Helping elderly parents manage their money
Finding yourself in the position of having to manage finances for an elderly parent can be a daunting task. Whether they’ve requested your for help or you’ve had to step in, it can be a challenge to manage someone else’s money.
Why parents may need help managing their finances
They may suffer from conditions like dementia which impact their ability to make informed choices, or they could be experiencing physical conditions which may cause problems such as signing cheques. They may generally be confused, making it difficult to know if they are making the right financial decisions for themselves.
Your level of involvement may vary from helping your parent out with day-to-day money-related tasks, to gaining power of attorney over their finances.
Day-to-day finance tasks
You may need to help your parent with ordinary financial tasks like making payments or collecting their pension. To do this, you may require access to their PIN number or online account details. As it is against banks’ terms and conditions for users to share such details with others, you’ll have to apply for a third party mandate. This involves the parent in questions signing over the right for you to access their bank account, so it is not suitable if they are not able to make decisions for themselves.
You may also opt to set up a joint account, which both you and your parent can access. However, bear in mind that you are responsible for half of the money in the joint account when it comes to income and inheritance tax. Both account holders are also liable for any debts – so if your parent racks up any debt on the account, you would be jointly responsible for paying it off – this could adversely affect your credit rating.
Power of attorney
Generally speaking, power of attorney allows your parent to give someone else the right to deal with third parties on their behalf. A person can have more than one ‘attorney’ in place.
There are different types of power of attorney arrangements in the UK, depending on the region. If you’re in England or Wales, you could be asked to take on one of these:
- Ordinary Power of Attorney
This allows you to help them out for a specified period of time.
- Lasting Power of Attorney
This allows you to assist with their affairs even if they have lost their mental capacity. There are two types of Lasting Power of Attorney: Property and Financial Affairs Lasting Power of Attorney, and Health and Welfare Lasting Power of Attorney.
- Enduring Power of Attorney
This ceased to exist in 2007, so only arrangements made and signed before 1 October 2007 can still be registered and used.
If you’re in Ireland, there are two types of agreements:
- General Power of Attorney
Similar to the Ordinary Power of Attorney in England and Wales, this allows you to help someone deal with third parties for a certain period of time.
- Enduring Power of Attorney
This lets you help someone out even if they lose their mental capacity. Your powers can be limited.
If you’re in Scotland, these are the options available:
- Continuing Power of Attorney
This allows you to take immediate control of their affairs, and continue to do so should they become incapable.
- Welfare Power of Attorney
This lets you make decisions about their health and welfare when they are incapable of doing so themselves.
- General Power of Attorney
Similar to the Ordinary Power of Attorney in England and Wales, and the General Power of Attorney in Ireland, this gives you power over their affairs for a specified time period.
When to discuss helping out
You may want to consider planning ahead and speaking to your parents about helping them out with their finances and other decisions while they are still self-sufficient. If you think that they may need to sign over power of attorney to you, note that such agreements are made when the granter is still in possession of their mental capacity. As such, it may be useful for them to sign the papers in advance.
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