From making sure bills are paid on time to general bookkeeping – and even monitoring for fraud – financial caregiving encompasses many tasks that help protect and manage the daily lives of your senior loved ones. 

But what else is involved in financial caregiving? If you’re a family caregiver, you may have been providing help to aging parents for some time now, or you may need to step in and take over some (or all) aspects of financial management as a loved one’s health or capability declines. Financial caregiving means making important decisions—and it can feel overwhelming. Learn more about what’s involved in financial caregiving, what steps you might need to take next, and where to get the help and information you need. 

Start financial caregiving before a crisis

“Life care planning and management is imperative because we wait – at times, we wait too long – and then you end up being in a crisis situation,” said Vanessa Bishop, founder of Elder Care Consultants. “Health care and just growing old requires substantial funds,” she explained. “It can very much require substantial funds even with an amazing support network and family.” 

It may seem inappropriate or intrusive to initiate conversations about finances when your parents or other loved ones are doing fine on their own. But waiting until a crisis makes everything more difficult. Watch for important signs you should begin to provide financial caregiving, and be proactive.

“I think the more knowledge that you have earlier on, the better. And it’s never too early to start to have those conversations; it’s important to understand the resources out there,” Bishop added.

The first 3 steps in financial caregiving

1. Talk about Finances

Financial caregiving always starts with a conversation. And while  an “all-or-nothing” type of conversation is often met with resistance, a better approach is to discuss financial caregiving as a process. If you don’t wait until a crisis, the process can be smooth and steady, rather than urgent and extreme. Be ready to have transparent and honest conversations about finances well before it becomes necessary. Starting with  topics such as online scams, phishing emails and setting up fraud alerts can open the door to more in-depth conversations about life care planning.

2. Assess the financial situation

When you begin to provide financial caregiving, evaluate the overall financial situation of your loved one, including income, costs, debts, their estate, etc. Who do they bank with? Do they work with any financial advisers, financial planners, brokers, accountants? Assess how they manage their finances, handle investments, and manage regular bills and expenses. Once you have an overall understanding of their current financial situation, you can then plan ahead.

3. Make a plan of action

When you begin to provide financial caregiving, you need a plann. This can include:

• Offering help with financial tasks
• Establishing  power of attorney and/or power of attorney for health care
• Notifying any pertinent financial institutions of POA status
• Assessing the overall financial situation
• Creating household budgets 
• Monitoring financial accounts
• Setting up fraud and suspicious spending alerts
• Setting up automatic bill payments
• Organizing and maintaining detailed records
• Involving financial professionals to manage finances
• Calculating health care needs, both short- and long-term
• Determining insurance coverage and gap needs
• Discussing desires for medical directives, end-of-life care and funeral arrangements

Providing this type of care is complex and multi-faceted. Having open conversations and planning ahead of a crisis situation is key. 

The legal side of financial care

“Sometimes seniors wait, then they can’t do power of attorney forms,” Bishop said. “They’re too cognitively impaired. Again, it’s never too early to start to have the conversation with the senior, what their wishes are from medical directives to end-of-life care to funeral arrangements. Do they understand what a ‘do not resuscitate’ is? It’s just never too early to have that conversation with them.”

From wills and trusts to medical directives and power of attorney, both you and your loved one need to have a firm understanding of what these legal documents provide. For more details about the legal issues and considerations of financial caregiving, see our guide. 

Make sure to educate yourself about the primary legal documents relevant to financial caregiving for seniors: 

• Power of Attorney (POA): This is a legal document that names a person to act on the behalf of someone else. It can be broad, restrictive or limited to specific duties regarding decisions about finances or property. A Durable Power of Attorney stays in place even when the individual assigning the power becomes mentally incapacitated. See more details here. 
• Durable Power of Attorney for Health Care: Also known as a health care proxy, this is a legal document that names a person to make decisions about someone else’s health care in case they’re unable to make those decisions themselves. 
• Living Will or Advance Directive: This legal document alerts medical professionals and family to the treatments someone wishes to receive or refuse, which only goes into effect under specific medical criteria. 
• Living Trust: This is a legal document that can distribute assets during a person’s lifetime; a trust does not undergo probate.  
• Will: A will is a legal document that distributes assets after a person’s death as well as names guardians for any minor children; a will must be presented to probate. See our guide to estate planning by state for information about making a legal will online. 

Organizing and managing finances

When it comes to organizing and managing finances, it’s vital to have an efficient system in place. Make sure you keep detailed records, and consider limiting access if necessary. 

Gather key information

You need to know where your loved one keeps any and all important documents, and make sure you have access to the following information:

• Banking details: checking and savings account details, login information, contact information for local branches
• Insurance policies: policy numbers for health, home, long-term care, life or auto insurance, and contact information for their agents
• Credit cards: statements, contact information for reporting lost or stolen cards
• Social Security or disability: records of benefits 
• Bills: statements for utilities, cable/internet, credit cards, department stores and any outgoing costs (note any automatic payments)
• Loans: payment books, contact information for customer service, loan numbers, online account login details.
• Tax documents: federal and state income tax filings for the last three years (and any receipts)
• Legal documents: titles/deeds, mortgages, wills/trusts, pension statements, 401(k) or IRA retirement accounts, and contact information for any points of contact 

Keep financial records

Be sure to keep your loved one’s financial records for the last three to six years, and create an organized system if your loved one does not have one in place. You might want to digitize the system as well, being sure to create accessible backups and hard copies. Make sure to keep your loved one’s financial records completely separate from your own.

Manage financial access

You might start with managing general financial tasks – such as paying bills online – before managing all financial responsibility. As the needs of your loved one develop, you’ll need to make decisions about who can access bank accounts, credit cards and sensitive financial information. Losing financial independence can be a very difficult process for your loved one.

Once you begin to provide financial caregiving, Bishop said, “You want to make sure the bank knows that there is a financial power of attorney, that there is documentation that the person cannot medically handle their financial affairs. Because sometimes the bank will say, ‘I don’t have anything on file. I’m not going to disclose information to you, or lock it, or allow you to put your name on the account.’ I think it’s very important for the senior and their authorized agent to have an understanding of when they step in.” 

Protecting against financial fraud

Financial fraud is extremely prevalent, and it ranges in scope and cause. Elderly financial abuse can be caused by a stranger on the phone, a scam on the Internet, or someone you know taking advantage of your loved one. Here is what you need to know:

• Your loved one is a potential target. If they fall prey to a scam, help them understand and be empathetic, as feelings of fear and shame are common.
• Involve only trusted family members in financial management. Be aware of any family members or family friends who might take advantage of your loved one. 
• Keep up-to-date on local scams. Talk to your loved one about common scams, especially those that involve unsolicited phone calls claiming to be from banking institutions, the IRS, Medicare/Medicaid, and other scams that use these tactics.
• Discuss online safety, such as not divulging location or other specific information online.
• Talk to your loved one specifically about online scams and phishing emails. 
• Limit access to online financial accounts if necessary. 
• Set up fraud alerts and suspicious spending alerts.
• Set up credit alerts.
• Be aware of new “friends.”

Financial caregiving and budgeting

Creating a budget is extremely important in providing future financial security to your loved one. After assessing their overall financial situation, you can look at a long-term budget. Household budgets need to factor in living expenses, as well as ongoing care and potential emergency health care costs. Compare your loved one’s assets against their projected expenses, determine if there’s a gap, and try to fill the gap without jeopardizing your own financial future. Make a budget for what you and any other family members can contribute, and be sure to track your expenses. 

Short-term situation

Listening to your loved one is key, Bishop said: “Really listen to what they say. Sometimes we have seniors that say, ‘The house is too much, I’m tired, I’m tired of managing the house and I’d rather move.’ Life care planning and management is listening first.” 

In the short term, here are important considerations:

• Is my loved one able to care for themselves independently?
• Are they declining slowly or rapidly?
• What are the current costs of their health care?
• What are any projected costs of their health care?
• Does my loved one want to downsize?

Long-term care

When assessing your loved one’s financial situation, your budget needs to factor in long-term care. While your loved one might be able to care for themselves now, this could change at any time. Be sure to also consider any out-of-pocket costs – such as custodial care expenses – and how much might be covered by long-term-care insurance.

Managing property and assets

Part of financial caregiving is an accurate assessment of all of your loved one’s property and assets. From maintenance costs to the ability to liquidate assets to offset the cost of care, you need an understanding of the full picture. 

Thinking about insurance

Crunching the numbers to really understand the true cost of health care is crucial.  Make sure you understand exactly what your loved one’s health insurance covers, what it doesn’t, and what the costs are. You may also have insurance options that haven’t been considered. 

Insurance for seniors

The main expense for older adults is health care, especially prescription drug costs. If your loved one has a health insurance policy, it’s extremely important to understand all aspects of the policy. 

Research free programs as well as federal and state insurance programs for those enrolled in Medicare and/or Medicaid, which include: 

• Program of All-inclusive Care for the Elderly (PACE)
• Home and Community-Based Services (HCBS)
• Medicare Part D (optional drug coverage)
• Medigap (supplemental insurance)
• State Health Insurance Assistance Program (SHIP)
• Women’s Institute for a Secure Retirement (WISER) 
• State Pharmaceutical Assistance Programs (SPAPs) 

Insurance for caregivers

When providing financial caregiving and other care to a loved one, consider all options to help offset the cost of care. Meet with a tax adviser to explore tax deductions; you may be able to claim your loved one as a dependent. If your loved one does not have long-term life care insurance, or if other insurance policies do not cover the necessary costs, you might be able to exchange life insurance policies for cash value to pay for care. 

Protecting your financial health

Being a primary family caregiver can have serious financial consequences. Be realistic about the cost of care; it’s not something you can simply add to your household budget without major repercussions. Start by fully understanding the financial situation of your loved one, and then explore all your options. 

Be sure to keep your financial records separate and track all spending pertaining to financial caregiving. Look into additional resources, such as Veterans Affairs and Medicaid programs that pay family caregivers, and consider consulting an elder-law attorney to fully understand how becoming a financial caregiver can affect your financial health.