Senior woman writing checksIt’s no surprise to family caregivers that caring for a loved one can involve more than just medical concerns. As your loved one ages, caregiving responsibilities can expand to include personal finances and planning for the future. Mom and Dad may be willing to share access to their bank accounts with you, so you can pay bills and manage expenses, but the obvious solution isn’t always the right one. Joint bank accounts, as the Casa Companion Homecare blog discussed last week, aren’t the best solution to this problem. Depending on what you, Mom, and Dad are trying to achieve, there are several options choose from that will give a family caregiver the right access to a loved one’s finances. This week, we discuss the alternatives to a joint bank account available to family caregivers and their loved ones that will permit access to financial accounts and assets in ways that protect everybody.

Much like the different types of companion homecare available, there are different levels of financial involvement in Mom or Dad’s finances. Each goal that your loved one sets has a different solution that can be set up relatively easily with financial institutions, or with downloadable legal forms. The three most common arrangements that seniors want to make for their finances:

Goal Number One: Mom wants her caregiver to be able to pay bills on her behalf.
Solution: In lieu of establishing a joint checking account, Mom can grant her caregiver signature authority on her checking account. This will give the caregiver authority to write checks and make withdrawals from the account, but doesn’t grant the full permissions of ownership. The authority only lasts as long as Mom is alive, and best of all, the funds in the account aren’t available to the caregiver’s creditors for any reason.

Goal Number Two: Dad would like to transfer access to his bank account immediately upon his death, usually to a child, avoiding probate or the estate settlement process.
Solution: Dad can add a “Payable on Death” provision to his bank or stock account. This provision is like a life insurance beneficiary designation, and the funds or assets in the account are paid directly to the beneficiary, bypassing probate. This works best if accessing the account to pay bills or otherwise manage affairs during Dad’s lifetime isn’t necessary, since this method doesn’t give authorization to withdraw funds while Dad is alive. However, the “payable on death” provision resolves the problem of transferring ownership without having to go through probate, giving the child access to funds immediately to handle expenses that may come up right away.

Goal Number Three: Mom wants to create a safety net by giving her family caregiver control of her funds and resources in the event of a medical emergency or eventual medical incapacity.
Solution: Depending on the state, seniors can grant a special kind of Power of Attorney (POA) that only goes into effect when a medical practitioner signs a document stating that the senior isn’t capable of handling his or her own affairs. California permits this type of “springing durable power of attorney”, but it’s not limited to medical incapacity. In California, this kind of POA [get link] can be structured around any kind of contingency which would activate the POA should it go into effect. One obvious benefit is that setting up this springing durable power of attorney obviates the need for a court proceeding to determine legal capacity. One disadvantage is that the person given the POA has complete and unrestrained access to all of Mom’s financial accounts while the POA is in effect, so consulting a lawyer to stru3cture the POA is a good idea.

There are effective solutions that will permit family caregivers to help loved ones with their monthly finances, and preserve their financial stability? No matter what the goal, there is a safe, legal way for a caregiver to guarantee that a loved one’s funds are used in their best interests, without compromising their personal finances in the process. If you missed Caregivers Cheat Sheet: Joint Bank Accounts 101, Part 1, take a look at why joint bank accounts can be a dangerous choice.