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6 Things You’ll Encounter When Taking Over A Loved One’s Finances

6 Things You’ll Encounter When Taking Over a Loved One’s Finances

Your parents took care of you for much of your life. It’s not a comfortable moment when you realize that they need you to help care for them.

Ideally, when it’s time to take the financial wheel for aging parents or other loved ones, you’ve already made some advanced planning. If not, the process may be more onerous. Here’s what you need to know.

1. It’s relatively easy if the person’s assets are in a revocable trust

A decade ago, I received a letter from an elderly cousin informing me that she’d met with a lawyer to set up a revocable living trust, and that she wanted to name me the successor trustee. At the time, this was mumbo jumbo to me. But a couple of years ago, when my relative’s health robbed her of the ability to conduct her own affairs, I was very grateful for her foresight.

Because my name was already on her accounts as successor trustee, it was relatively easy to have the banks promote me to “trustee,” which gave me the legal power to manage nearly all her finances. All I needed to do was to provide the banks with a copy of the trust and a signed statement of incapacitation from her physician. Then I was able to set up online banking with my own passwords, giving me the power to pay her bills, deposit her checks, and renew her certificates of deposit as needed.

Having this trust also made settling her estate easier when my relative eventually passed away.

2. A financial power of attorney is helpful, too

Having your assets transferred to a trust is a long process. In most cases, a durable financial power of attorney is almost as helpful, and creating one is much quicker and easier. The person who may need your future help simply fills out a few pages of paperwork and signs it in front of a notary. Their bank may have the necessary forms on hand.

This power may be set up to kick in only if the account holder has become incapacitated, or can be for anytime use; for example, if your mother wants you to handle finances for her while she travels overseas once a year. It gives you the power to sign checks and tax returns, collect and deposit Social Security checks, sell real estate — pretty much everything. The main difference between the revocable trust and the power of attorney, in my experience, is that a power of attorney ends when the person dies, while a revocable trust continues after death.

Even if you already have a revocable living trust, it’s good to also get a financial power of attorney, for several reasons. First, not everyone recognizes a living trust, but pretty much every bank employee is familiar with a POA. Second, your loved one may have forgotten to put some assets into a living trust, in which case the POA can be a backup means for you to handle those assets. Third, there are a few powers, like signing tax returns, that trustees don’t have.

3. It can be hard to talk to Social Security on their behalf

Once I took over my relative’s finances, I noticed that her Social Security payments seemed low for the number…

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