Helping Seniors Manage Money and Finances

Here's how to help an elderly loved one who can no longer manage money or finances.

Many people worry about the ability of aging parents and other loved ones to handle money and financial affairs. The numbers show that these concerns are valid. According to a 1991 study by the National Center for Health Statistics, approximately 5-10% of older Americans need assistance with money management. Another study suggests this number is as high as 29%. Many older people need assistance because of:

mental impairments
visual impairments
physical impairments (like arthritis) that limit the ability to write checks or sign documents
loss of a spouse who handled all of the finances
for immigrants, lack of English skills or familiarity with banking and tax procedures, and
increased vulnerability to scammers.

When elderly people cannot handle daily finances or become more susceptible to financial abuse, the consequences can be severe. Older people who forget to pay bills could lose their home to foreclosure, get evicted from an apartment, risk utility shut-off, or damage their credit. Those who fall victim to scams might get cheated out of large amounts of money or lose their home.

This article discusses informal methods of assisting elder relatives with their financial affairs including figuring out what kind of help is needed, broaching the subject with your relative, and how you can provide assistance yourself.

Sometimes an older person needs a guardian or conservator to take control of finances and medical decisions. Guardians and conservators can be family members or other adults, but must be appointed by the court. To learn more about these more formal methods of handling an elderly person's affairs, see Nolo's article Conservatorships and Adult Guardianships.

Assess the Situation

The first step in assisting your elderly parent or relative with money management is to determine if they need help and, if they do, how much help. Start by talking with your elderly relative. Some seniors will admit they need help and will welcome your assistance. Others will insist they can handle their affairs and so will resist intervention. If your relative falls into the latter category, but you see signs that assistance is necessary, do some investigating.

Talk to your older relative's doctors, friends, and other family members. What do they say about your relative's mental capacity? Have they seen signs of confusion or increasing forgetfulness?
Take a look around your older relative's home. Do you see lots of unopened mail, bills scattered around, or piles of papers? Can the elder show you an organized filing system or describe how they manage their money?
Go through your elderly relative's checkbook, credit card statements, and bank statements. Look for anything unusual, including: double entries for the same item, questionable transfers, or payments to unknown entities.
Ask the elder to explain large payments, or payments to entities or people unknown to you. (Often, the elder's explanation itself will give you an idea of their ability to handle their own financial affairs.)
If the elder pays the mortgage, rent, utilities, or other monthly expenses by check, do you see consistent entries for these items in the checkbook?
Has the elder received account alerts or letters from collection agencies?
Does the elder fail to open and pay bills, cash checks, record checks, or list deposits?
Are checkbooks, bank statements, or other financial documents missing or hard to find?
Does the elder seem confused or forgetful?
Has the elder spent large amounts of money on things such as lotteries, contests, or items from the home shopping network?
Has the elder made unusually large donations to charitable organizations or other groups?
Does the elder know what bank accounts and investments they have?
Has the elder been the victim of a financial scam such as telemarketing fraud, investment fraud, identity theft, or predatory lending?

Broaching the Subject

It is important to broach the subject of financial assistance with sensitivity. Many older people are embarrassed by their inability to handle their financial affairs. Others are afraid that by relinquishing control of money, they are losing a large measure of independence. Some believe that children or relatives want to steal their money.

Often, the best time to discuss this issue is before your elderly parent or relative needs help. Talk about what will happen if and when they need help managing finances, agree on some "trigger" events that might indicate they need help (for example, receiving account alerts), and come up with a plan as to how the two of you will work together if and when that time comes.

Explain your concerns about certain aspects of money management, and point out possible consequences if things remain as they are (such as foreclosure, closed accounts, or damaged credit). Involve your elderly relative in the decision-making process as much as possible. Keep the focus on what they can do and make suggestions only for those tasks that you feel they need help with. Most important, listen to what they have to say about the issue.

These conversations can be difficult and emotional for all parties involved. Before you dive in, consider getting guidance from an expert on elder issues. Your local Area Agency on Aging (AAA) can provide referrals for experts, workshops, or resources in your area. (To find your local AAA, visit the federal government's Eldercare Locator at www.eldercare.gov.)

Taking total or partial control of an older relative's finances can be daunting. Here's where to start.

Figure Out What is Lacking and How Much Help is Needed

Some older people need someone to handle every aspect of their financial affairs, while others only need help in certain areas. If possible, pinpoint exactly where the difficulties lie and then provide help only where necessary. Here are some examples:

An elder can handle paying monthly bills but can no longer make investment decisions. Provide help with investments only and allow the elder to manage everything else.
An elder cannot write due to arthritic fingers. Set up an online automatic payment system for bills and help the elder write checks and sign documents.
An elder has trouble managing spending. Give the elder a monthly allowance so they can do their own shopping and pay bills without losing their nest egg.

Take Stock

If your elder relative has lost track of documents, has failed to pay some bills, or does not know about certain income, investments, debts, or anything else related to their affairs, you'll have to take stock of the situation.

Start by identifying sources of income, bank accounts, and investments. These may include social security benefits, pension funds, stocks, bonds, mutual funds, other investment accounts, retirement funds, rental income, savings accounts, checking accounts, and certificates of deposit. Gather information about debts such as mortgage principal, credit card debt, and car loans, and estimate the elder's monthly and annual expenses.

If, after gathering this information you discover that the older person is in debt trouble or their expenses are greater than their income, you should take immediate action to get the situation under control. (To learn more about how to handle financial troubles, see Nolo's article Dealing With Debt: An Overview of Your Options.)

Protect Against Financial Scams

You and your older relative should become familiar with the many scams targeting the elderly. Look for warning signs that your older loved one has been the victim of elder financial abuse, and help them take measures to protect themselves in the future. (To learn about common scams targeting the elderly, see Nolo's article Elder Abuse: Financial Scams Against Seniors.)

Tools to Help With Financial Management

To help your older relative handle their finances, here are some tools you may want to consider:

Joint Accounts

The elder can add you or another relative to a checking account as a joint account holder. This makes you joint owner of the funds both you and your older relative can withdraw and deposit money and write checks. It allows the elder to maintain some independence and control, and allows you to keep an eye on things, pay bills, and handle some (but not all) financial affairs.

However, before you set up joint accounts, carefully consider the possible downsides:

The new account holder has access to all of the funds in the account. If cousin Billy is the joint account holder, there's nothing stopping him from withdrawing all of the money and using it to remodel his house.
Creditors with money judgments against the new joint account holder can take the money in the account to satisfy the judgment. (To learn more about when creditors can take money in a bank account, see Nolo's Q&A Can a creditor freeze my bank account?)

Single-Owner Accounts With an Authorized Signer

Your older relative can add you as an authorized signer to a checking or savings account, without making you a joint owner. This means you can write checks and withdraw and deposit funds. However, because you are not an owner of the account, all transactions must be made on behalf of the elder. The bank doesn't monitor this, but if cousin Billy absconds with the money, you at least have a legal claim against him. In addition, this means that your creditors cannot get at the money in the account.

Automatic Payments

You can ease the bill paying burden by helping your older relative set up electronic automatic payments or withdrawals for monthly bills. Most utility and telephone companies have automatic payment systems. This eliminates the need for the elder to write checks each month. However, you or the elder should still review the bills to ensure they are accurate.

Representative Payee for Social Security Benefits

The elder can designate you as their representative payee for social security benefits. A representative payee receives the social security benefit checks and is responsible for using the funds on behalf of the elder. Representative payees must periodically complete and file a form with the Social Security Administration (SSA) demonstrating how funds were used. To learn more about being a representative payee, visit the SSA's website at www.ssa.gov.

Financial Power of Attorney

With a financial power of attorney, the elder gives another person legal authority to act on their behalf. Usually the document gives the designated "agent" or "attorney-in-fact" broad powers to handle the elder's financial affairs. However, a power of attorney can also limit the agent's authority to only certain actions, such as paying monthly bills, preparing annual tax returns, or making investment decisions. In most states, if you make the power of attorney "durable," it remains in effect even if the elder becomes capacitated usually a good idea. This is called a "durable power of attorney." To learn more about financial powers of attorney, see Nolo's article Durable Financial Power of Attorney: How It Works.

Getting Professional Help

Consider getting help from a professional if you don't have the time or expertise to assist your loved one with every aspect of their finances. Some professionals to contact include:

Accountants. They can prepare tax returns or keep track of rental income and expenses.
Financial advisors. They can advise you on the best way to invest your older relative's money.
Daily money management programs (DMMs). These programs provide personal financial assistance to elders who can no longer handle certain aspects of money management. DMMs might pay bills for elders, prepare checks for signature, negotiate with creditors, or help the elder maintain financial records. To learn more about DMMs, see Nolo's article Daily Money Management Programs for Seniors.

For help managing all aspects of your elderly relative's well-being, you may want to consult the following Nolo resources: Long-Term Care, by Joseph L. Matthews (Nolo), and Social Security, Medicare, and Government Pensions, by Joseph L. Matthews and Dorothy Matthews Berman (Nolo).

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