How to Budget for Elder Care

Whether your aging parents live independently, with you, or in extended care, finances - theirs and yours - are important. Here are some thoughts on budgeting for elder care, no matter what your family living arrangements are.

Instructions

Difficulty: Moderately challenging

Things You’ll Need:

• Accountants
• Attorney
• Health Insurance
• Personal Financial Software

1. Help your parents protect their assets. This will almost certainly mean having a serious discussion with them about money.
2. Help them sort out their savings and investments - and get power of attorney if necessary - so that their money will be there for them when they need it and so that you will be able to protect it if they are unable to care for themselves.
3. Talk over long-term plans with your parents (and your siblings, if you have them). If possible, get your parents to make a Living Will so that their wishes can be followed even if they are unable to communicate. Find out how - and where - they want to spend their golden years, and let them know how much you are willing and able to help them financially.
4. Make sure your parents' health-care costs will be covered. They may need to purchase basic or extended health insurance or take over the payments on an existing plan. A good health-care plan means that your parents may get better, faster care when they need it most.
5. Work out a budget with your parents if they will be living with you. It's important to discuss this before you all move in together to avoid conflict later on. Will your parents contribute to your household expenses, or are you willing and able to pay for everything? If they need in-home care, will the payments come out of their retirement fund or your family budget? Will you take family vacations together and, if so, will they contribute?
6. Help your parents work out their own budget if they live independently. List their current expenses as well as any expenses anticipated in the future, and don't forget to consider inflation. It can be difficult for seniors to adjust to life on a fixed income even though work-related expenses drop dramatically after retirement.
7. Discuss joint ownership. If your parents would like you to help them handle their finances, it may be advisable to get your name added to property deeds and bank accounts. This means that you will be able to act swiftly in a financial emergency. It may also protect you from heavy inheritance taxes later on.
8. Talk over all the options with your parents. Try to avoid making unilateral decisions if your parents are of sound mind and able to share in decisions that affect their personal and financial lives. Whether your parents will be moving in with you, entering a nursing home or extended care facility, or staying in their own home for as long as possible, they should still retain control of their own finances for as long as possible.
9. Remember to allow for some travel and entertainment "mad money" in their budget. Life is about much more than paying bills and managing investments so try to make sure your parents will be able to have some fun in their golden years.

Tips & Warnings

• Consult your accountant and your lawyer about issues related to finances and estate planning for elder parents. These professionals can give you and your parents the information you need to maximize their pensions and retirement funds, and to protect all their assets both now and later.
• Research the various health-care options very carefully before making any decisions; there are many different levels and types of health insurance, and you need to make sure that your parents will get the care they need, when they need it.
• Remember that there are lots of discounts out there for senior citizens, and encourage your parents to take advantage of them.
• Don't wait for a financial crisis to develop. Deal with family finances and budgeting as early as possible, even though they can be awkward subjects.
• Ask your parents to let you know where all their important papers and financial documents are kept so that you can help quickly in the event of a medical or financial emergency.
• Seniors are often the targets of scams designed to cheat them out of their money. Remind your parents never to give out financial information over the phone or at the door, and ask them to talk to you before making any large expenditures or donations.
• Don't avoid financial discussions, even though they can be difficult. It's important to get everything out in the open so that there is no potential for misunderstanding or conflict later on. Just be tactful, sensitive and respectful.