When Your Parents Need a Hand
Sometimes, despite the best-laid plans, your parents need your help. Here's how to lend a hand without sacrificing your savings or your sanity. Or their dignity.
(MONEY Magazine) – Like the estimated 34 million Americans now caring for an aging loved one, you may be worried that one day soon your mom or dad will need your help. Maybe you've already spotted a few warning signs--a pile of unopened bills lying on a table when you visit, or their frequent complaints about the rising cost of gas or groceries.
You want to step in and help them. But taking on financial tasks for a parent can be a difficult diplomatic dance. Your mom or dad may be reluctant to accept a hand, out of embarrassment or fear of losing their independence. And you may be concerned about how much help you can afford to give without cutting into resources you need for yourself and your kids.
But when there are clear indications that your parents are struggling, you owe it to your family to intervene. At this stage in your parents' life, problems don't solve themselves. Left alone, they could jeopardize your parents' retirement security and spoil their legacy for future generations. Inaction could end up costing you dearly as well. "Unfortunately, most people wait too long to take action," says Virginia Morris, author of How to Care for Aging Parents. "Then there is a medical crisis to deal with, and you're left scrambling to find the checkbook."
With proper planning, you can help your parents make the most of their resources, and provide the assistance they need without risking your financial security. These steps will help.
HELP WITH MANAGING MONEY
The first step: Go on a fact-finding mission. Before you can figure out the best way to help, you'll need to get a handle on your parents' financial situation--their income, expenses and savings; their wishes and worries; and any steps they've taken to put their affairs in order.
The ideal time to start talking with them about money is while they're still in relatively good health and have plenty of options for ensuring they stay financially healthy and independent. But no matter when you raise the subject, an indirect approach is probably best, says Elinor Ginzler, co-author of Caring for Your Parents. You can use your own finances as an icebreaker ("Mom, I just signed up for automated bill paying and it's made my life so much easier. Can I set it up for you too?"). Or use the sobering experience of a family friend or relative ("Dad, I was so sorry to hear about Uncle Lou's stroke. Thank goodness he'd drawn up a power of attorney for his son. Do you have one if anything happens to you?").
Chances are, as long as you make it clear that you're trying to help them on their terms, not take control, your parents will welcome your assistance. For example, Alex Johnson and his wife Aria, both 86, were having trouble keeping up with their bills and other financial paperwork. So their daughters Alexandria Boone, 59, and Anne Rimmer, 57, and granddaughter Aria Thomas, 39, who all live near the Johnsons' home in Shaker Heights, Ohio, began dropping in regularly to take them shopping, go through their financial statements and help them write checks. "We make sure the bills are paid on time, and that they are getting good rates on their money-market accounts and aren't paying any unusual fees," says Alexandria. Her mom Aria adds, "They take all the worry off us."
These strategies can help you do the same for your folks:
• SIMPLIFY THEIR LIFE. Arrange for direct deposit of their Social Security benefits, pension checks and dividend payments so they won't have to make unnecessary trips to the bank. If they have bank, brokerage and mutual fund accounts at several institutions, suggest consolidating. That will make it easier for them--and you--to keep tabs on their portfolio's performance, and also reduce the number of statements they have to reckon with. If you see unopened bills stacking up, try to persuade them to let you set up an automatic payment plan for routine expenses like utilities and insurance premiums.
• MAKE IT A JOINT EFFORT. If your parents are receptive, consider setting up an online joint checking account in both of your names. That way you can sign checks to pay their bills, if necessary. As a precaution, though, first check with your parents' lawyer to make sure the move will not conflict with their estate planning, since you would inherit the account.
• HIRE HELP IF NEEDED. You may find you're not able to extend the same kind of in-person help that the Johnsons' daughters do--you work full time, live far away or just can't persuade them to accept help from you. In that case, professionals trained to work with the elderly may be able to step in. For example, you can bring in a money manager for assistance with budgeting, paperwork and bill paying. Typical charge: $35 to $125 a hour. (You can get referrals from the American Association of Daily Money Managers at aadmm.com). Most communities also offer seniors a range of free or subsidized services, including financial tasks like filing tax returns.
If your parent needs more generalized help with housekeeping, personal care or medical problems, think about hiring a geriatric-care manager, particularly if you live far away. Typically they are social workers or registered nurses trained to determine the types of services an older person needs, recommend specialists, and monitor care. The cost: $300 to $800 for an initial assessment, then $80 to $200 an hour. (To locate one, go to findacaremanager.org.)
Be sure to involve your mom and dad in the hiring process. After all, you want someone who will work well with them and vice versa. You'll also need to screen references and check the credentials of anyone you hire. That should include running a background check. Plan on taking as active a role in monitoring the quality of the services as your schedule permits, including making unannounced visits.
• GET IT IN WRITING. As difficult as it is to think about your mom or dad being incapacitated by illness, it would be worse if a crisis occurred and you were unable to help--or had to fight for your right to do so--because you didn't have the legal authority to act on their behalf. Urge your parents to draw up the necessary documents, such as a will and a power of attorney (see the box at left), and make sure you know where those documents are.
Then remind them to update that paperwork every few years or after any significant change in their circumstances. After the death of her mother in 2001, for example, Judy Kirshner, 53, of Coconut Grove, Fla., took her father Jerome Kordansky, 85, to an estate-planning attorney to update his will and power of attorney. "You hope you'll never need it, but there's just tremendous peace of mind knowing that all the paperwork is in place and drawn up properly," Kirshner says.
PROVIDING FINANCIAL SUPPORT
Sometimes helping your parents manage their own money won't be enough. According to a recent survey by the Pew Research Center, about 30% of baby boomers with living parents now contribute some of their own funds to support their parents, as longer life spans and soaring health-care costs strain the resources of many seniors. Says Rosanne Grande, a financial adviser with R.W. Rogé & Co. in Bohemia, N.Y.: "We're seeing more and more clients who thought their parents were funded for life discovering that they have outlived their money."
If your parents are coming up short, consider these strategies:
• MAKE THEIR ASSETS WORK HARDER. Look first at generating more income from your parents' savings, suggests Mark McClanahan, a financial adviser in Arlington, Texas. For instance, you might suggest moving cash from low-yielding bank savings accounts into higher-yielding online bank accounts or short-term bond funds.
If your parents own their home, you might also check into a reverse mortgage. This is a loan against the equity in your parents' home that they don't have to pay back; instead the lender makes payments to your folks, providing them with steady income. The lender is repaid when your parents move out or die and the house is sold. (For more information, go to AARP's Reverse Mortgage website at aarp.org/money/revmort.)
• MAKE IT A FAMILY AFFAIR. If you can't make your parents' assets stretch to meet their needs, you may need to reach into your own pocket. But don't go it alone. Talk with your siblings and relatives to develop a family plan to provide support. "It's common for one sibling, often the one who lives closest, to take responsibility," says Austin Frye, a financial adviser in Aventura, Fla. "But that can lead to resentments and misunderstandings later on."
Try to divvy up responsibilities--caregiving duties as well as financial contributions--in a way that feels fair to everyone. Maybe each sibling picks a single expense that he or she is willing to cover. Or an investment banker son volunteers to pay more of the bills, while his brother, a middle school teacher with less cash but more free time, drives the parent on errands.
Working with other family members proved to be an ideal arrangement for Julie Wiseman, 36, and her husband Sam, 41, of Riverside, Calif., after Julie's father, Richard Polson, 66, suffered a couple of mild strokes in 2003. Polson, a widower from Fort Worth, could no longer live on his own but couldn't afford full-time professional care either. The Wisemans discussed the problem with relatives, and a cousin in Fort Worth offered to look after Polson in her apartment while she attended college. In return, Julie and Sam pay her rent and utility bills. "It's really worked well so far," says Julie, a district manager at a payroll company. "But eventually we want to move back to Texas so we can care for him ourselves."
• CONSIDER LONG-TERM-CARE OPTIONS. Even the best arrangements can fall apart if your dad or mom becomes seriously ill and requires extended--and, typically, expensive--medical care. An assisted-living facility with on-site medical help could cost $5,000 to $7,000 a month; round-the-clock nursing at home may run $100,000 a year; a nursing home will cost $70,000 to $150,000. And Medicare won't pick up the tab.
If your parents have long-term-care insurance or live in a continuing-care retirement community, their medical needs will be covered (for more on this, see "Your Family's Money," page 72). If not, they'll have to dip into personal savings. Once your parent's finances are exhausted, he or she may be able to qualify for Medicaid (see "Is Medicaid Still an Option?" below). Although this government health insurance program was designed for low-income people, it now covers two-thirds of nursing-home residents. "You don't have to bankrupt yourself to get your parents the right care," says Harry Margolis, an elder-care attorney in Boston and founder of ElderLawAnswers.com.
Easier said than done when it's your mom's or dad's health that's at issue. But while your natural instinct may be to pony up as much cash as you can, advisers urge limiting your financial contributions to whatever your family can truly afford. "Give your parents your love, your time, your assistance; cover some minor expenses; but don't spend the college fund or your retirement account on their care," says Virginia Morris. "You will need that money for your children and your own old age."
• WORK WITH A TEAM. Support groups for people caring for aging parents can be a great source of expertise about local resources and for caregiving tips. To find a group nearby, look in your community newspaper or contact Children of Aging Parents (caps4caregivers.org). To ensure that you are making the best decisions for your parents, it is also a good idea to have a consultation with a financial planner and an estate-planning attorney.
• TAKE CARE OF YOURSELF. As hard as it may be to focus on your own financial needs when your parents are struggling, you owe it to your family--and yourself--to do just that. Keep setting aside money in a 529 or other college savings plan for your kids. Take a family vacation. And whatever else you do, make investing for your own retirement a top priority. After all, you don't want the youngest members of your family worrying about your financial security the way you're now worrying about your parents. Think of it this way: Your financially secure retirement is one of the best legacies you can leave your children.
THE ESSENTIAL PAPERWORK
These documents will help you help your parents if they can no longer manage their own financial affairs.
• FINANCIAL CHECKLIST Ask your parents to make a list of their assets, with account numbers, so you'll know what they have and where. Have them list their debts as well.
• DURABLE POWER OF ATTORNEY With this paper, your parents authorize a trusted rep--like you, perhaps--to pay their bills and make financial decisions on their behalf if they are no longer able to do so. Financial institutions may additionally require their own power of attorney forms.
• ADVANCE DIRECTIVES A health-care proxy authorizes someone to make medical decisions on your parents' behalf if they can't do so. A living will explains their wishes in the event that life-sustaining medical care is required.
• HEALTH-CARE PRIVACY AUTHORIZATION Your parents must sign this release to allow doctors to keep you informed about their medical status and treatment.
MAKING CARE LESS TAXING
These tax breaks can partially offset the cost of caring for a parent.
• GET AN EXEMPTION. If you provide more than half of your parent's support and he earns less than $3,200 a year (not counting Social Security), you can claim him as a dependent.
• DEDUCT MEDICAL COSTS. You may also be able to write off part of your parent's medical bills if those costs, plus your family's other out-of-pocket health-care expenses, exceed 7.5% of your gross income.
• CLAIM A TAX CREDIT. If your parent lives with you and requires care while you work, you can claim a federal tax credit to offset up to $3,000 of the cost of a home health aide or adult day care. Or sign up for a dependent-care spending account at work to get a break on up to $5,000 in expenses.
TAP INTO BENEFITS
Find government and private programs that may offer help at these sites:
• BENEFITSCHECKUP.COM From the National Council on Aging. This website screens for eligibility for programs that help with property taxes, heating bills and other costs.
• ELDERCARE.GOV From the U.S. Administration on Aging. It can identify services for seniors near where your parent lives.
Is Medicaid Still an Option?
More middle-class families need the help, but new rules make it harder to qualify
A growing number of families have been relying on Medicaid to help pay for an older loved one's long-term care. Now new federal rules will make it much tougher to qualify. If you're concerned your parent may one day need coverage, you'll have to start planning sooner and be conscious of these changes:
• THE LOOK BACK IS LONGER. You can't own or earn much to qualify for Medicaid--state limits on cash and investments are usually $2,000 or less. To ensure that affluent seniors don't try to qualify by shifting money out of their name and into, say, their childrens', states look at financial records to root out suspicious asset transfers. Under the old rules, the look-back period was three years; now it's five years for gifts made after February 2006.
• HOME EQUITY MATTERS. Before, your house wasn't regarded as an asset. Now home equity over $500,000 counts (states have discretion to bump up the limit to $750,000). So if your parents own a home valued over the limit, they may not be eligible now for coverage, even if the house is their only asset.
• GIFTING PENALTIES ARE HARSHER. If a state identifies a suspicious transfer from your folks' estate, your parents may have to wait to qualify for coverage. The delay is equal to the number of months Mom or Dad could have paid for nursing-home care with the amount gifted. Under the old rules, the penalty clock started on the date that the money was transferred; now the clock starts on the day your parent applies for Medicaid. The result is a much longer waiting period.
• GETTING HELP IS MORE IMPORTANT. To avoid unpleasant shocks, have your parents consult an elder-care attorney or a financial adviser who specializes in planning for seniors. They may never need Medicaid, but preparing now is the best way to avoid a last-minute nursing-care crisis.