If you are a caregiver, one of the questions you must certainly have thought of is, “How do I step into the role of managing Mom’s finances if necessary?” This issue is usually thought of after the fact. In other words, Mom has had a stroke, has been discharged from a hospital to a nursing home, and now you, the caregiver, have to figure out how to pay the bills.

The best time to address these issues is long before a crisis happens. Every adult should have legal documents in place that plan for an unforeseen illness that might temporarily or permanently necessitate someone else’s handling your finances and making medical decisions.

The easiest way to legally allow someone to take over for you is by signing a Durable Power of Attorney for Finances document and a Durable Power of Attorney for Health Care.

A Durable Power of Attorney for Finances allows the person signing it (the principal) to appoint a trusted relative or friend to be an agent. The agent can manage finances immediately or at some future time. A Durable Power of Attorney for Finances is generally used to pay bills, manage bank accounts or handle other legal and financial matters. With a Durable Power of Attorney for Finances, all property remains under the principal’s ownership. However, the agent may act on the principal’s behalf to manage the finances, including interacting with credit card companies, employers or government agencies.

Persons considering a Durable Power of Attorney for Finances should choose an agent carefully: someone who is trustworthy, capable and knows them well enough to be able to make decisions according to their wishes. Agents must use the utmost care in using the principal’s money for the principal only and not for themselves. There is no court oversight to ensure that the agent is responsible nor to prevent financial abuse.

A Durable Power of Attorney for Finances can be signed only by someone who is mentally competent enough to understand the document. If Mom already has dementia or is mentally incapacitated by a stroke, it is probably too late for this document.

You have to decide whether you want the document to be effective now or in the future. A younger, healthy person would probably want to sign a “springing power of attorney,” which takes effect only upon incapacity. An older person who is already encountering problems with managing finances will probably want to appoint an agent whose powers are effective immediately.

Because of the increasing levels of financial abuse perpetrated on elders, banks and other financial professionals may be reluctant to honor the Power of Attorney for Finances. Although each state has its own laws, the principal may need to take the Power of Attorney to the financial institution herself, and sign the bank’s own Power of Attorney card as well.

Remember, a Power of Attorney for Finances can always be revoked if the principal changes her mind, or the agent turns out not to be trustworthy.

Another tool for financial planning for incapacity is to prepare a living trust. This is a legal document that holds property including real estate, bank accounts, etc. for the beneficiary and that is managed by a trustee (usually the person creating the trust). The benefit of creating a living trust is that if the trustee becomes incapacitated, the terms of the trust indicate who should take over the trust and how they should use trust assets to care for the beneficiary. It also spells out how the assets of the trust will be distributed after death of the primary beneficiary. A living trust usually requires an attorney to prepare it.

If you need to assist your loved one with finances, find out first whether he or she has already done financial or estate planning. This information can save a lot of time, money and aggravation. These documents are usually kept in a black three-ring binder.

Janet Morris is a practicing attorney in the area of elder law with Bet Tzedek Legal Services, The House of Justice, in Los Angeles. Through her Family Caregiver Project she assists elders and their caregivers with a variety of legal issues. Janet is an executive board member of the California Coalition of Caregivers and sits on the board of the Alzheimer’s Association, California Southland Chapter. She has co-authored numerous publications including the “Caregiver Companion.” Fluent in English and Spanish, Janet has given hundreds of speeches in both languages. In 2005, she received the Caregiver of the Year Award from AARP and KCET. In 2007 she received an award from MetLife for her contributions to the area of caregiving. Send your questions to Janet@smartnow.com.