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Becoming a Financial Caregiver: Who Pays Those Bills?

Debt and finances are sensitive subjects, for both parents and children alike. However, as your parents age, they may require assistance with paying their bills, making their financial arrangements or advocating for their own best interests. While you may be eager to assist, carefully consider the steps necessary to ensure you are making sound financial decisions for all parties involved.

How To Manage Money When Your Parent Moves In

There are many reasons one or both parents may move in with an adult child, the most common being safety, health, loneliness and finances. When your parent moves in, the debt they incurred does not become yours. However, do not get into the habit of signing for payments on their behalf. By signing for purchases or transactions, you may legally assume responsibility.   

Helping Your Parent With Their Bills

If your parent needs help paying the mortgage, rent, utilities or other monthly bills, create a system to pay the bills using your parent’s bank account. Maintaining a clear paper trail regarding the bills you pay on behalf of your parent is important to show you are honoring your fiduciary duty and taking your parent’s financial affairs seriously. If your parent needs financial assistance in addition to help with paying bills and you are in a financial position to help, be aware of the rules associated with making financial gifts to other individuals, even your parent. If your parent needs more than $14,000 a year, it may be time to consult a trusted financial planner to map out a course of action.

If your parent needs help paying the mortgage, rent, utilities or other monthly bills, you might not think twice about writing a check or logging in online to remit payment. While paying their bills full-time or only on occasion does not legally make you responsible for them, the debtor’s bookkeeping system may automatically list you as a secondary account holder. This can be a hassle to reverse. Instead, send a money order in your parent’s name, or deposit the money they need directly to their account.

Joint Account Versus Check Writing Authorization

While it might be convenient to become a joint account holder on your parent’s bank account or credit card, this has many unintended consequences from an estate planning and debt management standpoint. If you are a joint account holder on your parent’s checking account, you will automatically inherit the assets in the checking account when your parent passes away. This may be contrary to your parent’s wishes and may not be sensible given your own estate plan. Instead, inquire about check-writing authorization for the checking account or becoming an authorized user on your parent’s credit card.

Be Careful What You Sign

As your parent’s health, mobility or independence decline, you may find yourself playing a more active role in their major life choices. This could include signing or co-signing for a lease or loan or becoming a “guarantor” or “responsible party” for their assisted living facility or senior housing. If their income is low, they may not have access to the care or resources they require without your signature. However, consider all options before becoming a responsible party – be sure to read through documents thoroughly and understand what you are agreeing to. (Note, this practice is illegal in nursing homes under federal law 42 Code of Federal Regulations sec. 483.12[d][2]. Just be sure to read the fine print, because there are a few loopholes.)

Financial Power Of Attorney (POA)

As your parent’s financial POA, while you are responsible for managing their finances with integrity when they are alive, you are not personally responsible for unpaid debts at the time of their demise.

Many children jump right in to assist their parent any way they can, and in many cases, there is not much time to think things through before helping. That is why it is important to start the conversation before help is needed. The conversation is never easy, but it can be easier when parties are assisted by a financial advisor who is well-versed in helping you and your family plan and prepare for aging.

Caring for your parents can be stressful, physically, emotionally and financially. We can help you make wise financial decisions for both you and your parents. Reach out to Linden Oak Wealth Partners today.  

Linden Oak Wealth Partners offers fee-only financial advising customized for women, in particular, women in transition. Our goal is to create an environment where financial planning is efficient, simplified and easy to understand. We want clients to feel empowered and engaged every step of the way. Please contact us to schedule an initial consultation today.

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