Financial Caregiving 101

As we get older, many of us realize we need some extra help in our daily lives. And whether that means a helping hand at the grocery store, someone to take us to appointments, or at-home personal care, having outside assistance can greatly improve our comfort and quality of life. In fact, most of us have experienced some form of caregiving––according to a survey conducted by Merrill and Age Wave, there are over 40 million people in the U.S. providing care to friends, family and loved ones. While 64% of these respondents provide physical caregiving, 92% said they instead provide financial caregiving.

A financial caregiver is a person who helps you manage your money and other assets, as well as assists with everyday financial matters. This person is different than a financial planner or advisor who will help you invest and grow your portfolio. Financial caregiving can include setting up automated payments for things like mortgages and utilities, assisting with tax payments, and reviewing account statements to prevent fraud. A financial caregiver can also be there to help manage your finances if you become unable to do so.

 

Types of financial caregivers
 

There are many types of financial caregiving, and you can choose a caregiver based on your needs. Let's start with the first broad category, the informal financial caregiver. An informal financial caregiver is someone who can help you on an as-needed basis and does not hold any power over your finances or estate. Here are some examples of what informal financial caregivers can look like:
 

Conversation partner

A trusted relative or friend who can help review financial statements with you. You can also ask your banker or broker to send copies of statements directly to this person.
 

Trusted contact person

You can also add a "trusted contact person" to your brokerage account and/or bank account. This is someone your financial institution can contact in certain circumstances to help protect your account, for example, if they believe you're being scammed. This person does not have access to your money, and they will only be contacted if your institution sees signs of financial exploitation.
 

Convenience account signer

A convenience account allows you to name someone to help you deposit or withdraw money and write checks. Unlike a joint account, someone with signing privileges on a convenience account does not own this money and is not entitled to inherit the account if the owner passes away.

The second broad category is the formal financial caregiver. A formal financial caregiver is best for those who need financial caregiving on an ongoing basis. Also known as a fiduciary, this person has legal authority to act on your behalf and an obligation to act in your best interest. Here are some examples of what formal financial caregivers can look like:
 

Power of attorney

Someone with the legal authority to make decisions about your money or property. A power of attorney agreement can take different forms, such as:
 

  • Durable Power of Attorney – The agreement becomes effective upon signing.
     
  • Springing Power of Attorney – The agreement only goes into effect if you lose the ability to make sound decisions.
     
  • Health Care Power of Attorney – Someone with the authority to make health care decisions on your behalf.
     

Guardian

Someone appointed by a court to manage your money and property, if it's been decided that you are unable to manage your own finances. Importantly, a court may not feel it necessary to appoint a guardian if you were previously designated a power of attorney.
 

Trustee

Someone who makes decisions about money or property in a trust. This person can only manage money or property in the trust, and none of your other assets.

 

Financial caregiving is a partnership

Whether you choose a formal financial caregiver or receive occasional help from an informal financial caregiver, it's important that you realize that this should be a collaborative relationship. This individual is here to help manage your financial life, not take complete control of your assets. This relationship can also evolve if you need more help over time. For example, you might ask a relative to help you review account statements as a conversation partner, but later decide that you'd like to add them as a trusted contact person on the account to help your financial institution protect your finances. You might then ultimately decide to sign a springing power of attorney agreement with them to act as a fiduciary if you're unable to make financial decisions for yourself. On the other hand, if this person doesn't meet your needs as a financial caregiver, you can revisit the relationship and appoint someone else to help you out.

Now that we've established what a financial caregiver is and reviewed some of the different ways they can help you manage your financial life, read on as we explore how to put your plan in action with How to Choose a Financial Caregiver.