The shifty financier played by Danny DeVito in the 1991 movie Other People’s Money pretty well summed up Wall Street’s view of a fiduciary: “I love money,” the DeVito character said. “I love money more than the things it can buy. There’s only one thing I love more than money. You know what that is? Other people’s money.”
Wall Street has long made a killing with OPM, as it’s known. But ordinary folks with a conscience, thrust into the role of fiduciary for an incapacitated family member, typically do not relish the responsibility. Yet it’s theirs, and they must do the best they can. Now they have a no-nonsense guide to steer their way.
The Consumer Financial Protection Bureau has just published advice for four categories of financial caregiver: court-appointed guardian, trustee, appointee for federal benefits, and the most common—those granted power of attorney. About 22 million people age 60 or older have named someone in a power of attorney to make financial decisions for them, the CFPB says.
“Millions of others have court-appointed guardians or other fiduciaries,” says Richard Cordray, director of the CFPB. “In addition to older adults, many younger adults with disabilities may also lack capacity to handle their own finances. The fiduciaries that help them are a critical source of support, but often have no training.”
Financial caregiving can be especially stressful if there are co-agents assigned to manage the person’s affairs, or if family members would like to do things another way. To navigate these waters, the guide offers four basic rules for managing OPM:
- Act in the person’s best interest A fiduciary should not loan or give money to themselves or others and should avoid conflicts of interest. Stick to the person’s intentions, and do not pay yourself for the time you spend managing their affairs.
- Manage money and property carefully Pay bills on time. Keep unspent funds and valuables safe. Collect anything owed to the person. Invest conservatively, and keep a detailed list of assets and debts.
- Keep money and property separate Separate means separate. Avoid joint accounts and using your own money for the person’s expenses, even temporarily. Keep title to money and property in the person’s name.
- Maintain good records Keep a detailed list of the money received or spent. To help with records, avoid paying in cash and keep all receipts. Records should include amount of checks written or deposited, dates, reasons, and names of people or companies involved.
In managing a loved one’s finances, your biggest headache is apt to be a family member who questions your decisions. These four steps can help make clear what you did and why you did it. But you might also raise the level of transparency by sharing information and seeking input.
In the end, as a fiduciary you must make the call. But it’s almost always easier to deal with doubts and questions as they arise than to deal with a family member’s suspicion and anger that builds over a long time.