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How to Manage Finances When Spouse Lost Functioning Ability

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How to Manage Finances When Spouse Lost Functioning Ability

Coping with a spouse’s loss of functioning can be incredibly difficult emotionally. On top of that, you may need to suddenly take over all financial responsibilities and decision making.

This abrupt life change can leave you feeling overwhelmed. However, with some knowledge, planning, and outside support, you can effectively manage your finances during this challenging time.

Understanding Power of Attorney and Guardianship

If your spouse is no longer able to make sound financial or healthcare decisions due to illness, injury, or disability, you have a few options to legally manage things on their behalf.

Power of Attorney

A Power of Attorney (POA) document authorizes someone to legally act on another person’s behalf regarding financial, legal, or medical matters if they become incapacitated. This person becomes the “attorney-in-fact.” The POA only takes effect once the spouse granting the authority loses competence.

There are two types of POAs to understand:

  • Durable financial POA: Allows the attorney-in-fact to manage finances, pay bills, file taxes, buy/sell property, etc.
  • Healthcare POA: Allows medical decisions to be made on behalf of spouse.

If your spouse already established a POA naming you as attorney-in-fact, it can greatly ease the financial transition. Make copies to provide anywhere your authority is required.

Also Read: How to Get Power of Attorney for Your Sick Husband

Guardianship

If there is no POA in place or an existing document is limited, you may need court-approval for legal guardianship over your spouse to handle healthcare and finances. This involves extensive paperwork and hearings to deem them legally incapacitated. While a lengthy process, it grants you authority.

Taking Over Finances: First Steps

Once you have legal approval to take over finances, here are some first steps:

  • Gather information: Locate important documents, bank/credit card statements, bills, insurance policies, real estate deeds, investment/retirement plans, tax returns, etc. This provides you a full picture of assets vs. liabilities.
  • Change names on accounts: Contact banks, investment firms, insurance companies, creditors, etc. and provide copies of POA/guardianship to switch names to yourself on all accounts and billing.
  • Notify credit bureaus: Send copies of legal approval documents to Equifax, Experian, and Transunion. This protects credit from identity theft.
  • Update advisors: Inform financial, legal, tax and medical teams of the change in responsibility. Make sure to authorize sharing sensitive information.
  • Pay bills/expenses: Review auto-payments and billing cycles. Ensure mortgage/rent, loans, utilities, insurance policies, HOA fees, taxes, etc. continue being paid.
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While this list feels overwhelming initially, tackle one step at a time. Organization helps ease the process.

Budgeting and Managing Ongoing Income/Expenses

Once you’ve handled the immediate first steps after taking over finances, consistent budgeting and monitoring of income and expenses is key:

Income Sources

  • Employment wages: If your spouse was working, contact the employer regarding medical leave eligibility, short/long-term disability policies, continuation of health insurance coverage, 401k plans, and pending wages. See if any income will continue during leave.
  • Government benefits: Your spouse may qualify for Social Security Disability and/or Medicaid depending on the condition causing disability. Contact the Social Security Administration to determine eligibility requirements.
  • Private disability insurance: Check if disability insurance exists from your spouse’s employer or individually purchased plans. File any claims and understand the policies.
  • Retirement/investment accounts: You’ll likely need to carefully withdraw from IRAs, 401ks, mutual funds etc. for living expenses. Consult a financial advisor to structure withdrawals without accruing penalties.
  • Additional income streams: Check for rental properties, patents, royalties, annuities or inheritance assets providing ongoing income. Manage wisely.

Having all income sources identified helps estimate realistic budgets. The more you locate, the better.

Managing Expenses

With fixed income sources known, establish budgets addressing where money can/should be allocated:

  • Medical costs: Even with insurance, out-of-pocket costs for doctors, specialists, hospital visits, procedures, medications and equipment adds up quickly. Keep meticulous records and look into prescription discounts/payment plans.
  • Caregiving: In-home caregivers, nursing aides, assisted living facilities and long-term care carry hefty price tags, often uncovered by insurance or Medicare. Evaluate Veteran’s benefits, Medicaid coverage, locality resources and community charities to offset costs.
  • Housing: As health declines, modifications like ramps, doorway widening, and ground floor bedrooms may be needed or moving to handicap-accessible facilities. Budget and plan for these contingencies.
  • Living expenses: Be smart about discretionary spending without depriving quality of life. Balance prudent financial decisions with your spouse’s emotional needs.
  • Debts/loans: Continue making minimum payments on all outstanding debts held. See if banks/creditors allow modified payment plans for hardship cases to reduce required monthly payments.
  • Taxes: Consult a tax preparer specialized in medical/disability deductions and credits you now qualify for. Keep quarterly tax payments current.
  • Legal fees: If establishing guardianship, POAs or healthcare directives for your spouse, attorney costs add up quickly. Find free/low-cost legal aid resources.
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The reality is your spouse’s situation now requires living below prior means. Embrace budgeting discipline to direct dollars where most needed. Saying “no” sometimes protects solvency.

Avoiding Financial Mismanagement Allegations

As newly appointed guardian with total financial oversight for your spouse, it’s imperative adhering to strict fiduciary responsibilities. Why? Family members or your spouse (if regaining competency in future) could scrutinize how you managed funds seeking misuse allegations.

You have immense power controlling assets so proceed extremely ethically and legally. Here’s how:

  • Keep immaculate records: Fastidiously track every dollar spent and invested. Keep receipts, bank statements, legal documents, and notes organized for easy reference later.
  • File required court accountings: State laws mandate guardians file thorough accountings on spending, investments, assets, etc., typically annually. Courts treat these seriously.
  • Don’t co-mingle funds: Never mix your spouse’s monies with your personal assets or improperly name yourself on property/account deeds. Maintain separation.
  • Retain property/valuables: Don’t liquidate or dispose of any belongings, real estate, heirlooms or treasures without court approval, even if unused. Get permission first or risk accusations of theft/embezzlement.
  • Avoid conflicts-of-interest: As guardian, you now stand in a fiduciary position to your spouse. Never engage in self-dealing for loans/gifts benefiting you without court oversight.
  • Consult attorneys: Seek both legal and ethical advice if ever unsure about transactions or accountability procedures. It’s better to confirm processes than mistakenly mismanage.

By making integrity and transparency high priorities, you lower allegation risks while protecting assets.

Caring For Your Own Financial Wellbeing Too

Attending to a disabled spouse’s expenses and stressing about the many complex issues now confronting you can understandably cause neglecting your own financial needs. Seeking personal financial advice provides an unbiased sounding board ensuring your future security too. Qualified financial counselors or fiduciary advisors can offer:

  • Retirement planning: Get projections if retiring early is necessary as caregiver. Review how carrying for spouse impacts your Social Security benefits.
  • Insurance analysis: Determine supplemental policies needed to cover your health costs and maintain savings if unable to work while caregiving.
  • Tax advice: Consult on allowable medical expense deductions, dependent/spousal tax credits or other ways minimizing your tax burdens.
  • Investment guidance: Get assistance adjusting investment time horizons or risk tolerance levels to ensure reaching future financial goals.
  • Family budget help: Receive suggestions managing household costs or revising budgets given new single income realities.
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By making your financial stability a priority too, you position both of you better in coming years through smart management today.

Final Tips

Caring for a spouse with significant health issues or disability while navigating unfamiliar financial territory feels daunting. Just remember:

  • Seek professional legal and financial expertise when needing guidance or accountability.
  • Build support systems to assist during difficult periods.
  • Practice mindful self-care and stress coping strategies for your own health too.
  • Expect good days and bad days emotionally and respond gently.
  • Appreciate all positive progress made, no matter how small it appears.

Implementing organization systems allow prioritizing what truly matters – providing loving companionship to your spouse during a challenging season of life needing you most. This is the ultimate privilege and gift.

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