A Live Chat with The Washington Post’s Color of Money columnist Michelle Singletary posed an interesting question about handling a parent’s debt. The person who wrote in to the chat has financial power of attorney and has had to move that parent into an assisted living facility. The parent had $3,000 in credit card debt that the credit card company is pressuring the adult child to pay off using monthly payments: “While his account had been closed for fraud, I didn’t see anything too suspicious. I called the cc company to discuss options. They offered me a 5 year payment program at 6% which is $62/mo. I know I am not personally liable for his debt, and he is practically judgment proof at this point, but I’m wondering what you would recommend.”
This person is empowered enough to know that having power of attorney does not mean being automatically responsible for someone’s debts. The ins and outs of handling this kind of responsibility can sometimes come as a surprise and many people do not know what to do. If you did not educate yourself ahead of time because you were not anticipating the need to manage someone else’s finances, you can still consult with a Fee-Only financial planner. You do not have to go it alone and try to handle this responsibility without expert advice.
Singletary recommended continuing to negotiate with the credit card company to get a cash settlement (as opposed to monthly payments with interest), adding: “Yes, you have the power of attorney (POA) but you are not obligated to do more than try to manage his affairs and not take on his debts.”
(By the way, this live online chat session also includes advice on getting a password manager, something we’ve mentioned before since password access is a part of estate planning. The person who wrote in about credit card debt had to repeatedly ask the credit card company for information and it took time to get past statements.)
©Bring Clarity to Your Finances. Financial Power of Attorney: Are You Responsible for Covering Debt? is a post from Bring Clarity to Your Finances