Q&A - Elder Care Planning


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.

  • 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.