Steps to Creating a Financial Caregiving Plan

By Ryan Verfurth on November 28, 2022

National Family Caregivers Month is celebrated each November to recognize the sacrifice made by family caregivers.  The dedication caregivers provide make all the difference in an aging adult’s way of life.  According to the National Alliance for Caregiving (NAC) and AARP¹, today more than 1 in 5 Americans (21.3%) are caregivers.  This totals an estimated 53 million adults in the United States.  

A valuable complement to health caregiving is financial caregiving.  As we age it is vital that we engage our adult children and trusted contacts in our finances, so that we can plan for expected and unexpected life changes.  Sadly, a senior experiencing early stages of mental decline often starts to make financial blunders before loved ones notice cognitive changes.  Possible warning signs include forgetting to pay bills, losing financial account passwords, or falling victim to fraudsters.  These and other errors could significantly impair one’s financial stability and future flexibility.  

It is important for caregivers to put guardrails in place that will protect loved ones from themselves (and others) before an “event” happens.  Financial caregiving involves many tasks which include paying bills, banking, recordkeeping and tax records organization, handling insurance claims, and assisting with investment decisions.  Unfortunately, it is common for financial caregivers to either not fully understand their loved one’s financial situation, or not have the proper authorization to perform required tasks, because a caregiving plan wasn’t developed in advance.  

Here are some important steps in guiding an aging adult and their future caregiver.  

1. Get “Buy In” from the Aging Adult – This is often the most difficult step, and for many will be more of a ‘process’ than a conversation or a single point in time.  The realities of getting older are tough to cope with, and aging parents often insist on holding onto their finances independently.  Stay persistent, remain focused on the aging adult’s needs and the big picture of their goals and ultimate wishes. 
2. Update Estate Planning Documents – Wills and trusts need to be regularly reviewed and updated to properly reflect the aging adult’s financial situation and their current intentions.  A Will dictates who gets what when you pass away.  Trusts define and empower the proper handling (by the trust creator and his or her financial caregiver) of one’s finances during and after life. 

TIP:  The financial caregiver should have access to an original copy of the will and other important documents, along with keys to safety deposit boxes and safes. 

3. Update and Renew Durable Powers of Attorney – The Durable Power of Attorney (POA) is an essential part of every caregiving and estate plan.  It designates a trusted person to make important decisions, especially financial ones, should incapacitation or mental decline become reality. 

TIP:  The POA should be reviewed, updated, and renewed every three years, proactively before it is needed.  

4. Create Medical Planning Documents – Designate someone to make healthcare decisions for you if you are unable to make them yourself.  A Healthcare Power of Attorney names the person you authorize to make medical decisions for you if you are unable to do so.  An Advance Medical Directive (or living will) spells out medical treatments you would and would not want, and your preferences for other medical decisions such as pain management or organ donation.  Consider completing the “Five Wishes” directive to convey medical, personal, and spiritual wishes to your caregiver and your family. 
5. Automate Financial Responsibilities – Enroll in paperless statements and automate payments to ensure that bills, mortgages or rents, insurance premiums, subscriptions, utilities, are paid properly and on time.  This will improve organization and will save the financial caregiver valuable time!  

TIP:  Duplicate payment confirmations can be sent to the financial caregiver to ensure that payments have been received and accounts are current. 

6. Engage A Caregiver in Your Financial Affairs  
   1. Authorized User Access – Add the caregiver as an authorized user on credit cards and various financial accounts.  This will enable the caregiver to smoothly support the aging adults’ financial needs as they change.  It will also add a ‘second set of eyes’ to help ensure that no unusual activity is taking place.   
   2. Add a Trusted Contact – A trusted contact is a formally designated person that can confirm your contact information and health status, and can discuss urgent, unusual financial account activity or other possible red flags including cognitive issues.  It is especially helpful for someone living alone.   A designated trusted contact may help your financial firm move more quickly and decisively when addressing fraudulent activity.  VWG will be contacting our clients to add a trusted contact to their accounts.  
7. Review Insurance Coverages – Be sure to review health and other coverages so the individual is protected during a major health event or other disaster.  Adults need a Medigap policy and prescription drug coverage to fill in the gaps of Medicare Part A + B.  Review homeowner’s, umbrella, (and automobile if applicable) insurance policies to ensure they are up to date and that liability limits are appropriate.  Aging adults who rent should add Renters Insurance, a cost-efficient method to ensure their belongings are covered.  

If you think you’ll be in a caregiving position one day, you are certainly not alone.  According to Pew Research², three-quarters of middle-aged adults with parents ages 65 to 79 expect to care for or give aid to an older family member at some point.  These key financial caregiving protections will help protect your loved one as they age.  Your VWG advisor is always ready to answer your questions and help to facilitate these conversations.  

Disclosures:

VWG Wealth Management is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment advisor. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. All information referenced herein is from sources believed to be reliable. VWG Wealth Management and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. VWG Wealth Management and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. VWG Wealth Management and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. VWG Wealth Management and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.