#9 - Show Me The Money Trail
It is common for adult children caregivers to take over managing their parents’ money and paying the bills. This often starts as an administrative task. The child caregiver moves money between accounts when necessary and writes out the checks each month. Access to bank accounts is on a permission basis and prepared checks are presented to the parent to sign. When a parent is unable to directly participate, for whatever reason, then access to the accounts and the execution of checks is premised on a Durable Power of Attorney appointing the adult child caregiver as Agent.
Regardless of how and why an adult child caregiver has begun to manage finances, how they keep the records becomes especially important. You must assume that your parent will need to pay for support with activities of daily living at some point. This means that Long Term Care Medicaid will probably become the source of funds.
Here are important standards and guidelines to keep in mind. Do not comingle your parents’ money with your own. For example, don’t deposit their income into your personal account and pay your bills and theirs from that account. Do not lump together deposits of funds; keep deposits from different sources separate. When you are shopping for a parent, do not use their money to pay for your stuff and seek reimbursement later. Please do not loan yourself money from your parents’ funds on the thought or hope that you will or can pay it back later. Keep receipts for significant purchases and fill in the memo section on checks to identify what was purchased. If you have advanced money on behalf of a parent, create the written paper trail to prove their payment to you was a reimbursement and not a gift.
A lot of elderly disabled parents want to make gifts later in life. It often takes the form of trying to take advantage of the gift tax rule known as the annual exclusion amount ($15,000 per person/per year). For Medicaid qualification purposes this is still considered a transfer of money for no consideration that creates a period of self-pay for care before Medicaid will begin to pay. Unless the parent is independently wealthy, the children should refuse this type of gift. The same is true for gifts of cars to grandchildren and payments toward tuition.
In summary, an adult child caregiver should create a document trail for money coming in and going out. They absolutely must keep their parents’ assets separate from their own. When a parent is elderly and disabled, the caregiving adult child should shut down significant gifts of money and things to family members.