain control.

If you get a pop-up, don’t click any links, call a phone number, or agree to send money by any means. Unless you made the original contact with a trusted party, don’t give anyone your financial information or control of your computer.

Grandparent Scams

As sinister and bizarre as this sounds, there are also scams in which a con artist attempts to take advantage of a person’s status as a grandmother or grandfather. The reality is that there is nothing quite like a grandparent’s love. Scammers have found a way to take advantage of the love a grandparent has for a grandchild.

These scammers might impersonate another family member or a police officer. Such a con artist tells the grandparent that a grandchild has been detained or arrested. The scammer is apt to say the grandchild is in serious legal trouble. The scammer asks the victim to help by sending money fast, often via wire transfer. After payment, the fraudster often calls again requesting additional funds.

If you get such a call, ask questions only your grandchild would know how to answer or make your own contact with purported authorities.  

Elder Financial Abuse and Exploitation

According to the Government Accountability Office or GAO, elder abuse comes in many forms. These include physical abuse, mental and emotional abuse, as well as financial exploitation. Financial abuse or financial exploitation is defined as any illegal or improper use of an older adult’s funds, property, or assets.

A 2020 GAO report on elder financial exploitation reveals:

  • Costs of financial exploitation are estimated to be in the billions, although comprehensive data does not exist because many instances of elder financial abuse are not reported (or even discovered)
  • $1.7 billion in actual losses and attempts at elder financial exploitation were reported by financial institutions nationwide in 2017
  • Estimated financial exploitation costs could be more than $1 billion in each of the three states alone (New York, Pennsylvania, and Virginia) from 2016 to 2020

Perpetrators of financial abuse can include anyone from strangers and judge-appointed guardians to caregivers and family members.

Romance Scams

The con behind so-called romance scams involves contacting older adults online through a chat room, online dating site, social media site, or email. The scammer then plays on their emotional vulnerability in order to gain trust. After a relationship is established, the purported romantic interest circumstances change – specifically, the scammer needs money.

According to the 2021 U.S. Senate Special Committee on Aging report:

  • The FTC received 8,500 online romance fraud complaints in 2015, but those complaints topped 25,000 in 2019
  • Romance scams reported to the FBI have resulted in one of the highest financial losses compared to other online frauds
  • During the pandemic, there was a rise in the number of romance scams reported to the Committee’s fraud line

Be cautious of someone who tells your parent he or she is in love with your mother or father and cannot live without your parent … and that individual needs money. Keep in mind that your parent may not tell you about their seemingly romantic involvement with a person they met digitally. The fact that a parent may not talk openly about such a connection underscores the need to do your best to remain in good contact with your aging mother or father. By maintaining a solid connection with your aging parent, you will be in a better position to detect any changes in the routines or behavior of your mother or father that might indicate some external influence being brought to bear on your parent’s life.

COVID-19 Scams

The same 2021 report mentioned a moment ago indicates that during the COVID-19 pandemic (and carrying on through this juncture), scammers continued to get creative, inventing new phone and online scams. These include scams involving:

  • Offer of vaccines
  • Contact tracing
  • Virus and antibody test kits
  • Financial relief grants
  • Even miracle cures

When such a scam is being perpetrated, it does not take long before the perpetrator asks the older person to wire money or send money for processing fees or taxes.

If a scammer calls or contacts your parent and wants money or personal information relating to the types of services mentioned a moment ago, it should be presumed it is a scam. Again, these scams continue today.

Identity Theft

With personal information like a Social Security number, fraudsters can access a victim’s bank account, apply for credit, and even file for Medicare or Social Security benefits in the victim’s name. Make it a rule – and make sure your older loved ones know – to never give out personal or payment information by phone, email, or online if you haven’t initiated the contact or aren’t 100 percent sure who you are communicating with at that time.

Respect Wishes of Your Parent

Unless your parent is cognitively or otherwise impaired to the point that he or she cannot make decisions on his or her own, you must respect the wishes of your mother or father when it comes to managing his or her finances. (Of course, that does not mean you need to blithely go along with some scam for which your parent is targeted.)

Ultimately, even if you think you are pursuing a financial management plan that is in your parent’s best interests, it is not your place to determine what those interests should be and choose the route to get there. You need to let your parent remain the final decision maker.

While it’s not always easy to give your parent this leeway and authority, it does mean that you may need to step back (at least to some degree) regarding financial management decision-making. Your ultimate goal really needs to be to come up with an appropriate financial management strategy, educate your parent on what you are proposing, and then allow your parent to make the final decision about what will and will not occur in this regard.

Armed with this comprehensive caregiver’s guide to finances and managing your older parent’s money will be suitably protected. You will be able to ensure that your aging mother or father will be in the best possible position regarding all matters associated with their money, savings, and spending.