…Before it’s too late
by Samantha SteinMs. Stein is an online content manager for Association for Long Term Care Planning (ALTCP). Visit www.altcp.org
Helping elderly parents with finances is a nightmare for adult children. Taking over your parents’ finances can be extremely successful. But there’s a way to handle this situation like a pro. How?
By having a plan in place and dealing with it one step at a time, you can easily manage the finances o your elderly parents.
Step 1: Start the Conversation
Initiating the conversation about money with your elderly parents is the hardest part. According to Kathleen Burns Kingsbury, a financial services industry consultant, “almost half of Americans say that the most difficult topic to discuss with others is personal finance and they would rather discuss death, politics or religion.”
Also, statistics published by TD Ameritrade shows that adult children do not discuss financial support to their elderly parents because of the following reasons:
Talking to your parents is hard and can be very stressful but it’s inevitable. You cannot expect them to reach out first and ask for financial help. They would rather keep things to themselves than become a financial burden to you. Don’t put off the conversation with your elderly parents. Start as early as you can, speak honestly and raise your concerns as swiftly as possible.
Step 2: Assess Money Management
It may not be evident that your parents are struggling with their finances so it is best to be observant about signs of trouble in their home. Do you find stacks of unopened bills? If yes, then it’s a sign that your parents are having problems paying their monthly bills.
It is recommended to check on them regularly to avert situations such as this. Talk to your parents and ask them how you can help them. There are various types of payment methods today that would make paying bills easier like setting up online accounts that would automatically pay for their bills or you can take over paying their bills by writing checks on their behalf, which is only possible if you have POA.
Step 3: Plan for Long Term Care
One of the most overlooked factors when planning for retirement is healthcare and long term care cost. Most elderly parents underestimate their risk of requiring long term care, which is wrong because according to a study by U.S Department of Health & Human Services, 52% of Americans turning 65 today will develop a disability that would require long term care services and supports (LTSS).
The cost of care is also another factor that parents should prepare for. Long term care costs are rising today and without an insurance policy in place, Americans will have a hard time paying for care expenses. Here’s the average cost of long term care to give you an idea how much you need to shell out in case you will need LTSS:
Step 4: Check on Legal Documents
Find out if your parents have taken the necessary steps to protect their financial assets and to make sure that their wishes will be followed when the time comes that they can no longer make important decisions.
Estate planning is very important especially if you have assets to protect. This will ensure that your parents’ estate and other assets will not incur costly taxes and costs. Also, it allows them to decide who will benefit from their estate.
Here are some documents that your elderly parents should have:
1. Advance Directives – These are documents containing instructions on how your parents want you to take care of them when they can no longer do it on their own.
These are the two types of advance directives:
• Living wills or Advance health care directives – written instructions on how your parents wished to be cared for. These decisions include the type of medical assistance or care you want or you do not want to be administered to our parents.
• Medical power of attorney – appoints a person who will be responsible in making decisions regarding your parents’ health care.
2. Living Trust – a document that places your parents’ assets into a trust during their lifetime. Your parents’ assets will be passed down to their heirs when they pass away.
3. Durable Power of Attorney – allows your parents to choose who will manage their estate when they can no longer make sound decisions.
Step 5: Talk about Scams and Frauds
There are around 25 million Americans who are victims of consumer fraud every year according to a study done by Federal Trade Commission and aging Americans are prime targets since they have most money.
Start a conversation with your parents about the different types of scams that are rampant nowadays. Some of the common scams are investment firms asking for immediate payment, phone calls claiming they are from IRS or Social Security asking bank or credit card information and people claiming to be grandchildren who are in trouble. Discuss this issue with caution and emphasize that everyone is vulnerable to fraud and we should be careful all the time.