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Topic: Elder Care Planning
Q: My parents are getting on in
their years and while there have been no major problems, I’m concerned
about planning for them if they decline in health or mental capacity.
What can I do now to prevent problems later?
A:
Caring for an aging spouse, parent or a close
relative can be a financial strain for families-sometimes even a financial
nightmare. For example, the Journal of the American Medical Association
reported that one-third of families caring for a seriously ill member
spent most or nearly all of their life savings. Caregiving involves no
small number of families, either. Roughly one in four households provide
caregiving to persons aged 50 and over, according to the American
Association of Retired Persons and the National Alliance for Caregiving.
Here
are several strategies that can help minimize the financial impact of
caring for an aging adult in your family.
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Plan.
The further ahead, the better. Start by writing down the current and
potential needs of the person. Will they eventually have to move to a
nursing home or other care facility, or require at-home health care?
Can they use less expensive alternatives? Do they need someone to
manage their finances, such as paying bills? Can family members or
friends help? Review these needs both with the ill person and with
family members.
-
Review
personal financial resources.
Locate and review bank and savings accounts, checkbooks, insurance
policies (life, disability, medical, long-term care, etc.), will,
living will, investment accounts, retirement accounts, stock
certificates, outstanding loans, and pension and Social Security
payments. If the person is still employed, review employee benefits.
-
Put
legal documents in place.
Legal instruments such as a durable power of attorney, living will,
health care power of attorney, and a will are important for any adult,
but especially for someone at risk of being declared legally
incompetent. Without these basic documents, providing caregiving can
become much more complicated and expensive. Review as soon as possible
these and other appropriate estate planning documents, such as titling
of assets or establishing a trust.
-
Review
community and government financial resources. While most families prefer to draw on their own
resources, it may become financially necessary to seek government or
community assistance. Review the eligibility rules for Medicaid,
Medicare, Social Security disability income, supplemental security
income, Veterans benefits and local public assistance. Community
resources such as Meals-on-Wheels and Visiting Nurses also may be
available.
-
Create
a spending plan.
With the person's needs and financial resources clarified, create a
spending plan that will balance out expenses and income. If major
expenses are still ahead of you, a spending plan should save as much
as possible out of current income for future needs. Also take into
account use of benefits and capital resources.
-
Review
investments.
Cash-flow needs are or will likely become paramount. While it's
important to invest for long-term growth, a larger-than-average
portion of the portfolio may need to be kept in lower-risk investments
such as money market accounts or short-term bonds.
-
Buy
long-term care insurance.
If the aging adult can still qualify for long-term care insurance, buy
a good personal policy. Children sometimes pay for the premiums if the
parent can't; it's less expensive than paying out-of-pocket for care
later.
-
Keep
taxes in mind.
Tax laws provide breaks for buying and using long-term care insurance,
and the use of living benefits from a life insurance policy. A
caregiver also may be able to claim the aging adult as a dependent if
they provide more than half of their support and satisfy other
dependent rules such as income limitations. Adults who share
caregiving responsibilities with others, such as siblings, may need to
rotate the expenses and the deductions claimed each year. Taxes also
should be kept in mind when selling investments to provide more ready
cash.
-
Take
care of yourself.
Caregivers often sacrifice their own needs. A caregiver's failure to
save for their own retirement, carry adequate life and health
insurance, and have basic legal documents could force the caregiver to
later rely financially on others.
-
Seek
professional help.
A Certified Financial PlannerTM can help with cash flow,
taxes, investments and overall financial planning. An attorney can
review legal documents and government assistance rules, as well as set
up any necessary trusts. A geriatric care manager can help find
appropriate living facilities or at-home care.
< Back
CFP®, CERTIFIED FINANCIAL
PLANNERTM, and
are certification marks owned by the Certified Financial Planner Board of
Standards, Inc. These marks are awarded to individuals who successfully complete
the CFP Board’s initial and ongoing certification requirements.
Disclaimer
"Ask Our Experts" is intended as a medium to reply to
frequently asked financial questions and to provide answers which are
appropriate for most consumers. We make every effort to ensure that
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We attempt to provide responses that are appropriate to the circumstances
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you should not assume that a response to a given question will be appropriate in
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advice of a qualified professional who is aware of the details of your personal
situation prior to making any important financial decisions.
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