Monthly Commentary – Caring for Aging Parents

Frequently, clients approach us with concerns not only about their present financial situation but how things might look if they need to aid aging parents. Or even assist their adult children.

As part of a complete financial plan, these considerations should be taken into account. These needs don’t need to be at odds with each other – you can make it all work. However, it is imperative that you have the correct information in place.

For aging parents, caring for their needs is both financial and personal.

Our first recommendation is to prepare in advance for crises. Start with a family meeting that includes your parents and all of your siblings, if any. The outcome of this meeting is to ensure everyone is on the same page with a common goal: to make sure a plan is in place for the parents before any potential crisis – such as a healthcare emergency – occurs. These are some good starting point questions:

• What are the parents’ inflows? (Social Security, pensions, investment income, and so on)
• How much assistance do the parents need, if any?
• Are there any sources of conflict between siblings that need to be addressed or prioritized?

As an example, your mom has an injury and immediately needs to find a rehabilitation center and skilled nursing facility:

• Who’s going to help facilitate that?
• Who’s going to take which roles?
• Which siblings are best suited to step into each role?
• For non-emergency situations, like cognitive difficulties, at what point do the children step in and take over?

After building an understanding of each person’s role(s), the next question is how do you effectively take over the finances for a person when the need arises? This is accomplished by proactively completing legal estate planning documents before the need arises.

Examine what documents the parents already have, such as wills, powers of attorney, guardianship forms, and so forth. Confirm that the documents are still valid. Do you understand who is doing what? If not, find an estate attorney (we can help with recommendations if needed) who can help with your situation.

Some beneficial estate planning documents include:

• Financial Power of Attorney (POA) – allows you to step in for your parents and transact business, such as selling a home, sign documents, or open/close accounts, on their behalf.
• Healthcare Power of Attorney – allows you to step in for your parents if they are incapacitated and unable to make decisions for themselves.
• HIPAA Waiver – enables doctors to disclose confidential medical information to the children so more informed decisions can be made. This waiver is a relatively new document, so, if you haven’t updated your estate documents in a while, you might not have one in place.
• Living Will – shares what the parents’ wishes are if they are terminally ill.
• Guardianship – similar to Power of Attorney, however, this provides more latitude for a person to take over for physical needs such as moving between facilities and other daily needs.

Once all documents are in place, the third step is to connect the right person for each role with regards to relevant institutions. The Financial POA should be connected with the bank, brokerage, and IRA custodian ahead of time. Most institutions require their own set of forms, so getting everything filled out beforehand ensures expediency. The Healthcare POA and HIPAA waivers should be delivered to the appropriate doctor(s), and the children should meet their parents’ doctors and get on record that they can receive information.

One of the most significant advantages to having these documents sorted out in advance is that once an emergency occurs, you’ll be able to act quickly and keep your attention where it’s needed most instead of rushing through it all in a state of panic. Also, from a financial perspective, you’ll have the ability to keep things properly separated.

For many reasons, the parents’ assets should be used for their expenses to the greatest extent possible. Thus, it’s important to know what assets, income, and expenses exist, so you know what’s available and what’s needed. Many times, particularly when proper planning has not occurred in advance, children are tempted to pay expenses from personal accounts and then pay themselves back later on. Avoid this as much as possible. It can create conflicts later when seeking reimbursement. Also, be cautious about children adding themselves to the parents’ accounts as joint owners, especially if there are multiple heirs. It can work with an only child, but the gifting and estate tax ramifications need to be checked in advance.

If your parents’ liquidity starts to run out, there are ways to structure loans, but be sure to document everything. Use an attorney to draw up a promissory note so that there is a clear paper trail indicating reimbursement is needed from the estate at the appropriate time.

Lastly, it’s important to understand that Medicare does not pay for long-term care expenses in most cases. Need-based aid may be available through Medicaid if the parents run out of money.

While we hope this information is useful, it is merely a starting point for the topics and questions you should be preparing for and discussing with your loved ones. At the end of the day, wealth is not all found on the balance sheet. It’s also important to similarly transfer your human capital – the values, ethics, and experiences that have helped you preserve and grow life.

If you have questions about what to do next, please reach out. We can provide referrals to a variety of specialists for useful services as they are needed, such as: elder and estate attorneys, care management companies, family mediators and facilitators, and companies that specialize in helping people downsize their living situation.