Help automating finances for low income sibling who is bad with money

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Topic Author
Kow
Posts: 24
Joined: Fri May 27, 2016 5:04 pm

Help automating finances for low income sibling who is bad with money

Post by Kow » Sun Apr 29, 2018 5:11 pm

I have a sibling who earns minimum wage and struggles with money management despite receiving help from across the family including a paid off house. I'm looking for ways to share with my parents assist in the management of his money so he can not continue to make poor, short sighted decisions. For example, last night he called me around a birthday gift from a check cashing joint if he could cash it there because he was overdrawn from his checking account and wanted more cash immediately. It was a 10% charge to cash it there so I told him no. Between the overdraft and the cash checking fee he would have wasted almost a whole day of work. I give that as an example so obviously understand both how bad a decision that is and don't need any judgement about cutting him off. He has some special needs so he does need some support. What i'm looking for is a better way for family to help hold him accountable and avoid this waste while giving him an easier way to win.

My current thought involves:
1 joint account with him and my mom that is a bank local to my parents and he does not have a debit card - This is where all recurring bills will be paid from. Car Insurance, Property taxes, HOA, and medications would come out of this account on an automatic basis with bills going to my parents. In case of any additional medical needs my parents would be able to fund this account in emergency.
1 prepaid debit card that gets funded with the rest of his pay check, this will be his bi-weekly expenses used for food, gas and other odds and ends and will not be able to be overdrawn.

Open to any and all options if there are other ideas. Thanks.

Nyc10036
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Re: Help automating finances for low income sibling who is bad with money

Post by Nyc10036 » Sun Apr 29, 2018 5:19 pm

Last year I volunteered for a few weeks in the accounting department of a non-profit set up to help developmentally-disabled adults.
What they did was for the group home manager discuss with the individual what the anticipated expenses were for the upcoming month or 2 weeks - don't remember. They gave the individual cash usually $40-$50. Not sure that cash is good but that is what they did.

In your situation, I would say no joint account.
Your parents payment pay the rent, insurance etc.
Your sibling gets an allowance per week.

SeekingAPlan
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Re: Help automating finances for low income sibling who is bad with money

Post by SeekingAPlan » Sun Apr 29, 2018 5:38 pm

If the bills and responsibility are made less visible to your sibling, what happens when mom is gone or no longer able to help? Will you be taking over that process?

jminv
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Re: Help automating finances for low income sibling who is bad with money

Post by jminv » Sun Apr 29, 2018 6:26 pm

Edit: Did not see the special needs line, it was a bit late in the evening here. Apologies.
Last edited by jminv on Sun Apr 29, 2018 9:26 pm, edited 1 time in total.

Topic Author
Kow
Posts: 24
Joined: Fri May 27, 2016 5:04 pm

Re: Help automating finances for low income sibling who is bad with money

Post by Kow » Sun Apr 29, 2018 6:32 pm

NYC - He is able to live on his own and is not at the "special needs" level though has significant difficulty holding down a job / interacting with others based on some very certain diagnoses. Some of his funds should be going to pay for his bills so how would they get that money from him each month? I worry writing a check becomes a once in a while thing given they live far away and want to automate that.

SeekingaPlan - I am the trustee and would take over / help out from the funds they will have set aside for him which should be enough

JmINV - It's one of those cases that is more difficult then being a fully capable adult, but that line is tough to find. He is clearly not a high earner. I totally respect the cut-off scenario but don't think that's the right option as his medication will likely be what get's skipped and my mom won't allow that.

Thanks for the responses so far.

CedarWaxWing
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Re: Help automating finances for low income sibling who is bad with money

Post by CedarWaxWing » Sun Apr 29, 2018 7:41 pm

"Special Needs" is not an exact term of course, but if he is going to need special assistance all of his life is it possible that a trust might be a useful way to manage funds gifted to him rather than a joint account? You and your mom could each have transaction authority over funds contributed to help him as is useful and necessary so as to make sure they are used for his benefit as intended?

You could also decide, with him, how much of his own earnings, if any, should or should not go into the trust, or if he can manage his own earnings with his own account. Your description suggests that he can manage some money, but perhaps need a safe way to make sure he cannot mismanage large sums, or cannot be taken advantage of "friends" who could prey on him.

For years we did something similar with my MIL and it saved her a lot of money when some scum bag started using her CC without her permission.

Sounds like he is lucky to have a concerned family who is willing to help out.

ParsimoniousFrontier
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Re: Help automating finances for low income sibling who is bad with money

Post by ParsimoniousFrontier » Sun Apr 29, 2018 8:07 pm

By creating a joint account with your mom you are linking the liabilities of your sibling with you mom's assets. If he makes poor financial decisions, it's not much of a leap to consider he might make poor decisions all around (not just financial), potentially leading to a lawsuit/judgment that would open your mom up to creditors.

If assets could be pooled for a trust, this might be a good opportunity to take some of the subjective (sibling, child) emotional ties out of the equation. A trustee could be appointed to execute the terms of the trust that would include things like reasonable living expenses plus a small amount for 'extras' as deemed appropriate. That person could be corporate trustee or a (salt-of-the-earth-type) family friend who would not budge on the incessant requests for needless items/getting bailed out. It would potentially help steer your brother towards more sensible financial choices in the future, if that capacity exists.

This is obviously a tough situation. There may not be reasonable assets to justify a trust, in which case I think you work hard (as a family) not to enable your brother. Best of luck. Your brother is fortunate to have a caring family.

OnTrack2020
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Re: Help automating finances for low income sibling who is bad with money

Post by OnTrack2020 » Sun Apr 29, 2018 8:51 pm

We have an adult special needs son currently in college who, in terms of money management, we keep things pretty basic (a savings account and a checking account). Our son tends to be pretty frugal.

You will needs to set things up with your/your mom's name on the accounts. My question for you is where does his paycheck money go now? Does it go into one account already? I'm assuming that most companies these days have direct deposit for wages so it would automatically go into one account. I would say keep things simple and when money goes into his account each payday, you/your mom transfer the amount needed to pay his bills into another checking account that you can pay his bills from. You need to tell him you are doing this. The amount that isn't needed for recurring bills he should keep in an account that you also have your/your mom's name on that you can at least see. So basically there will be two accounts. Our son has a card for the checking account; that way if he needs to pay gas or get something at the store, that is what he uses to pay. He normally will text me with the amount he spent, and I just text back with the new amount he has left in his checking.

I do think that if you are going to set up an account to be used to pay his recurring bills from, that there probably needs to be a way that he can't necessarily walk into a bank and pull money out of that account. I do not know what the bank could do in this instance.
Last edited by OnTrack2020 on Sun Apr 29, 2018 8:58 pm, edited 1 time in total.

Mudpuppy
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Re: Help automating finances for low income sibling who is bad with money

Post by Mudpuppy » Sun Apr 29, 2018 8:58 pm

Kow wrote:
Sun Apr 29, 2018 5:11 pm
He has some special needs so he does need some support. What i'm looking for is a better way for family to help hold him accountable and avoid this waste while giving him an easier way to win.
Kow wrote:
Sun Apr 29, 2018 6:32 pm
NYC - He is able to live on his own and is not at the "special needs" level though has significant difficulty holding down a job / interacting with others based on some very certain diagnoses. Some of his funds should be going to pay for his bills so how would they get that money from him each month? I worry writing a check becomes a once in a while thing given they live far away and want to automate that.
I still think a trust is your best vehicle to ensure your brother's basic needs are met. A trust will ensure that withdrawals are being used to tend to his basic needs, while a joint account can be drained by him at any time, for any reason. And it doesn't have to be a special needs trust, as trusts can be established for a variety of reasons. But if he receives or is expected to receive any government assistance, special needs trusts are good for that.

Also keep in mind that you are not going to be able to force him to be better with money. What you can do is protect some money from his bad decisions through the trust so the money is still there to help him when he needs it.

OnTrack2020
Posts: 442
Joined: Mon Mar 20, 2017 10:24 am

Re: Help automating finances for low income sibling who is bad with money

Post by OnTrack2020 » Sun Apr 29, 2018 9:03 pm

OP, please tell us more. Does your sibling qualify for any government assistance? Since you mentioned you are the trustee, is there already a trust set up?

Topic Author
Kow
Posts: 24
Joined: Fri May 27, 2016 5:04 pm

Re: Help automating finances for low income sibling who is bad with money

Post by Kow » Mon Apr 30, 2018 5:37 am

OnTrack2020 wrote:
Sun Apr 29, 2018 9:03 pm
OP, please tell us more. Does your sibling qualify for any government assistance? Since you mentioned you are the trustee, is there already a trust set up?
There is a trust in my mom's will, with me as the trustee. No current trust is set up. Also no government assistance as of yet as has been denied in his state.

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