Planning Reflection | August 12, 2022
The basic elements of managing someone else’s finances can feel similar to managing your own. You pay their bills, you talk to professionals, and you decide how to proceed when presented with choices or dilemmas. In the abstract, these things sound straightforward. However, when acting on someone else’s behalf, there is an added layer of complexity to everything involved.
Serving as financial power of attorney is a major commitment. A power of attorney is a legal document that authorizes an agent to act on behalf of another person. On its surface, it’s about financial decision-making and management, but it is often much more than this. It places you in a caretaking role for that person, where you have to decide what’s best for them. It may also involve mediation between other stakeholders, including family, friends, and professional advisors. All of this can be overwhelming, and often it comes at a time when you may also be disoriented by a loved one’s declining capacity.
Being a power of attorney for someone is a fiduciary responsibility, and it’s not one we should agree to lightly. The reason we agree to serve is because it means taking care of someone we love when they can no longer care for themself. In a previous article, we wrote about what it’s like to give someone power of attorney. Here we give a practical view of what it can be like to serve as someone’s power of attorney.
Creating a System
“Paying bills” sounds simple enough. You get the bill, and then you write a check or set up an electronic payment. Two steps and you’re done. While this seems straightforward, it’s helpful to think through the steps to get a sense of what it can actually be like to pay bills for someone else.
The first step is creating a system to get the bills. Some are mailed, others are emailed. For physical bills, you need to have a way to get the piece of paper. That could mean driving over every few days, or if you live farther away, setting up mail forwarding or enlisting a trusted person to help sort and keep track of incoming mail. For emailed bills, you need to be able to access the person’s email – which likely also includes their private correspondence. You may ultimately redirect all correspondence to yourself, but in the beginning, you are like a goalkeeper trying to catch everything as it comes in.
Once you have bills in hand, you need to have the means to pay them, which means getting access to bank and brokerage accounts. To do this, you have to establish yourself as an agent, typically by providing the power of attorney document, incapacity letters, and anything else the institutions might request. Sometimes it’s smooth; often there are snags. Some will make you physically come to a bank branch with all the paperwork. Others will require additional documentation because the power of attorney was signed too long ago. Still others will simply take their time approving everything, even as the bills keep coming. You will go through a version of this process with every financial institution, every utility, and any other organizations or professionals the principal worked with. While interaction is usually straightforward once you’re established as an agent, getting to that point can be quite difficult. Persistence and organization are key.
Once you have the bills and a way to pay them, you can create a system to make sure they get paid on time. Automating payments, where possible, can make your life a lot easier once you’re through the initial setup
Cleaning Up Messes
Although a power of attorney outlines a specific legal role around finances, your involvement often transcends financial transactions into more of a caretaking role.
For example, if you are your parents’ power of attorney, you might be involved in all of the logistics around replacing a broken dishwasher. Beyond paying for it, you may need to schedule a time for delivery and make sure someone is there who can oversee the installation. When it doesn’t arrive on time, you’re the one who calls the seller to find out what went wrong. And at every step, your siblings may be offering their opinion about how you’re handling things.
While a broken appliance can create a literal mess, as you start to take over for someone, you can discover figurative messes, too. They may have allowed their homeowners’ insurance to lapse, and you need to work with an insurance broker to fix it. They might not have filed taxes for the last few years, and you need to fix that, too. Losing capacity rarely happens overnight. It’s a gradual process, and issues can develop over time. It takes time and energy to correct issues like these, but knowing they’re resolved gives you the space to take care of new things that arise.
Another potential mess for a power of attorney is the unfortunate prevalence of scams. Many scams specifically target elderly people precisely because the ability to resist undue influence declines with age. Someone who lacks capacity may not be able to legally direct their own affairs, but that won’t stop them from giving their checking account number to a concerned (and pushy) “representative” of their bank or buying thousands of dollars in gift cards to “reimburse” that representative for a “mistake.” You can limit the damage a scammer can inflict by limiting how much money the principal has access to – and if they do get scammed, you can support them and help clean up the mess.
A Gift to Your Loved Ones
We’ve focused on a few specific examples, but there are myriad other responsibilities that can fall to a power of attorney. Caretaking, medical treatments, relationships between family members – all of these areas interact with each other in complex ways. Even mundane things like bill payment involve extra time and energy when you’re doing them for someone else. And yet it is a tremendous gift to give your loved ones, and it’s important to remember that you don’t have to do it all alone. You can and should rely on your own support network to help you, whether that’s family, friends, or professional advisors.
As you think about your own estate planning, it can be helpful to consider what it will be like for your own successors. Serving as someone’s agent is never easy, but if you organize things for your successors in advance – by sharing information, by bringing them in gradually, by titling everything appropriately – you can ease some of the burden of transition. Proper estate planning is also a gift to your loved ones, and it can smooth the process for everyone involved.
About Sam Wood-Bednarz, CFP®
Sam Wood-Bednarz is a Partner, Lead Advisor, and Director of Financial Planning. He provides clients with a sense of confidence and security in their financial lives.
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