Taking care of somebody’s personal finances in addition to your own can be an overwhelming endeavor. The very idea of managing money or property for a family member can be incredibly stressful. Nevertheless, millions of people in the United States act as fiduciaries for their parents or other loved ones when these family members are no longer able to make decisions for themselves. Fiduciaries often take on these responsibilities without any expertise or training.
Fiduciaries are appointed under a number of different circumstances. The first involves being granted power of attorney. The power of attorney is a legal document that allows a person to make property and money decisions on behalf of another person. Secondly, a court may appoint someone as a guardian when it becomes clear that the person in question can no longer manage his or her money. Also, a person may end up as a fiduciary after being named as a trustee in a revocable living trust. Lastly, the government may appoint a person to manage Social Security or other government income that an incapacitated person receives.
The Consumer Financial Protection Bureau has listed four of the most important responsibilities for people who find themselves in a fiduciary role. The first involves acting in the principal person’s best interest. This means avoiding unethical actions such as taking some of the money for yourself or loaning money out. Secondly, money must be managed with care. For example, it’s important to pay the principal person’s bills on time and invest wisely.
The CFPB also states that it’s important for a fiduciary to keep their own accounts separate from the account they’re managing. Expenses must be paid using the principal person’s funds rather than a joint account, for example. Lastly, a fiduciary must keep excellent records. This would mean maintaining detailed lists of funds spent or received as well as avoiding paying for things in cash.
The bottom line is that a fiduciary must be honest and trustworthy. If a person does not act ethically in this position, he or she could end up repaying money that was ill-spent or facing a lawsuit. In some cases, an unethical fiduciary could even end up in jail. Colorado residents taking on this responsibility should be sure they’re up to the task.
Source: thonline.com, “A guide to managing someone else’s finances” Jason Alderman, Jan. 14, 2014