Taking care of aging parents is not something most people ever expect to do. But as Americans live longer, the need to help mom and dad with various aspects of Senior living is becoming much more common. That may include being in charge of their finances, and giving you the legal right to act in that capacity is best done through a legal document—a Durable Power of Attorney (DPOA).

 

But unless the DPOA is well thought out, it may cause more problems than good. For example, naming a favorite child to handle the parents’ finances even though that child has addictions, can’t handle their own money, is untrustworthy or just down right dishonest. That opens the door for the person named as the DPOA to help themselves to mom and dad’s bank account and siphon off money for whatever they want. “Oh no, that won’t happen,” you say.

 

According to the National Council on Aging, 60% of all elder financial abuse is committed by family members. A 2019 study by the University of Southern California’s Keck School of Medicine puts the number at 62%. So, if mom and dad appoint a family member as DPOA, the possibility of elder financial abuse skyrockets.

 

Unfortunately, this power to control another’s money is not hard to get, particularly as a person ages, has memory loss or is easily manipulated. A predatory person can persuade an elder to revoke a prior, safe and valid document and then sign a new one with the predator’s name as agent.

 

The Durable Power of Attorney is not monitored by any court. It can be revoked at any time as long as the aging person is competent. And it’s easy to do. You can download a free template from the internet, get the elder’s signature notarized, and as long as the document says it’s effective upon signing it’s a done deal and the new DPOA has a license to steal.

 

I recently had the daughter of a client in her 80’s try to manipulate Sarah (not her real name). The daughter and her husband took Sarah to look at a $400,000, 2-bedroom house. They told Sarah the second bedroom was for her and she could come live with them. They also asked Sarah to buy the house for them. Sarah said no. However, the daughter did convince Sarah to write her a check for $10,000. Fortunately, Sarah had named a reliable non-family member as DPOA several years ago.

 

If you’re a responsible, honest person managing an aging parent’s finances the right way, there are four rules to follow:

  • Use your authority for the benefit of the person who names you as Durable Power of Attorney. That should go without saying. This is the elder’s money, not yours. It’s not a personal piggy bank. Don’t be part of the 60% of family members handling mom and dad’s finances who think it is.
  • Realize that taking care of the finances is more than just paying bills. Yes, you do have to pay for mom and dad’s expenses and care. But as a Durable Power of Attorney, you may also have to make decisions about selling property, opening or closing accounts, paying debts, filing a lawsuit, or making investments to protect the funds. Be conservative. This money has to last a long time.
  • Don’t mix your money with that of the aging person who appointed you. The technical term is co-mingling. If your name is on mom’s bank account, don’t use that account to pay your own bills or expenses. Keep your money in a separate account without the elder’s name on it. Use that account for your expenses.
  • Keep good records. If anyone ever questions where the money went or how it was spent, you’ll have a paper trail, proof, so there is no question that the money was spent solely to take care of your parents. You may even want to give siblings regular financial reports. Transparency can avoid a lot of unpleasant issues and hurt feelings.

 

If someone has been appointed Durable Power of Attorney for mom and dad and you think the DPOA is manipulating them or using the funds for personal use, that person can be removed. It will take legal action, so you’ll want to get advice from an attorney who specializes in elder law about the steps necessary to stop the financial abuse. You can also get information from the  Consumer Financial Protection Bureau.

 

 

Disclaimer:

This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors; all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investments at 1-888-777-0970 or email us at info@alhambrapartners.com.