Managing your finances has been a task you have taken on for all of your adult life. While most people manage their own finances, there may come a time when you find it necessary to manage or help manage the finances of someone else, whether it be a family member or friend.
Cindy Clampet, Oklahoma State University Cooperative Extension assistant family resource management specialist, said this situation can arise as a relative or friend ages or if the courts find reason to appoint a financial guardian. A person legally responsible for another person’s money and property is called a fiduciary and the person whose money is being managed is the principal.
“Basically, the fiduciary has four duties, including acting in the principal’s best interest, carefully managing the principal’s money and property, keeping the principal’s money and property separate from the fiduciary and keeping accurate records,” Clampet said. “While many people serve as the physical caregiver of the principal with no legal document, a fiduciary must have a legal document called a Financial Power of Attorney. This gives the fiduciary legal right to make financial decisions in the best interest of the principal.”
An FPOA is a legal document drawn up by an attorney and must be presented to the bank or other places the principal does business when acting on behalf of the principal. Clampet encourages the fiduciary to safely store the original document, but have several certified copies on hand when business needs to be conducted.
“Something to keep in mind is the principal may continue to manage personal money and property even after an FPOA has been drawn up, as long as he or she is still capable to make decisions,” she said. “However, if the fiduciary is court appointed, the principal may no longer make financial decisions. In addition, the principal may at any time cancel the authority of the fiduciary, which would end the fiduciary’s responsibility.”
It is imperative the fiduciary avoids any conflict of interest. Do not borrow, loan or give money to yourself or others and do not change the principal’s plans for how the money will be used after death. Also, the fiduciary should not pay himself or herself for the time spent conducting business on behalf of the family member or friend, unless it is stated in the FPOA or state law allows.
Make a list of the principal’s money, property and debts. Valuables may need to go into a safe deposit box. If needed, change the locks on any property and make sure the property is insured.
“Be sure to pay the principal’s bills and taxes on time and cancel any insurance policies that are no longer needed,” Clampet said. “Find out if the principal is eligible for any financial or health care benefits from an employer or the government and help them apply for those benefits.”
Good recordkeeping is a must and keep a detailed list of all monies received or spent on behalf of the principal. Keep receipts and notes, even for small expenses, and void paying in cash. If a cash payment for something must be made, document the expense.
If the principal is still managing his or her own expenses, but you do have the FPOA in place, keep an eye out for signs of financial exploitation or abuse. Those signs can include missing money; sudden changes in the principal’s spending or savings; making new or unusual gifts to family members or others; changing a will or beneficiaries of a life insurance policy; or even acting fearful of a relative, caregiver or friend.
“If you suspect exploitation, contact adult protective services or an attorney,” she said. “Acting as a fiduciary takes careful observation, organization and awareness of resources, but it’s something that’s beneficial for the person in need of assistance.”
Story by Trisha Gedon