People are having kids later in life, and their parents are living longer. This means more people are taking care of their kids and their parents at the same time. It's important to consider the financial aspects of taking care of aging parents.
This may be a topic that is very timely in your personal life, I, too, experienced this with my parents. I think one of the more challenging things to do when facing the declining health and independence of your parents is to know when to step in and where to start.
Have the conversation before a crisis
I think the first step is a gentle conversation with your parents or surviving parent. Experts in this area recommend a great deal of patience and sensitivity when broaching the subject of finances as the dialogue will most likely include how to plan for a chronic illness and a parent’s mortality. Not the kind of stuff families enjoy discussing over the dinner table.
Approach the subject from your parents’ perspective, you might be able to give an example of how one of their friends had to deal with finances and the challenges that can come as we grow older. Be careful not to make the conversation about you and your siblings. The conversation is about putting a plan in place for the parent. You want to avoid a crisis or an emergency dictating what the plan will be.
Get organized
This is a great time to help your parents get organized. Ask if you can help them put together a binder or a file that would include important documents such as their will, birth certificate, marriage certificate, power of attorney, health insurance information, health care directives, military records, bank account information, investment account information and other documents you collectively deem to be important. Include in the binder or file the contact information for their attorney, accountant, financial advisors and physicians.
My two sisters and I went through this process with my aging parents a few years ago. A year ago in July, my father passed away after a brief illness. Having his information organized made a difference in my sisters and I being able to navigate my mother through what seemed like an endless and confusing process that must be completed after the death of a spouse.
Beware of scammers
Two things we were not prepared for and had not adequately anticipated were the scams that proliferate upon an elderly parent’s death and the importance of having a secure system for passwords. Thank goodness my mother had her wits about her to not be taken advantage of during a difficult time. The day my father’s obituary was published, my mother began receiving phone calls from individuals stating they were with a bank where my father had an account. The name of the bank is not important, but the bank name did appear on the phone’s caller ID. The conversation went something like, “Mrs. Patterson we are sorry for your loss. We at the bank want to help with your accounts and make sure they are not tied up in probate. Could you please verify Mr. Patterson’s account number for us? We will also set you up for online banking so you can immediately access the account. We just need the username and password that was in use by Mr. Patterson.”
What a despicable person to try such a scam on an elderly widow. My parents, like each of us, access their credit card statements, their cell phone accounts, insurance claims and many other day-to-day items through the internet. Each of these accounts and services should, and did, have unique passwords. It was quite the challenge for my siblings and I to assist my mother in gaining access to these password-protected websites. A list of usernames and passwords locked in a small home safe or other secure location would have been a tremendous help.
Transparency and documentation
When you are striving to help your aging parents with their money, two things are critical for all involved: transparency and documentation. Once you have agreement from your aging parents that they want your assistance, it is critical that you involve your siblings. Unfortunately, I have seen family strife created when one sibling is not in sync with the other siblings in the assistance that is being provided to mom or dad. Make sure all family members involved are made aware of any financial actions or transactions that occur.
Talk with an attorney and have a power of attorney document prepared while your mom or dad is still of sound mind. The days before my father passed away, we acted on his Power of Attorney and were able to make some important arrangements.
Seek professional counsel
It is important that a qualified attorney or elder law attorney be a part of the planning process with your aging parents. Here are some of the questions you will want to cover:
- Are wills up to date?
- Has a power of attorney been established?
- Has a healthcare directive been completed?
- Are assets titled properly so as to maximize government benefits and minimize assets being eroded?
This last item is what I see getting missed the most or not acted upon until an emergency occurs. Many aging parents will need some form of assistance when dealing with a chronic illness. If they do not have the assets to pay for care or do not have insurance, their best option will most likely be Medicaid.
Medicaid rules vary from state to state but, in general, a recipient of Medicaid benefits must impoverish themselves, meaning spend down almost all their assets, before benefits will be paid. There are prudent and legal strategies an elder law attorney might recommend to help lessen the loss of assets in order to qualify for Medicaid benefits. The key is for your parents to have the conversation well before care for a chronic illness is needed.
It’s tough on everyone
I see clients having to help their parents physically, emotionally and financially, and it’s difficult for everyone. An adult child giving up time with their spouse and children to care for an aging parent puts an enormous amount of stress on everyone involved. This stress is heightened when the adult child also puts their career on hold.
A baseline for the best way to handle caring for aging parents is to have a conversation about their wishes and their finances. Help them get organized. If they have not already done so, get them to an elder law attorney.
Talk with your parents about how extended care costs should be paid. Do they have adequate assets and insurance, or should planning be started now to make the best use of government benefits? Have the conversation, make a plan and communicate the plan to your immediate family.
This material is for informational use only and does not constitute advice or the solicitation of any product or service.
Greg Patterson offers Advisory Services through Concourse Financial Group Advisors (DBA Simplicity AFG), a Registered Investment Advisor and division of Concourse Financial Group. Securities offered through Concourse Financial Group Securities (DBA Simplicity AFG), a Registered Broker/Dealer and Member FINRA/SIPC.
Representatives may only conduct business with residents of the states for which they are properly registered.
