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Preparing Adult Children to Assist with Finances

Preparing Adult Children to Assist with Finances

  • March 10, 2022

Jonathan Krause
I’m having you on today because I wanted to touch a little bit about the role that adult children can play in assisting their parents with finances as they get a little bit older in years. So the first question I would have then is how best do we prepare adult children to act on their parents' behalf if they get to a point where they need to do that?

Sarah
Oh, one of the best things that can happen are just communication; conversations with the kids. So that they know which of them they've been hoping is going to step into that role, making sure that the questions are answered, having an understanding of the documents that are in place, the plans that are in place, knowing what professionals you use, these are all things that can really make it easier for a child to kind of step into that role. Having Power of Attorney documents, in particular, can be incredibly important, just because you're married, or just because you're a child of another person doesn't mean that you have an automatic ability to do things on their behalf, to sign things for them, or to access things for them. And all of these things require documentation. And if a person has lost capacity entirely, and they can't find documents anymore, you're kind of left with whatever they signed previously. And if they haven't signed anything previously, then the only thing that you're left with is court action, which can be time-consuming and expensive. So, making sure that you have basic power of attorney documents, and that you've talked to your kids about what it is that you're asking them to do, giving them information, those are kind of the key points, I would say.

Jonathan Krause
The kids and obviously they're adults, need to be understanding that this is not a negative, this is actually a positive because, in the long run, you're going to be helping to protect your parents.

Sarah
Oh, absolutely. And they're going to be able to do a much better job. If they understand that first, they have a job to do. And second, that they understand what it is that their parent wants. That, you know, what kinds of things are they supposed to be maintaining? What choices have you expressed that they need to make sure they're communicating correctly. So they're going to feel better about what they're doing. And they're going to be able to do it much more effectively. If they understand your wishes beforehand.

Jonathan Krause
What's the process like to pass along financial Power of Attorney?

Sarah 
Creating a power of attorney is, basically the parents in this situation, signing a document that says these are the people that I trust. And these are the powers and authorities that I give them to act on my behalf. So it's essentially a list of authorities where you're saying whether or not I have capacity, you can do them so that it's only after you lose capacity, the child has the ability to act, or most are done immediately effective, which means that, as soon as the parent asks for help they can get it, it doesn't mean that they're giving up the ability to do things themselves. They're just asking for somebody else to also have that authority. And then you have to make sure that you're addressing all of the things that you want them to be able to do. Do you want them to be able to write out checks for you to pay bills? Do you want them to be able to file taxes, in which case they're going to have to sign for you. A big one is Long-Term Care. If you're concerned about if you need care and assisted living or in a nursing home, and you want somebody to be able to do some planning for you at that time, you have to very specifically address that in your Power of Attorney document. And like I said, it has to be in advance of needing care or losing capacity. If you are incapable of signing a new document at that point, you have to make sure you have it in there beforehand. I mean, the most difficult meetings we have with families are the ones where there are things that we could do, but because we don't have anybody that has the authority to sign anymore, we can't actually implement any planning. And, we don't like to be in a position where we're powerless to help people. But that's kind of the result if the person hasn't signed documents already, and now they've lost capacity. Guardianship is the alternative. So going through the court process of having somebody put in place to do things for you. But it's a little different in terms of what authorities can be granted and what kind of oversight is provided the types of reports that need to be done. So it's a different experience and different sets of authorities that you get, you may not be able to get all of the things that you would have wanted your child to do. So it's important that you do this in advance and that you're specific about it and that you let the child know the fact that they're in this position, what authorities are given and where the documents can be found.

Jonathan Krause
How do you make sure that children know what accounts their parents have, and then how to access them as well?

Sarah
Part of it is going through things with them and that can be difficult. I have lots of clients where they're not really comfortable giving financial statements or access to accounts or things like that to their kids, which is perfectly fine. But that they have to know at least where to find things, even if you're not giving them information about like account balances or something, as long as they know which financial institutions who do business with, if you have a financial advisor that can be key, if they know that there's somebody that they can call to find out, you know, how are you investing things, where should I get money from, what account should I be using, the job of your power of attorney is to try to maintain your situation as best they can. So being able to kind of maintain the routine of how you do things financially. But in order to do that, they need to have a good understanding of it. Knowing what other professionals to use if you have an accountant or an attorney that you work with. These are all people that would be helpful for them to know. So, having a list of them, where your child knows who they are even better is making an introduction, we do a lot of family meetings where we meet kids and interact with them. I tell my clients all the time, it's much more likely that your kids are going to call me if something happens if they've interacted with me in person. So even if you're not comfortable sharing, like account balances, at least letting them know where you do banking, where your financial assets can be found when they need to, and who you work with, can be important to them being able to step into that role. And there might be things that you set up, that they're not aware of that could be disrupted if they start doing things for you, and they don't understand it. So, for example, if you have one bank account that you plan on going to a charity, or one account that you plan on going to the grandkids or something like that, and the child doesn't know that they may inadvertently just start using that account to pay for things. So you know, they've effectively disinherited that charity or those grandkids, simply because they didn't know. So, communicating is important. In order to make this go well, and the child that steps into this is going to have to figure out a lot of stuff at that point in order to try to do a good job. So, making that easier by communicating, giving them information, at least as much information as you're comfortable with will make it so much more likely they're going to do a good job for you.
 
Jonathan Krause
We're talking to Sarah Kons from Hooper Law Office here about Power of Attorney, Financial Power of Attorney, and turning that over to their kids. Now one other thing that children should be prepared for is to help their parents prepare for the cost of Long-Term Care. What tips do you have there?
 
Sarah
Well, you have to have a very specific authority or provisions in your Power of Attorney document that explicitly states, I want my Power of Attorney agent to be able to deal with long term care, to do planning around it, to do preservation of assets or to kind of restructure things to make my assets last as long as possible. It's a different type of planning and a different type of authority that in general, you can't get through the guardianship process. So you have to have it in your Long-Term Care document first. I can tell you that the statutory state form that you get off the internet doesn't include the US authorities. So you have to make sure that they're stated in there, there isn't one thing that you're looking for, there's not like a magic word or something that I can tell you to look for. It could be a variety of different things. But you want to make sure that your agent has the authority to deal with Long-Term Care to put you in the best position possible. Especially with spouses and even with spouses you need to have Power of Attorney documents in place. There are some things that a spouse doesn't have the natural ability to access or control, like retirement accounts, for example, retirement accounts are only ever in the name of one spouse. So if that spouse loses capacity, the other spouse can't just access it or take distributions from it without some sort of authority. So, again, it's important that you understand what you'd want in different situations and that you've communicated that clearly to the people that you're putting in these roles. And then you're providing documents that back up what your intentions are, so they know what to do and they have the authority to do it as easily as possible.

Jonathan Krause
Sarah, we need to take a break when we come back though we'll talk about how to keep track of all of this stuff that comes along with Financial Power of Attorney. It’s Sarah Kons from Hooper Law Office joining us here on Crossing Company back with more on WHBY.


Jonathan Krause
Back on Krause and Company, Jonathan Krause with you today here on the show again, [...] and we are talking about Financial Power of Attorney for adult children of those who are getting up in age. And Sarah, you wanted to touch on some common mistakes that are made when the child adults- the adult children rather- have people you work with who are receiving the Financial Power of Attorney, some common mistakes they may make when it comes to actually handling the money.

Sarah
And honestly, we see this so much, I mean, and usually, these are during times of stress, you know, this is because there's been a health event or a decline in health as a parent or someone that you care about. So people are doing the best they can and just trying to figure out how to do things. But we run into a lot of situations where people may not have been doing things exactly the way that they should. And it's important that you do things in a way that's legal and appropriate, and isn't going to end up being more harmful than helpful in the long run. So some of the common things that we see our kids being put on as joint owners on bank accounts, it's probably one of the most common ones. There isn't a lot of explanation, usually when this happens from the bank. But joint ownership really, is not just now my kid can access my account and sign bills. It's also now this account is partly owned by my child. And anything that happens to them now happens to this account, so they get in a car accident and get sued or something happens to them legally, this could potentially now happen to the money that's in this account because they are considered an owner. Another really common example is our child starts paying for things and then reimbursing themselves from their parents. And either they're not really keeping receipts, because who keeps every receipt from the grocery store, or they're having their parents pay them back in cash or write them checks directly to reimburse them or running errands. Well, if that person then needs care down the road, those are going to be looked at as gifts, because it's just money going from the parent to the child. So unless you have a lot of documentation showing how exactly this money was spent, you're going to potentially have some issues with gifting. And we've got a bunch of other examples of this logging in as your parent on their online accounts. Still, a problem if you're not legally them so logging in, although it might be easier if you're representing yourself as that person, you're not saying you're their legal representative, you're saying you are that person by accessing the accounts that way. So you want to make sure that you have the authority to do the things that you're doing and you're doing them in a way that's appropriate. So we've got a bunch of other examples of this. There's a chart on our website that goes through the examples and explains what you should be doing instead and then why it matters that you do it the right way. What are the possible ramifications down the road?

Jonathan Krause
Who should be holding on to copies of the agreement that hands over the Financial Power of Attorney? Because I've gone through this with my folks, there was a large binder I signed a bunch of stuff, and I haven’t seen it since.

Sarah
Usually what we recommend, Is that the kids know where the documents are, okay, you're keeping them in your house. Don't put them in a safe deposit box. I'm very commonly providing electronic copies to kids, I find they keep better track of them if I sent them to do their email, especially some of the medical stuff like HIPAA authorizations, Health Care Power of Attorney, it's more likely you're going to need that in an emergency. So, if I've sent it to you or your parents have sent it to you by email, you're more likely to have it on your phone and then have it with you in an emergency. So I mean, I sat 20 minutes waiting for people to try to find things sometimes when it comes to documents. So, electronic access can sometimes prevent that.

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