Your options when a parent is financially irresponsible

A child can take over with power of attorney or guardianship

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
My mother has no assets, a small Social Security check and debts from storage facilities and utilities. She also is in the check-cashing loan cycle. We will ask her to sign a power of attorney form next week, and I will pay off her debt for the check-cashing.

I want to advise the various places where she gets short-term loans that future debt will not be honored and my mother has no funds to pay if she takes out a loan with them. Can I send an email in advance to try to get her blacklisted at these places? Otherwise, she will just get in debt again. I cannot continue to bail her out. – Liz


Dear Liz,
First, you are not obligated to pay off your mother’s check-cashing loan debt with your own money. In fact, that may not be the best use of your funds.

If your mother has assets, those can be used to pay off the debts. Otherwise, she may be judgment-proof, meaning they can’t collect money from her because she doesn’t have the means to repay.

There’s no easy way to prevent your mom from taking out new loans from payday loan or check-cashing places. You’re free to call the places she has used in the past. However, if your mom is exhibiting financially irresponsible behavior and you’re worried about her, you should go further to protect her interests.

Virginia lawyer Matthew L. Kreitzer says, “Until a person has been told by a court that they lack the capability to do this, they are allowed to continue this financially dangerous behavior – taking out loans, mortgages and so on.”

You say you will ask her to sign a power of attorney document, and if she agrees to it, that is the best option. It does not require a court order, and it can give you the right to take control of her finances. That includes handling Social Security benefits, bank accounts, retirement accounts and anything related to financing. While you can find free forms online, you would be better off paying an attorney familiar with the laws of your mother’s state. There are many variations of power of attorney.

But what if mom does not agree? If she makes bad financial decisions because of mental infirmity or some other incapacity, your other option is guardianship, also known as conservatorship. This is a legal status that allows you to take control of your mom's personal and property because she is no longer able to.

Guardianships are granted by a court order and require a hearing that examines:

  • How incapacitated is the person?
  • What degree of oversight is required?
  • Who is the best person to provide that oversight?

“You’ll likely need a doctor’s note with a formal evaluation, and you’ll have to prove that you are the person who should be managing the finances,” says Kreitzer. “When you start the process, the whole family gets involved, and someone may step in and say they should do it instead of you.”

If you want to have guardianship, you’ll also need to get your own attorney. Every state is different. Be sure to talk with an attorney licensed in the state your mother lives in for help making the best decisions in her case.

Taking over someone else’s finances, whether by power of attorney or guardianship, is no small step. It creates legal obligations on you as a fiduciary, so be sure to ask your attorney about the responsibilities you will have. The federal Consumer Financial Protection Bureau also has guides to managing someone else’s money.

See related: Steps to protect finances of those with Alzheimer’s, How to detect and prevent elderly financial abuse

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Updated: 03-18-2019