Episode 25: Why Naming the Caregiver Adult Child (instead of your Spouse with Dementia) as Beneficiary of your IRA Can Backfire
Episode 25
Host: Jill Mastroianni
Why Naming the Caregiver Adult Child (instead of your Spouse with Dementia) as Beneficiary of your IRA Can Backfire
In this Tuesday Triage episode, Jill answers a listener question from Molly in Washington, whose father is considering naming her as the beneficiary of his IRA to help care for her mother, who has dementia. Jill explains the potential pitfalls of naming the “helpful child” as a beneficiary, shares a real-life cautionary case from the Michigan Court of Appeals about mishandling a power of attorney, and offers guidance on safer ways to ensure assets are available for care when they are needed most.
What Jill discussed:
The central question: Should Molly’s father name her as IRA beneficiary to help care for her mother?
Three major problems with naming a child as beneficiary in this context:
Mortality risk – what happens if Molly dies before her mother
Legal/financial risk – exposure of funds to lawsuits, creditors, and divorce
Lack of accountability – no legal requirement to track or use funds as intended
A Michigan Court of Appeals case illustrating breach of fiduciary duty by an agent under a power of attorney
The fiduciary duties of an agent: good faith, loyalty, prohibition against self-dealing, and meticulous record-keeping
Practical advice: If you’re managing someone’s finances, keep accurate records from the start and get help if needed.
Link
Tuesday Triage episode on powers of attorney: How Powers of Attorney Work, When to Use Them, and When It’s Too Late to Get One
Connect with Jill:
Website: DeathReadiness.com
Email: jill@deathreadiness.com
Subscribe to receive news and updates.
Love this episode? Please rate and review in the Apple podcasts app!
Submit a question for Tuesday Triage
Did you enjoy this episode? Share it with someone you care about.
-
Jillian Mastroianni (0:00):
Your dad thinks naming you as the beneficiary of his IRA will make it easier to care for your mom who has dementia if he dies first.
But what if that choice actually puts the money- and your mom - at risk?
In this episode, I'll walk you through the hidden pitfalls of naming the “caregiver child” as beneficiary and the safer way to make sure the money is there when it's needed most.
Welcome to the Death Readiness Podcast. This is not your dad’s estate planning podcast. I’m Jill Mastroianni, former estate attorney, current realist, and your guide to wills, trusts, probate and the conversations no one wants to have. If your Google search history includes, “Do I need a trust?” “What exactly is probate?” and “Am I supposed to do something with mom’s Will?” you’re in the right place.
(0:58) When I was just starting out in law, I remember talking to a partner from another firm who was bragging about a case she'd handled. Her client was on her deathbed, worried about how to provide for her sister with special needs.
Instead of setting up a special needs trust, the partner asked, is there anyone you trust completely? The client said, my brother. So the partner's advice was simple. Leave the money to your brother and trust him to take care of their sister.
And I remember thinking—what happens if the brother dies tomorrow? Is the sister out of luck?
That conversation stuck with me, because it showed how easy it is—even for professionals—to recommend a shortcut that feels simple in the moment but can create huge problems later.
And that’s exactly what came to mind when I read today’s Tuesday Triage question from Molly in Washington state.
(01:52) Molly’s parents are in their late 70s. Her mom has moderate dementia, and her care needs are growing. Her dad is still healthy and sharp.
Here’s Molly’s concern: Her dad has an IRA—an individual retirement account—and she’s wondering how it should be set up to best support her mom if her dad dies first.
Should her dad name Molly as the beneficiary so Molly can use the funds for her mom’s care? If the assets stay in her mom’s name, how could Molly access those funds to help her mom?
One important detail is that Molly’s parents signed financial powers of attorney while her mom was still competent.
A power of attorney is a legal document that lets one person (the “principal”) give another person (the “agent”) the authority to act on their behalf. It can cover financial decisions or healthcare decisions. I did an episode on powers of attorney that I’ll link to in the show notes if you want to learn more on that topic.
(02:53) In Molly’s case, her dad is the current agent. Molly is the successor agent if her dad can’t act. This means that even if Molly's mom is named as the beneficiary of her dad's IRA, Molly can still manage the IRA on her mom's behalf. And if Molly can't act, her brother is named as the agent.
While a trust could be a great tool here, Molly’s mom already has a power of attorney in place—with successors lined up three deep—so I’m going to save the trust discussion for another Tuesday Triage. For now, just know that naming a trust for Molly’s mom’s benefit as a beneficiary of the IRA is also an option.
And I understand exactly where Molly’s coming from.
She knows caring for her mom will be overwhelming, and she’s trying to set herself up for success—making sure she can focus on her mom instead of getting tangled up in red tape.
(03:53) I hear similar questions from parents of children with special needs—especially single parents. They sometimes skip creating a special needs trust and instead leave money to a sibling, cousin, or close friend, trusting that person to “do the right thing.”
But there 3 big problems with Molly’s dad leaving the IRA to her, expecting her to use it for her mom’s care:
Problem #1: Molly is a mere mortal.
If Molly inherits the IRA and then dies while her mom is still alive, that IRA doesn’t automatically go back to her mom—it becomes part of Molly’s own estate.
Also, the success of this setup assumes a lot: that Molly will keep meticulous records, never dip into the funds for other needs, and make sure the inherited IRA (and the account holding the required minimum distributions) names the right successor beneficiary. It also assumes the successor beneficiary Molly named will follow those same instructions. That’s a long chain of “ifs” for something as important as Molly’s mom’s care.
(05:02) Problem #2: Legal and financial risks. We live in a litigious world. Once the IRA (or the required minimum distributions from it) is in Molly’s name, it’s exposed to her personal liabilities. If Molly’s in a serious car accident and gets sued, those funds could be taken to satisfy a judgment.
Problem #3: There’s no built-in accountability. When funds are in your own name, there’s no legal requirement to track them separately or use them exactly as intended. Even with the best intentions, it’s easy to mix them with personal accounts, borrow against them, or spend them on other needs—especially if life throws curveballs. And once the lines blur, it’s hard to untangle them later.
(05:57) In Molly’s case, there’s already a power of attorney in place. If her dad dies first and her mom is the named beneficiary of the IRA, that asset would pass into her mom’s name. Molly, the person acting under her mom’s power of attorney would then manage it.
And here’s what I want to emphasize: If you’re an agent under a power of attorney, like Molly, take that role seriously. Very seriously.
Let me give you an example from a Michigan Court of Appeals case decided in April of this year.
The case involved a woman I’ll call Barbara. Barbara had four adult children. In 2013, she signed a financial power of attorney naming one of them, her daughter Cynthia, as her agent. Cynthia accepted the role in writing, agreeing to act in Barbara’s best interest and keep accurate records of all transactions.
(06:49) Fast-forward to May 2021: Cynthia petitioned to be appointed as Barbara’s guardian. Barbara responded to the petition, saying that she didn’t need a guardian and had left Cynthia’s home “due to financial mismanagement and mistreatment.” The court stepped in and suspended Cynthia’s authority as agent under Barbara’s power of attorney.
Although Cynthia agreed to account for how she handled Barbara’s money, she repeatedly failed to provide proper documentation, even after being ordered to do so multiple times.
The court found major problems in Cynthia’s accountings:
More than $100,000 in expenses had no receipts or supporting documentation
Some funds were spent on improvements to Cynthia’s own home.
Approximately $10,000 in expenses were Cynthia’s personal expenses
More than $55,000 in cash withdrawals from Barbara’s account were unexplained.
(07:45) The court ruled that Cynthia had breached her fiduciary duty to Barbara. And she wasn’t entitled to be reimbursed from Barbara’s estate for her attorney fees.
The Michigan Court of Appeals opinion came out in April 2025, nearly four years after Cynthia first petitioned for guardianship. Meanwhile, Barbara’s estate was footing the bill for the court-appointed guardian, the guardian ad litem, and their attorneys.
Here’s the lesson I want you to take away - Being an agent under a power of attorney is not a casual role. It’s a legal position with strict fiduciary duties—good faith, loyalty, no self-dealing, and meticulous record-keeping. If you fail in those duties, you can be removed, face legal consequences, and cost the very person you’re supposed to protect a lot of money.
If you’re managing someone’s finances, do it right. Even if you know you’re not doing anything wrong, be prepared to prove it one day. Maybe the person you’re caring for will question you. Maybe a sibling will become suspicious.
(08:50) Get help now so you can do it the right way from the start. Don’t get in over your head and keep telling yourself I’ll “catch up later.” You won’t. And if you haven’t been keeping perfect records so far, it’s not too late to start.
I’m not a money manager, and I don’t do bookkeeping for clients but I’d be happy to help connect you with someone who does.
And Molly—thank you for sending in today’s Tuesday Triage question.
If you found this episode helpful, I’d love for you to share it with someone you think could benefit from it.
If you have a question you’d like me to answer on a future Tuesday Triage episode, whether related to today’s episode or something totally different, send me an email at jill@deathreadiness.com or visit deathreadiness.com/TuesdayTriage. I’d love to hear from you.
(09:46) This is Death Readiness, real, messy and yours to own. I’m Jill Mastroianni and I’m here to help you sort through it, especially when you don’t know where to start.
Hi, I'm April, Jill's daughter. Thanks for listening to The Death Readiness Podcast. While my mom is an attorney, she’s not your attorney. The Death Readiness Podcast is for educational and entertainment purposes only. It does not provide legal advice. For legal guidance tailored to your unique situation, consult with a licensed attorney in your state. To learn more about the services my mom offers, visit DeathReadiness.com.
