Managing a Loved One’s Finances After a Serious Life Event

Thursday, January 07 at 09:50 AM
Category: Personal Finance

Would you know what to do if you became responsible for handling the financial affairs of a loved one who has serious health issues? What if you were responsible for managing the money of someone who died? If you find yourself in either situation, here are some basic strategies to help you navigate this unfamiliar territory.

Helping an Elderly or Ill Person

Get a handle on the most important financial records. Seek legal assistance, if possible, before procuring documents regarding care of your loved one’s finances. Look into getting a "power of attorney," which is the legal authorization for you to manage matters like finances and health care decisions if your loved one becomes mentally or physically incapacitated. Remember, when you accept authority to manage your loved one’s finances, you have a fiduciary responsibility to use that money for the benefit of your loved one. Ask about a will and a living will, in which a person specifies what treatment he or she wants or doesn't want in case they can't decide for themselves. Know where to locate his or her birth certificate, insurance policies, bank account statements and other important documents. Find out how to access online accounts and passwords, if necessary. Ultimately, you will need to identify all of the accounts and obligations, including debts.

Find ways to simplify their finances. "If you will be handling someone else's bills, consider arranging for automatic or electronic payments, but also remember to keep good records," said Bobbie Gray, FDIC supervisory community affairs specialist. "Also, have regular income from pensions and other sources deposited directly which will save you time and avoid the risk that checks could be lost or stolen."

Consolidating deposit accounts at one financial institution can make it easier to monitor the accounts and avoid low-balance fees, but be sure the accounts stay within the FDIC's insurance limits.* If there are accounts that have not been used in a while but should be kept open, find out how to avoid paperwork and fees associated with "dormant" accounts.

Avoid financial crimes. Help loved ones monitor their bank, investment and credit card statements plus their credit reports (visit*) to look for suspicious transactions. Be wary of phone calls or mail promoting get-rich-quick investments and other schemes. 

Learn more about your duties as a financial caregiver and where you can go for help. Check out guides from the Consumer Financial Protection Bureau (CFPB) called "Managing Someone Else's Money."* Also, the U.S. Administration on Aging helps caregivers connect with organizations that can assist with a variety of problems at*

Managing the Affairs of a Deceased Person

Take precautions against identity thieves who target the deceased. Criminals look in obituaries and other sources for details about deceased individuals they can use to try to open or access accounts. Among the first steps to take soon after a loved one dies is to notify his or her banks and investment firms so they can scrutinize attempts to withdraw funds from the account. Consider reporting the death to the fraud departments of the nation's three major credit bureaus (Equifax*, Experian* and TransUnion*).

Also, quickly contact the Social Security Administration*, pension providers and others who may be paying money to the deceased. It's also good to safeguard the deceased's driver's license and Social Security card.

Locate important documents needed to wind down the deceased person's financial affairs. Examples include insurance policies, the most recent will (an original, not a copy) and multiple copies of the death certificate (needed to apply for death benefits from life insurance policies or Social Security and to access bank and brokerage accounts).

Inventory the deceased's financial accounts.
Stop automatic payments from the person's bank account or credit cards. Inform the credit card issuers about the death so they can cancel the cards and prohibit future transactions.

Check if all deposits are federally insured. Depending on the types of accounts the deceased had, the death could result in some funds exceeding the $250,000 federal insurance limits. However, the FDIC's rules* allow a six-month grace period after a depositor's death to give survivors or estate planners a chance to restructure accounts. 

Know your rights if a debt collector contacts you to pay debts of the deceased. "Any debts typically are paid from the estate of the deceased, not by family members," advised Gray. If there isn't enough money in the estate to cover the debt, it usually goes unpaid, but there are exceptions, such as for co-signed loans. If you have questions, talk to a lawyer. And, if you are contacted by a bill collector seeking to collect on a questionable debt, request proof of the debt and include a copy of the death certificate. 

There’s a lot to consider when managing a loved one’s finances. Hopefully this guide will help you get started.

Information courtesy of FDIC Consumer News.

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.

Tags: Financial Education
Robert Nelson on 1/18/2016 at 10:29 PM
Very good information, however I would have liked reference Mad regarding the handling of a trust.

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