Managing Someone Else’s Money

This post was inspired by Marie over at Family Money Values, who asked Do You Talk to Your Parents About Money?
We’ve been managing my mother-in-law’s finances since 2008. While my husband and I are younger than most who have to deal with this, it is not uncommon for adult children to eventually need to step in and handle the finances for aging parents. Often, it is do due poor memory or dementia associated with aging. In our case, it stems from some minor brain damage (that sounds odd, doesn’t it- how is brain damage ever minor) my MIL sustained in a car accident back in 2000. Over the years, she also had multiple (untreated) mini-strokes. It led to her having very poor impulse control and an inability to understand abstract or delayed cause and effect.
She was still capable of living on her own and physically caring for herself, but she started racking up late fees and overdraft penalties because she lost the ability to truly grasp how money she wasn’t holding in her hands actually worked.
What I mean by this is, if we give her $50 cash every two weeks, then she knows she only has $50 to spend for those two weeks. If she runs out, she runs out and she can’t buy anything more. She knows this because she can hold the money in her hands. She can count it and knows there is less of it every time she spends it. And when she’s out of cash, she doesn’t try to buy anything until she has more cash.
However, if she has $250 in an account, with $200 in bills due in one week and no more money coming in for 2 weeks, she will spend all $250 in that first week. She is perfectly capable of only spending $50, but when you take the cash out of her hands, make money abstract instead of concrete, she is no longer capable of understanding her limit. If she has $250 in her account today, then she has $250 she can spend. Because the $200 in bills isn’t due for another week, the effect of spending the money today is too far delayed for her to be able to connect it anymore.
To most of this, this may seem ridiculously simple. If she can subtract, why can’t she add. Well, brain damage doesn’t always make sense, and after beating our heads against the wall for what felt like forever trying to get her to grasp these concepts that she once understood, we had to give up. Instead, we asked her to give us Durable Power of Attorney for financial purposes.
She still has theoretical access to her money. She can still legally enter in to contracts and all of that. We just also have the power to enter in to contracts for her and to access all of her financial data.
She gets a cash allowance. We make sure all her bills are paid and take her grocery shopping, paying her bills out of her money. Once she was no longer paying a couple hundred (sadly, I am not exaggerating) in late fees and overdraft charges a month, she had more than enough money to live on.
Still, she lived with us, rent free, for 16 months. (Never again.) We got all of her credit card debt paid off and closed the cards. We paid off her first mortgage and did the math on her HELOC to figure out how much a month needed to be paid so that it would be paid off before the balloon payment was due.
This was not an easy 16 months, and I don’t recommend it for anyone. But sometimes you do what you have to do.
There’s a trickiness to managing someone else’s money. How do you prioritize her wants and needs? Or perhaps, when she feels something is a need and you feel it’s a want? What about when the person decides to try and play you against other family members like a pre-teen playing newly divorced parents off each other?
We had more than one uneasy conversation with my MIL’s sister when the MIL called and asked her to buy her something because she needed it and couldn’t afford it.
Except, we didn’t think she needed it (or at least not now, now, now – the impulse control issue) and she could afford it, but there were other priorities for the money. Naturally, her sister was only getting her side of the story, and we would have to jump in.
Then there’s the problem that her sister doesn’t want to admit the brain damage happened. She wants to treat her sister as a fully functional adult. And she’s just not anymore. So sometimes, we’d have to remind her- we live with her. We know how she actually responds to things (can’t tell her anything in advance because she has no patience), and we also know what other things are looming. Just because she feels something is an immediate priority does not mean that it is.
Trust me, these are not conversations you want to be having with your Aunt, or even a sibling. But when it comes to taking over a family member’s financials, you have to be prepared to have them.