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When Does Someone Need Help With Managing Their Finances?

When Does Someone Need Help With Managing Their Finances?

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When individuals are unable to manage money on their own, it’s common for a family member or professional to step in and offer their support. While this help may not always be welcomed, the right type of assistance can help them maintain the funds they need to cover daily expenses. 

In this article we’ll walk through what signs may indicate your loved one needs help managing their finances and what options you have for supporting them. 

What to look out for

  • Unpaid Bills and Collection Notices: Keep an eye out for unpaid bills piling up or collection notices arriving in the mail. This may suggest that the individual is having difficulty keeping up with their financial obligations.
  • Changes in Spending Habits: Major shifts in behavior, such as excessive shopping, dining out, big withdrawals from cash accounts, or buying excessive gifts for others could signal financial trouble. 
  • Experiencing Financial Exploitation: While anyone can become a victim of scams, those who repeatedly lose money to telemarketing schemes, charitable donation scams, or other predatory activities may need additional financial protections
  • Difficulty Affording Basic Necessities: Struggling to afford essentials they used to be able to cover such as groceries, rent, utilities, or healthcare may indicate financial hardship. 
  • Confusion or Forgetfulness: For older adults, or individuals experiencing cognitive decline, confusion or forgetfulness regarding financial matters can signal the need for a loved one to step in. This might look like your loved one frequently making late payments, being unable to understand financial statements, or making impulsive financial decisions.
  • Navigating a Disability, Injury, or Illness: If your loved one experiences a sudden injury, receives a new diagnosis, or is navigating recovery from addiction, they may struggle to manage their money on their own – particularly if they’re dealing with new expenses. 

Ways to help someone manage their finances 

Depending on the type of support your loved one needs, there are a variety of ways you, another family member, or a professional can help.

Financial Guardianship 

In cases where individuals are deemed incapable of managing their finances independently, a court-appointed guardian may be assigned to make financial decisions on their behalf. This is the most restrictive form of financial oversight and comes with a number of legal guidelines and requirements.

Financial guardianship – also known as “guardianship of the estate” or “conservatorship” gives the guardian the authority to oversee the protected person’s finances, take care of any property, and access money to pay bills. In many cases, the terms of the arrangement require the guardian to seek court approval before making financial actions on behalf of the ward, such as spending money and selling assets.

Financial Power of Attorney

Guardianship may be appropriate when a person is incapable of understanding money or making even the most basic financial decisions, but in many cases, this sort of arrangement is more than what is needed. If an individual can still make decisions and understand the consequences of their choices, a Financial Power of Attorney (POA) may be more appropriate.

A Financial POA is a legal document that grants someone the authority to manage certain financial affairs on behalf of the individual creating the POA. This means a family member, friend, or professional can step in and help with monetary decisions, but your loved one gets to choose who this person is (as opposed to guardians which are court-appointed) and revoke the POA at any time for any reason (as long as they are not incapacitated). 

The specifics of what a POA agent can help with will be outlined in the legal document but can include: payment of bills, managing investments, filing taxes, budgeting, and managing public benefits and insurance. 

Supported Decision Making

Another alternative to guardianship is Supported Decision-Making. Under this arrangement, a person can have a trusted individual or multiple people help explain the impact of financial decisions while still maintaining a level of independence in their financial decisions. 

Supported decision-making does not have a rigid legal structure like a Financial POA or an appointed guardian does, and states take different approaches to protecting individuals in these arrangements. But for any supported decision-making scenario, experts recommend drafting a formal, written agreement that outlines the individuals who are gathering and presenting information to the person making decisions and may define which types of decisions they’ll assist with. A supporter may provide information around life decisions related to financial management, living arrangements, health decisions, finding a job, making purchases, continuing their education, choosing support services, and more.   

If you’re trying to determine whether your loved one needs some form of help managing their finances, speaking with an elder law attorney can be helpful. Should you step into a support role yourself, know that maintaining a healthy familial relationship while handling someone’s financial decisions isn’t without its challenges. Here’s our guide on tips to balance your responsibilities and a close bond.

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