(Note: The pdf for the issue in which this article appears is available for download: BIFOCAL Vol. 35, Issue 1.)
- A daughter manages finances for her elderly mother under a power of attorney or a trust.
- A brother serves as court-appointed guardian to manage the finances of his sister with a severe mental illness.
- A mother is named by Social Security to handle the benefit checks of her adult son with an intellectual disability.
These are all examples of people who have legal authority to manage the finances of a family member or friend. Usually, they have never done this before, and they are looking for guidance on their responsibilities.
The federal Consumer Financial Protection Bureau (CFPB), Office for Older Americans, has released four guides for “lay fiduciaries” entitled Managing Someone Else’s Money. CFPB contracted with the American Bar Association Commission on Law and Aging to develop the package of easy-to-understand booklets to help financial caregivers.
The guides help these caregivers with three things:
- Understanding their responsibilities;
- Watching for and responding to scams and financial exploitation; and
- Knowing where to go for additional help from federal, state and local resources.
While the guides focus on legal duties, they do not give legal advice. Situations and state laws and practices vary. The guides suggest that fiduciaries talk to a lawyer if they have specific questions.
Four Guides and Four Basic Duties
The guides cover four types of fiduciaries:
- Agents under power of attorney
- Guardians of property (sometimes known as conservators)
- Trustees under revocable living trusts, and
- Government benefits fiduciaries (Social Security representative payees and VA fiduciaries).
For each type of fiduciary, the booklets provide practical guidelines for four overarching duties:
- Act only in your family member or friend’s best interest
- Manage the money and property carefully
- Keep the money and property separate from yours
- Keep good records.
Guide Audience
The primary audience for the guides is family members and friends with legal authority to handle an incapacitated person’s funds. Millions of people have legal authority to manage money for a family member or a friend, and the number may grow with the aging of the population and the rising number of individuals with disabilities. But the booklets have practical tips for managing someone else’s money that could be useful to informal caregivers as well.
Family members and other caregivers may be managing money for an older person with Alzheimer’s disease or other dementia, or for a younger adult with a disability. Even mild cognitive impairments can limit a person’s ability to handle money—and this in turn can make people vulnerable to scams and fraud.
State Guides and Replication Tips
The four new guides are for a national audience, so they don’t address requirements in particular states. However, in the coming year, the CFPB will publish six sets of state-specific guides based on the national models, written by the Commission with input and information from state professionals. The state guides are for Arizona, Florida, Georgia, Illinois, Oregon, and Virginia. These states were selected because they have a high number or percentage of older residents, and also because they are located in different parts of the US. The state guides will address requirements imposed by each state’s laws as well as resources available to people in these states. Also, CFPB will publish replication instructions so that interested professionals and organizations in the remaining states can create their own Managing Someone Else’s Money guides.
Fiduciary Guides Online and in Print
You can download the guides for free on the CFPB’s website.
By December, you will be able to order free print copies of the guide as well. Single or small orders as well as free bulk orders will be available.
The CFPB’s Office for Older Americans is eager to help all stakeholder groups get the word out about the guides. Please reach out to Naomi Karp at [email protected] if you have ideas on distribution channels and strategies.
How Many Fiduciaries Are Out There?
Social Security representative payees:
In FY 2012, 14% of all Social Security beneficiaries1 had a representative payee, and half of those (7%) were adults. For children and adults combined, 5.9 million payees managed benefits for 8.4 million beneficiaries; over 4 million adults had representative payees.2
As of January 2013, family members served as representative payees for about 85 percent of beneficiaries who had a payee.3
VA fiduciaries:
As of October 2, 2013, VA oversaw approximately 120,000 fiduciaries who provided services to more than 152,000 beneficiaries with VA funds under management exceeding $3.6 billion.4
Guardians:
An estimated 1.5 million adults in the United States—and possibly over 3 million— have a court-appointed guardian.5
Powers of attorney:
About 35% of people age 60 and over currently have a power of attorney. That equals about 22 million people.6
About 95% of people with powers of attorney name a spouse, other family member or friend to be their agent. Only about 5% name a professional or someone other than a family member or friend.7
1 Includes Social Security (OASDI) and Supplemental Security Income (SSI) benefits.
2 GAO SSA Representative Payee Program: Addressing Long Term Challenges Requires a More Strategic Approach. GAO-13-473, May 2013.
3 GAO SSA Representative Payee Program: Addressing Long Term Challenges Requires a More Strategic Approach. GAO-13-473, May 2013.
4 http://veterans.house.gov/witness-testimony/dave-mclenachen (link no longer available)
5 Uekert, B. & Van Duizend, R., “Adult Guardianships: A ‘Best Guess’ National Estimate and the Momentum for Reform,” Future Trends in State Courts 2011, pp. 107 – 112.
6 Board of Governors of the Federal Reserve System. Insights into the Financial Experiences of Older Adults: A Forum Briefing Paper, July 2013. Available online at: http://www.federalreserve.gov/newsevents/conferences/older-adults-forum-paper-20130717.pdf
7 Board of Governors of the Federal Reserve System. Insights into the Financial Experiences of Older Adults: A Forum Briefing Paper, July 2013. Available online at: http://www.federalreserve.gov/newsevents/conferences/older-adults-forum-paper-20130717.pdf ■