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Managing a loved one’s finances: What you need to know.

It’s a part of life many of us will experience – becoming a caregiver. According to the National Alliance for Caregiving (NAC) and AARP’s Caregiving in the U.S. 2020 report, the number of caregivers has increased by 9.5 million from 2015 to 2020, with one in five being a family member.

However, there are plenty of variables, including conditions that impair memory like Alzheimer’s or dementia, that can get in the way of someone being able to handle one of the most fundamental elements to their livelihood – their finances. If you’re taking care of a loved one’s assets it can become overwhelming, so it’s important to prepare and understand where to begin.

Starting the conversation

First and foremost, it’s important to understand your family dynamics. Some people are open about their finances and others may feel talking about money is taboo. Make sure to assess your loved one’s situation and take inventory of where you may need to step in.

Start early, if possible, before you even need to take over. Understanding that managing another's person's finances is a process and you're on your loved one's timeline."

Constance Moore
Client Care Specialist | Commerce trust

One way to approach the subject is to use personal experiences or something you may have heard in the news to initiate a conversation. Moore adds that you don’t need to do it alone — allow others to help if possible, but avoid power struggles.

It can be a difficult process to release control over finances or end up in a position where someone needs to step in and manage your personal affairs. That’s why it’s essential to make sure your loved one understands you want to ensure their wishes are known and understood. The only way to do that is to truly put yourself in their shoes.

“At the end of the day, remember it’s about them,” Moore says. “You want to be proactive and patient. It’s important for your loved one to be a part of the process.”

Understanding which legal documents you’ll need

Once you have a better understanding of your loved one’s needs, you’ll need to assess which legal documents may be required. A durable power of attorney, for example, allows someone to act on the behalf of another person, whereas a healthcare power of attorney focuses solely on their healthcare wishes. According to the National institute on Aging, it’s a good idea to store these legal documents in one place, such as a filing cabinet, desk drawer or bank safe deposit box. Make sure to keep copies available at home so they can be easily accessible. Common legal documents you may want to consider include:

Furthermore, it’s important for you to have answers to other questions, such as:

  • Does your loved one have a financial advisor or attorney? If so, who?
  • Does your loved one have any investments that need to be managed?
  • Do they have a safe deposit box? If so, where?
  • Can your loved one provide answers to basic medical information, including names of doctors, a current list of medications, or preferred hospitals?
  • What are the log-ins and passwords for key accounts?
  • If your loved one already has the above legal documents, where can they be found?
  • What kind(s) of insurance do they have? Where are the policies located, and what do they contain?

Guy Hockerman, Director of Financial Advisory Services, Commerce Trust, says try to be organized in your approach. Consider creating a balance sheet to understand cash flow and have a complete financial picture of assets.

“If your loved one has done everything they can to title assets in their living trust, a power of attorney for property is important as it relates to other things,” he says. “But the trust document is what’s going to dictate, for example, who the successor trustee is. Knowing who owns what and the titling of those assets becomes important.”

Hockerman adds that if a trust isn’t involved, typically a power of attorney is sufficient in many cases. Additionally, if your loved one doesn’t have a trust and doesn’t plan on establishing a trust, they may want to consider adding a Transfer on Death (TOD) designation to transfer title to assets without going through probate.

Unforeseen expenses and the wild card years

Retirement provides an opportunity to relax, spend time with friends and family and possibly even cross items off a bucket list. Often a loved one’s expenses remain similar to that of their pre-retirement spending and level off or even go down, post-retirement. However, as they get closer to end of life, expensive unexpected expenses can often arise.

“We call these the wild card years,” Hockerman says. “You may not need anything, or you could need a lot, due to a medical condition, private-pay home healthcare, or even costs for a nursing facility.”

Luckily, planning for this unknown period can be eased by ensuring an extra financial cushion. Consider a long-term care policy to safeguard assets and provide an element of predictability.

You don't want to become overly dependent on the market. If you haven't planned ahead of time, sometimes situations arise and the only option you may be left with is to expand your assets. The earlier you can get in front of that, the better."

Guy Hockerman
Director of Financial Advisory Services | Commerce Trust

Be proactive to avoid pitfalls

Stepping into someone else’s financial world can be tedious and quickly become an overwhelming task, but it’s okay to ask for help. For example, a certified financial advisor or bank can help you navigate through the process or manage finances on your behalf. If you’re overseeing a loved one’s estate with the help of family members, be sure to be transparent about the status of their assets to avoid tension and confusion down the road.

Being proactive with these conversations, both with your loved one and with anyone who may be assisting, can alleviate stress and allow you to enjoy more quality time. Start early and talk often — more often than not, when you fail to plan, then you plan to fail.

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The opinions and other information in the commentary are provided as of October 25, 2022. This summary is intended to provide general information only, and may be value to the reader and audience.

Commerce does not provide legal advice to its customers. Consult an attorney for legal advice, including drafting and execution of estate planning documents. This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional.

Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Commerce Trust is a division of Commerce Bank.

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