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Adam Vega, CFP® profile image Adam Vega, CFP®

Your Responsibilities as a Financial Caregiver

Edited By: Adam Vega, CFP® April 30th, 2023 A financial caregiver is an individual who takes on the responsibility of managing the finances of a loved one, often due to age, illness, or disability. This role is crucial to ensuring the financial well-being of the person in need, and it

Your Responsibilities as a Financial Caregiver
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Edited By: Adam Vega, CFP®

April 30th, 2023

A financial caregiver is an individual who takes on the responsibility of managing the finances of a loved one, often due to age, illness, or disability. This role is crucial to ensuring the financial well-being of the person in need, and it can be a complex and demanding task. Long-term care is a significant aspect of this responsibility, as it often involves substantial costs and requires careful planning to ensure the necessary resources are available when needed. As a financial caregiver, you must understand the various aspects of long-term care and be prepared to navigate the challenges associated with managing another person's finances.

What is Long Term Care?

Long-term care refers to a range of services and support that aging individuals may require due to chronic illnesses, disabilities, or age-related issues. These services can include personal care, assistance with daily activities, medical treatments, or nursing care. Long-term care is provided in various settings, such as your home, a residential care facility, or a nursing home (CareFull). Planning for long-term care is essential to ensure that you and your family have the necessary financial resources and support in place when needed.

In addition to understanding the types of care available, it is crucial for you, as a financial caregiver, to be aware of the costs associated with long-term care. The expenses can vary widely depending on the level of care needed, the location where care is provided, and the specific services required. By researching and comparing the costs of different care options, you can make informed decisions about the most suitable and cost-effective solutions for your loved ones.

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One of the challenges of long-term care is that your loved one’s need for these services may change over time. As your family members' health and abilities decline, their care needs may escalate, requiring adjustments to their care plan and financial arrangements. You must be prepared to adapt to these changes and ensure that your loved ones continue to receive the appropriate level of care and support.

Who Needs Long Term Care?

People who need long-term care are typically those who cannot perform daily activities independently due to physical or cognitive limitations. These daily activities are commonly referred to as Activities of Daily Living(ADL). The ADLs typically include eating, bathing, dressing, toileting, continence, and transferring(being able to get in and out of bed and chairs). Individuals that are unable to do these, are often considered to be in need of long-term care. This may include aging adults, individuals with chronic illnesses or disabilities, and people recovering from severe injuries or surgeries (National Caregivers Library). The need for long-term care can arise suddenly or gradually, and it often increases as a person ages. Factors that can increase the likelihood of needing long-term care include a family history of chronic health conditions, lifestyle habits, and environmental factors (CareFull).

It is essential for you and your family to assess your aging loved ones’ potential long-term care needs and develop a plan to address these needs both financially, and emotionally. By understanding the factors that contribute to their need for long-term care, you may better anticipate and prepare for your loved ones' future care requirements. This may involve researching care options, estimating costs, and discussing preferences and expectations with your family member that needs care.

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In some cases, preventative measures can be taken to reduce the likelihood of needing long-term care or to delay its onset. These measures may include adopting a healthy lifestyle, managing chronic conditions, and engaging in activities that promote physical and cognitive well-being. As a financial caregiver, you can support your loved ones in these efforts by providing information, encouragement, and resources.

What is a Financial Caregiver?

A financial caregiver is a person responsible for managing the financial affairs of someone who cannot do so independently. This role can involve various tasks, such as budgeting, paying bills, overseeing investments, and ensuring that their loved one receives any benefits or entitlements they may be eligible for (CaringInfo). A financial caregiver may be a family member, friend, or professional fiduciary. The specific responsibilities of a financial caregiver can vary depending on the care recipient’s needs and the legal arrangements in place, such as a power of attorney or guardianship (CareFull). It is crucial for you, as a financial caregiver, to educate yourself on your responsibilities and seek professional advice when needed to ensure that you are making the best decisions on behalf of the person in your care.

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In some situations, a team approach to financial caregiving may be more effective, with multiple individuals or family members sharing the responsibilities and tasks associated with managing a loved one's finances. This can help distribute the workload and reduce the stress on any single caregiver. Communication and collaboration are essential in these cases, ensuring that all parties involved are informed of the individual's financial situation and that decisions are made in the best interest of the person in need of care.

Financial caregivers also need to be prepared to deal with the emotional aspects of their role. Managing a loved one's finances can be a sensitive and challenging responsibility, and it may involve making difficult decisions or having challenging conversations. Developing strong communication skills, empathy, and a support network can help you navigate these emotional challenges and maintain a positive relationship with the person in your care.

1. Budgeting

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One of the primary responsibilities of a financial caregiver is creating and maintaining a budget for the person in their care. This involves tracking all sources of income, such as Social Security, pensions, and investments, as well as all expenses, including medical care, housing, utilities, and other daily living costs (CaringInfo). A budget will help you to ensure that your loved one’s financial resources are used efficiently and effectively to meet their needs. Regularly reviewing and updating your budget can help you identify any changes in income or expenses and make necessary adjustments to ensure financial stability (CareFull).

Budgeting also involves setting aside funds for emergencies and unexpected expenses, such as medical treatments or home repairs, to provide a financial safety net for the individual in your care. This may require making difficult decisions about prioritizing expenses and allocating limited resources. By developing a clear and comprehensive budget, you can make more informed decisions about how to best allocate your loved ones’ financial resources and maintain their financial well-being.

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Another important aspect of budgeting is monitoring and managing debt. As a financial caregiver, you must be aware of any outstanding debts, such as loans or credit card balances, and it’s your responsibility to develop a plan to manage those debt payments. This may involve negotiating with creditors, consolidating debts, or exploring other debt management strategies. By staying proactive in managing debt, you can help reduce financial stress and ensure that your loved ones remain in good financial standing.

2. Planning for Care

A crucial aspect of financial caregiving is planning for the long-term care needs of your loved ones. This involves researching the various care options available; in-home care, assisted living facilities, or nursing homes, and determining which option is most suitable for their needs and preferences. You must also consider the potential costs of these care options and develop a strategy for financing them (National Caregivers Library).

Creating a long-term care plan requires considering not only the current needs of your loved ones but also anticipating how their needs may change over time. This may involve regular assessments of their health and abilities, as well as ongoing discussions with their healthcare providers and other members of their support network. By staying informed about your loved ones’ condition and any changes in their care requirements, you can make timely adjustments to the care plan and ensure that the necessary resources are in place to meet their loved ones' needs.

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In addition to researching and planning for the costs of care, you may need to consider other financial aspects of long-term care, such as insurance coverage, government benefits, and tax implications. By thoroughly investigating these issues and seeking professional advice when needed, you can ensure that you are taking advantage of all available resources and minimizing any potential financial burdens associated with long-term care.

3. Managing Costs of Care

One of the most challenging aspects of financial caregiving is managing the costs associated with long-term care. These costs can be substantial and may increase over time as your care recipients’ needs change. As a financial caregiver, you must be proactive in finding ways to manage these costs and ensure that your loved ones receive the necessary care without jeopardizing your financial security (CareFull).

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One strategy for managing the costs of care is exploring available financial assistance options, such as government programs, nonprofit organizations, or charitable foundations that may provide financial support or subsidies for long-term care services. You should also investigate potential tax credits or deductions related to caregiving expenses, which can help offset some of the costs associated with long-term care (CaringInfo).

Another way to manage the costs of care is by carefully selecting care providers and negotiating the terms of service agreements. This may involve researching different care providers, comparing their fees and services, and discussing any potential discounts or payment plans. By becoming an informed advocate for your loved ones, you can help ensure that your loved ones receive the best possible care at the most affordable cost.

4. Track Expenses and Debts

Tracking expenses and debts is a crucial responsibility for financial caregivers, as it allows them to maintain a clear and accurate picture of the individual's financial situation. This involves keeping detailed records of all income, expenses, and debt payments, as well as regularly reviewing and updating these records (CaringInfo). By closely monitoring your loved ones’ financial transactions, you may identify unusual or unauthorized activity, such as fraud or identity theft, and take appropriate action to address these issues.

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In addition to tracking your care recipients’ financial transactions, you should maintain a system for organizing and storing important financial documents; bank statements, tax returns, insurance policies, and legal agreements. This can help ensure that all necessary information is readily available when needed and can assist in the preparation of annual tax filings or other financial reporting requirements (CareFull).

Furthermore, tracking expenses and debts can help you identify areas where you can reduce costs or make more efficient use of your family’s financial resources. By regularly reviewing your loved ones’ spending habits and financial obligations, you can make informed decisions about budget adjustments, debt management strategies, or other financial planning actions.

5. Keeping an Inventory of Finances, Assets, and Investments

An essential responsibility of a financial caregiver is maintaining an up-to-date inventory of the individual's finances, assets, and investments. This includes bank accounts, real estate, personal property, retirement accounts, and any other financial holdings the individual may have (National Caregivers Library). By keeping a comprehensive inventory, you can ensure that you have a clear understanding of your loved ones’ total net worth and can make more informed decisions about financial planning and resource allocation.

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Another important financial responsiblity, is monitoring the performance of investments and making adjustments as needed to ensure that the individual's financial goals are being met. This may require collaborating with financial advisors or other professionals to obtain expert advice and guidance on investment strategies and risk management (CareFull).

Finally, an inventory of finances, assets, and investments can serve as a valuable tool in estate planning and the distribution of assets upon your loved one’s death. By documenting your family’s financial holdings and ensuring that all necessary legal arrangements are in place, you can help prevent disputes or complications related to the administration of your loved ones’ estate.

6. Documenting All Income

Another important responsibility of a financial caregiver is identifying and documenting all sources of income for the individual in their care. This could include wages, Social Security benefits, pension payments, investment income, rental income, and any other forms of financial support that your loved ones may receive (CaringInfo). Accurate documentation of income is crucial for several reasons, including maintaining a clear and comprehensive financial picture, ensuring that your aging family members receive all the benefits they are entitled to, and meeting tax reporting requirements.

Documenting income also involves staying informed about changes in income sources or eligibility for benefits, such as increases in Social Security payments, adjustments to pension plans, or changes in government assistance programs. By staying up-to-date on these changes, you can ensure that your loved ones receive the maximum financial support available and can make any necessary adjustments to their budget or financial plan (CareFull).

In some cases, you may need to assist your loved ones in applying for or renewing benefits, such as submitting applications for government assistance programs or filing appeals for denied claims. This may require gathering and submitting documentation, communicating with benefits administrators, and advocating on behalf of your loved one to ensure they receive the support they are entitled to.

7. Working With Third Parties

As a financial caregiver, it may be necessary to work with various third parties to manage the individual's financial affairs effectively. This can include financial advisors, attorneys, insurance agents, healthcare providers, and government agencies, among others (National Caregivers Library). Developing strong relationships with these professionals can help you access valuable resources, advice, and support to make the best decisions for your loved ones.

When working with third parties, it is crucial to maintain open lines of communication and keep all parties informed of any changes in your loved ones’ financial situation or care needs. This may involve sharing financial documents, discussing your family’s financial goals, or seeking input on financial planning strategies (CaringInfo).

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In some cases, financial caregivers may choose to delegate certain responsibilities to third-party professionals, such as hiring a financial planner to manage investments or an attorney to handle legal matters. In these situations, it is essential to establish clear expectations and guidelines for the professional's role, monitor their performance, and maintain regular communication to ensure that they are acting in the best interest of the loved one that you have placed in their care.

8. Power of Attorney

In many cases, financial caregivers will need to obtain a legal document called a power of attorney (POA) to effectively manage their loved ones’ financial affairs. A POA grants you the authority to make financial decisions on behalf of the family member you are caring for, such as paying bills, managing bank accounts, and making investment decisions (CareFull).

There are different types of POAs, and the specific powers granted to the financial caregiver can vary depending on the document's terms. A durable power of attorney, for example, remains in effect even if the individual becomes incapacitated, allowing you, as a financial caregiver and POA recipient, to continue managing their financial affairs without interruption (CaringInfo).

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Being a financial caregiver is a significant responsibility that requires dedication, organization, and compassion. By understanding the various aspects of long-term care and being prepared to navigate the challenges associated with managing another person's finances, you can help ensure the financial well-being of your loved ones. By staying informed, seeking professional advice when needed, and maintaining open communication with the loved one in your care and other members of their support network, you have the opportunity to provide the essential support your loved ones need to maintain their quality of life and financial stability.

Adam Vega, CFP® profile image Adam Vega, CFP®
Adam Vega is the President of Avance Private Wealth Management. He has worked in the financial planning space for over thirteen years, offering planning and wealth management services to his clients.