Becoming a caregiver for an aging relative is a profound expression of love. You may find that you will begin to take on many of the responsibilities they might have had while raising you. Like raising a family, being a caretaker can be physically, emotionally and financially challenging but it is also extremely rewarding. It's a responsibility that millions of people take on each year out of love for their families.
Whether you are preparing to care for a parent or another relative, understanding and preparing for the financial implications can help you provide the best care possible.
Start the discussion with your family
Whether you think you'll provide direct care, decide to hire a caregiver, or both, you can work with your family members, including the relative in question, to create a plan.
Starting the conversation early can help you all reach conclusions without pressure to make a quick decision. You may want to cover the types of care that are available and learn which your parent prefers. For example, does he or she want to stay at home for as long as possible or prefer to live in an assisted-living home or elderly community?
You should discuss who'll be responsible for managing personal, financial and medical affairs if your parent can't handle those responsibilities anymore. Beyond making a verbal agreement, a parent can give someone legal authority by signing durable power of attorney agreements, which keep the delegation of decision-making authority intact even if your parent becomes incapacitated. There are two durable powers of attorneys, one for medical-related decisions, and a second for legal, personal and financial decisions.
Your parents might also want to execute a living will, also known as an advance directive. It has instructions for the medical treatments they want, or don't want, if they are unable to communicate.
Determine what resources are available to your parent
Your financial situation may depend in part on your parent's finances and the assistance that's available to him or her from outside sources. Creating a list of these resources ahead of time can help you all plan for the future.
☆ Your parent's finances. Together with your parent, and possibly with the assistance of a financial planner, you can create a list of your parent's current financial assets and future income.
☆ Government and non-profit programs. Medicare and Veteran Affairs benefits may be available for those that are 65 or older. Medicaid, a joint federal and state program, often provides benefits to those with limited income, although the qualifications and benefits can vary by state. There are also non-profit organizations that provide helpful services to the elderly.
☆ Family assistance. Whether it's unpaid care or financial assistance, also take into account the family’s contribution to your parent's care. Call a family meeting with your parent, siblings and extended family to discuss how you'll take care of each other.
☆ Professional support. You could hire an outside expert as well. A quick internet search may turn up organizations that specialize in working with families and elderly family members to plan for the future.
After gathering this information, you'll have a better understanding of where the caregiving funds will come from and how they can be used. You may also discover gaps in coverage that you may want to fill in on your own.
Look for tax savings while paying for care
As an adult child and caregiver, there may be ways to structure an arrangement to improve your parent's, and your own, financial situation.
Working with a tax professional, you may find there are ways to use the tax laws to maximize your parent's money. For example, if your mother has gifted you money, you could then use it to pay for her medical expenses. If you’re able to claim the expenses as a deduction, you could put your tax savings back into her medical care fund. You might also be able to claim medical expenses you paid on behalf of your parent, which could include supplies and at-home caretaking, as an itemized deduction.
Find the best services you can afford
There are many different types of programs available, and someone might move back and forth from one facility or service to another as their health and preferences change.
☆ Home care. Non-healthcare related assistance, such as buying groceries, preparing meals, cleaning the home, helping with bathing and other day-to-day tasks.
☆ Home health care. At-home health-related support, including services from a physical therapist, nurse or doctor.
☆ Assisted living. Assisted living homes are non-healthcare providing facilities that may provide supervision, a social environment and personal care services.
☆ Skilled nursing home. A care facility designed to deliver nursing or rehabilitation services.
Your parent’s location can impact which option makes the most sense, and you can research and discuss the pros and cons of your parent moving. For example, some states have Medicaid waiver programs that allow Medicaid recipients to receive care in their home or community rather than in a nursing home or long-term care facility. Also, a parent that lives near or with a relative might only require part-time outside care.
Bottom line: As you prepare to take care of aging parents, work with them to understand their wishes, needs and financial situation. Together you can explore the family’s ability to provide physical and financial support and learn about the help available from government, non-profit or other programs.
Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney.