Your parents spent years caring for you when you were a child. There may come a time for you to return the favor. Understanding how elder care can affect your life, and your parents’, will help feel confident that you’re making informed decisions about their health, happiness and welfare.
Helping your parents manage their finances – this can be a sensitive issue. After all, giving up control of your finances can be a difficult decision for anyone. Having the discussion well before the need arises can lay the groundwork and provide you information you may need later. Work with your parents to establish a budget designed to make their assets last as long as possible. Remember to include:
- Income sources – retirement accounts, Social Security and disability benefits
- Financial assets – bank accounts, investments, life insurance and cash
- Bills – utilities, services and subcriptions
- Real estate – homes, investment properties and vacation properties
- Other assets – automobiles, boats and inheritances
- Liabilities – Mortgages, personal loans, credit cards and car loans
Legal issues – Help position yourself to protect your parents’ interests, as well as your own, by taking the following legal steps in preparation for the time when they may be needed. While it may be difficult for parents to share and plan for giving over control of legal, health and financial matters, having these mechanisms in place may help you more quickly act on their behalf in the future:
- Joint bank account ownership – allows you to act on your parents’ behalf and access funds for their care in an emergency
- Establishing a Durable Power of Attorney for Finances (DPA) – a mechanism for your parents to give you legal authority to make all financial decisions on their behalf
- Creating a Health Care Power of Attorney – allows your parents to give you the legal right to make decisions regarding their medical treatment when they are temporarily or permanently unable to make their own
- Helping them draft a living will – once in place, this directs medical professionals to withhold or withdraw life-sustaining treatment according to your parents’ wishes, such as if he or she is diagnosed with a terminal condition and is no longer able to state his or her preference
Paying for healthcare and long-term care – you may want to have a discussion now with your parents about how to pay for health expenses and long-term care in the future. That can help make sure you’re all on the same page about where those funds will come from. If your parents are are age 65 or older, Medicare can be a big help. Private supplemental insurance, known as Medigap, may cover many things Medicare won’t. Together, Medicare and Medigap can provide fairly comprehensive coverage. For seniors who are disabled or qualify as low-income, Medicaid is also an option for funding medical care. Eligibility requirements are intricate so you should speak with a Medicaid planning specialist before applying. Typically, there are three ways to pay for long-term care. :
- Government benefits – if your parents have little income and few assets, Medicaid may pay for their nursing home care. Keep in mind that Medicare covers only short-term stays in a nursing home for the purpose of rehabilitation after a period of hospitalization. If your parent is a veteran, he or she may be eligible for care in a VA facility.
- From savings – before paying out of pocket be sure you or your parents don’t qualify for assistance. You should turn to your savings only if you have to.
- Long-Term Care Insurance (LTCI), Linked Benefit and Life Insurance with a Long-Term Care Rider – The piece of mind offered by LTCI may be well worth the premiums. LTCI offers the most flexibility in terms of level of care desired and policy customization but be aware that premiums can rise with age. Linked Benefit products and Life Insurance with a Long-Term Care rider are somewhat less flexible but premiums can be guaranteed and some policies offer return of premium (ROP) or cash value that can be accessed if long-term care is never needed. Additionally, a Life Insurance policy with a Long-Term Care Rider offers the highest death benefit that can be received by policy beneficiaries free of income tax if care is never needed.
Preparing ahead of time for the care of your aging parents can help you preserve your finances and theirs, while giving your parents more options to sustain their quality of life.