Caring, and planning for the time when they can no longer care for themselves
by Jeff GitlenMr. Gitlen is affiliated with lendEDU.com, a marketplace for private student loans, student loan refinancing & consolidation, and personal loans, among other financial products.
Financial planning for elderly parents can be a highly rewarding and loving experience for your clients. It can also, however, be emotionally and mentally taxing—and in some cases, an incredibly difficult financial weight. In some cases, it can sap their available cash, savings, and even their own retirement funding—but it doesn’t have to.
While paying bills for elderly parents might seem like too much on top of their own costs, saving for their children’s college education, retirement, and other expenses, they can successfully plan for the situation and handle it in a financially savvy way. Below we will go over the steps they should take when it comes to helping elderly parents with finances.
Steps for Helping Elderly Parents With Finances
Having the Talk
Having a conversation with your aging parents about money can be uncomfortable; after all, they are probably the people who taught you about finances. It’s important, however, to have that talk before medical issues—such as Alzheimer’s, dementia, or other potential cognitive illnesses—make the conversation impossible.
The point of the talk is to understand what, if any, plans they’ve made in terms of wills, powers of attorney, and how they would like their affairs to be handled if they are unable to care for themselves. Your parents may be grateful you’re willing to help them, but they may also be embarrassed or feel defensive. As a result, it’s important to approach the subject in a loving way.
One strategy is to talk about the preparations you’ve made for yourself. You may want to phrase it as asking for advice. By bringing up your own plans and asking how they successfully planned for their own aging, you open the door for them to talk about it without the topic seeming confrontational or accusatory.
You could also mention the prevalence of financial scams targeting the elderly. If your parents aren’t internet savvy, they might let you help them get copies of their credit reports or set up credit monitoring to help protect them from identity theft or telephone scams. This could be a good gateway to understanding your parents’ financial situation and what they may need in terms of planning.
Above all, make sure they understand your concern isn’t because you think they are somehow incapable or even incompetent, but because you love them and want to help protect them—and ensure you’re in a position to help when the time comes.
Power of Attorney
One of the more important facets of financial planning for elderly parents is a power of attorney. There are different types of these. One allows you to make medical decisions on behalf of your parents, such as how many heroic measures are to be taken in a medical emergency or how to approach physical care. Others are financial and can be set up for a specific type of financial decision, or can even be very open and span a wide spectrum of all decisions that need to be made.
If your parents are able to handle their own affairs now, it’s a good idea to get started talking about what they would want if their health takes a sudden turn. While many ailments offer a timeframe in which to plan, some do not.
It’s important you and your parents discuss the idea of you being able to legally make decisions for them through a durable power of attorney. Feel free to bring in a professional to help; financial advisors, attorneys, or even a doctor can help make the case to your parents that a power of attorney should be in place before their health deteriorates.
When you’re helping elderly parents with finances you’ll need a complete picture of what is going on; understanding where their money is coming from and where it’s going is critical. In order to do that, you’ll need to get copies of all of the following:
- Bank statements
- Pensions, investment, or retirement accounts
- Tax returns
- Income sources
- Assets such as homes, boats, autos, etc.
- Insurance policies
- Credit report
You might need to start small, such as helping them get a copy of their credit report or assisting with their taxes. Be open and upfront with them. Let them continue to handle their own affairs as much as possible if they still can. This will help ease any tensions or discomfort between you and your parents.
Long-Term Care Insurance
In 2016, Genworth estimated that approximately 70 percent of people over the age of 65 will need some sort of long-term care in their lifetimes. That could come in the form of a home nurse, living in a residential assisted care apartment, a nursing home, or even hospice. Those types of care are incredibly expensive. Nursing home care averages $6,700 per month—and that is for a semi-private room.
If you’d like your parent to have the privacy of their own room, expect that cost to jump to over $91,000 per year. Even home health care can approach $4,000 per month depending on the state you live in. Having insurance to help cover these costs could end up being the difference between paying the bills for them successfully or being ruined by them.
If your parents are in a high-income bracket, they may already have plans in place or can cover the costs on their own. If they are close to the poverty level, Medicaid can help with costs. For middle-class families, however, the decision about insurance should come after some discussion and understanding of what can be expected.
Do research on your area, find out what the different options of long-term care can cost. If you do decide to take on a long-term care policy, make sure to get one that has inflation protection to keep your policy costs from skyrocketing later. Get a three-year term; the average nursing home stay is about a year for most people and you may not need a longer term.
Keep in mind that some insurance companies also offer hybrid policies that allow both long-term care benefits and life insurance on the same policy. Don’t be afraid to shop around for a good policy. While you may have an agent you or your parents normally deal with, be aware that sometimes an independent broker can get you a better policy.
If you have siblings, it’s important to get them on board with what you’re doing. Aging parents—and what happens once they’re incapacitated or gone—can cause deep resentment and conflict among other family members who may want to be involved in the process. There may be differences of opinion in how your parents go about handling their affairs, or even issues with the fact that you’re the person helping them.
As you start talking to your parents, talk to your siblings too, and explain why you’re doing what you’re doing. Find ways for them to be involved if they want to be, but make sure they understand you are taking the lead. If necessary, have your parents reinforce that—but don’t approach it as a “favorite child” thing; take the road of diplomacy and assistance.
Financial planning for aging parents can be an amazing experience—and it doesn’t have to bankrupt you or steal from your child’s college fund. Plan now, and plan smart. You and your parents will be glad you did.