The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.
It’s never too early to start preparing for the inevitable – that one day your parents will become too old and dependent on your support. And one of the toughest realities that you will need to face is financing your parents’ care in their old age.
Here’s a short list of strategies to help your family shore up the financial resources to cover the cost of elder care. And even if your parents are financially settled and don’t need your help, it’s still useful to talk about these subjects and be better prepared.
1. Start a Regular Family Dialogue
It’s important to ease into the difficult subject of finances with your parents by starting a regular family dialogue and slowly build trust. A parent may feel guilty about poor money decisions in the past, or feel too proud to let their own child take care of them, or may have other plans on how to spend their money.
Talking about the future and asking the hard questions will bring issues to light and may even help improve your relationship. Once you have established a level of trust through honest and caring dialogue, your parents will soon feel comfortable to accept your help.
2. Set a Clear and Specific Agenda
Prepare for the family dialogue by letting your parents know about the agenda in advance so that you’ll have a productive family meeting. The purpose of these meetings is for you to better understand their financial situation so that you know how you can be most helpful. Below are some questions that can direct your discussion and help formulate a plan of action.
•Are they financially prepared for retirement?
•Is there a retirement plan or will they just keep working?
•Will they need your financial help?
•Who will oversee activity on bank accounts or help them decide when to file for Social Security?
•How to create a budget to help prevent them from taking on more debt?
•Who will accompany them to meet with a lawyer to set up an estate plan?
•Who will provide them with financial support to continue living independently?
•Will your parents agree to move in with you for health and financial reasons?
•Who is the designated family member to discuss a parent’s personal affairs with key professionals, such as doctors, financial representatives and Medicare officials?
3. Set a Plan of Action
Once you’ve reached the point where you can talk freely about finances, help your parents take action. Identify the sources of funds and draft a spending plan now and years into the future. For reference, the average cost of assisted living in California is $4,500 / month according to Genworth’s Cost of Care Survey 2019. Below are some questions to help you get a clear view of your parents’ finances.
Quick Checklist:
•Have you done an inventory of Assets vs Liabilities?
•What does that look like?
•Have you done an assessment of Income vs Expense?
•What does their monthly expenditure look like?
•What are their financial gaps? And how do you plan to source the funds to close these gaps?
•When will your insurance policies mature? And how do you plan to spend the returns?
4. Review Healthcare Options
Ask your parents if they’ve thought about needing a greater level of healthcare in the future. It may be weighing on their minds. The sooner you can help them start planning for what may lie ahead, the better you’ll all sleep at night.
Health Insurance
Does their employee benefits package include access to a flexible spending account for health care or other financial or tax incentives they aren’t taking advantage of? There may be ways to help your parents save money on their current insurance plan. During the next open enrollment period, review all of the insurance options available with your parents.
Medicaid
Texas does not have a comprehensive program that pays for long-term care nor many non-medical support services for seniors who live in their homes. Check if your parents have long term care insurance. Talk to an insurance agent about what long term care insurance programs are available.
Veterans Benefits
If your parent was in the military, learn about their benefits under the VA pension program. More than a third of Americans over the age of 65 are wartime veterans or are spouses of wartime vets. The Aid and Attendance pension under the VA program pays for long term care for senior veterans and their spouses – a significant financial lifeline in case of a health crisis.
5. Prepare to Offer Direct Financial Support
If your parent has exhausted all the available savings, insurance, employment, government benefits and other resources that could provide a financial cushion for the high cost of elder care, you should also consider giving direct financial support. Do everything you can to assist your parents financially while securing yours and your children’s future.
Consider a no-interest loan to your parents even if they don’t have the ability to pay it back. Just keep in mind you may never see the money again. Reach out to siblings and relatives about setting up a fund to support their financial needs.
What’s next?
Your parents need to consult an estate planning attorney in regards the specific powers of attorney for Texas residents. A Power of Attorney is a legal document that authorizes you to act on your parent’s behalf on a broad range of business and personal matters, for example, handling personal finances, real estate, medical issues, end of life and even funeral matters.
See an estate planning attorney who can help your parents draft the power of attorney documents they need and an Estate Plan that fits your parent’s needs.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.www.moakandmoak.com©
