The elder care equation

As financial planners, we love helping our clients reach their goals and enjoy the retirement they dreamed of. But – just as important – we want to be sure your financial plan helps you navigate life’s unexpected twists and turns.

One of the biggest issues facing many clients is caring for aging or ill parents, while planning ahead for their own care needs in the future. Elder care, whether for yourself or a loved one, brings together so many financial planning touchpoints: insurance, retirement income, Social Security/Medicare, estate planning, etc. And like many topics we cover, having honest and respectful conversations with your loved ones is a key component too.

We’ll break down how you can plan ahead for elder care and provide some practical tips for helping elders with their finances.

A 2020 survey conducted by Wells Fargo found that most Americans want to be responsible for their parents’ finances, but that most hadn’t discussed it with them – which is understandable.

Talking to your parents or other aging loved ones about their finances can be a sensitive undertaking, especially if it means they’d be giving up some control or independence.

But it’s a crucial step to take as a planning stage. There’s no guarantee your parents will need you to take over their finances, but it will make it easier for everyone down the road to have a game plan in place. Consider these questions:

• Do you know how much money and assets your parents have, and where they’re kept?
• Do you know whether they have updated their estate plan or even have one?
• If they have estate planning documents, does anyone know where they are located or does anyone have a copy?
• Do they have long-term care insurance to cover what most health insurance policies do not: the costs of nursing homes, assisted living and support with activities of daily living?

It’s also important to include other family members, like your siblings, in-laws and children, to reach a consensus so there are no misunderstandings about who’s responsible for what, and what your parents’ wishes are for housing and critical care decisions. Naming someone who will take on responsibility for making decisions if someone is incapacitated – well before that ever happens – can bring enormous peace of mind if the day comes that a parent is unable to care for themselves or make decisions. 

Levels of authorization

1. Trusted contact – notification only, no authority to act
2. Authorization to share – ability to share information, but not act
3. Third-party notification – used by insurance companies
4. Authorized signatory – used by banks and credit unions
5. Durable Power of Attorney agent – authority to act
6. Medical Directive agent – authority to act
7. Successor trustee – authority to act

And if that day doesn’t come for a long time, or indeed never comes at all, you still want to have a plan in place for the more mundane or everyday responsibilities: Who’s going to attend medical appointments with the aging parent and keep an eye on prescriptions and insurance paperwork? Who’s going to help with food, clothing and housekeeping if needed?

Another thing to keep in mind as you discuss this topic with your family: We are on the verge of the largest wealth transfer in history from baby boomers to their Generation X and millennial children. Yet most people haven’t talked to their parents about their financial situations. So is there someone else you should bring into this intergenerational conversation? That’s right – a financial planner who can work with you, your parents and the whole family to help make sure you’re asking the right questions and to help you build out a strategy designed for preserving and protecting the family legacy for generations.

As part of your parents’ estate plan, and as part of your strategy to provide assistance for them if the need arises, organize all the documentation you’ll need. Completing a new (or updating an existing) durable power of attorney, health care power of attorney and living will/terminal care directive can provide a continuity plan in the event someone is unable to manage their financial affairs or health care decisions. Preparing these documents now provides you and your family with an opportunity to plan for a smooth transition to whoever will be assuming control. One thing all these documents will ask you for is to name the “trusted agent” who you and your family have decided on. 

As part of your parents’ estate plan, and as part of your strategy to provide assistance for them if the need arises, organize all the documentation you’ll need. Completing a new (or updating an existing) durable power of attorney, health care power of attorney and living will/terminal care directive can provide a continuity plan in the event someone is unable to manage their financial affairs or health care decisions. Preparing these documents now provides you and your family with an opportunity to plan for a smooth transition to whoever will be assuming control. One thing all these documents will ask you for is to name the “trusted agent” who you and your family have decided on. 

Even if a parent is not incapacitated, it might be a good idea to have the trusted agent – let’s say it’s you, for this example – start working with them early on. For example, helping with tracking expenses, paying bills, managing bank accounts and keeping insurance up to date is a great way to get ahead of any potential issues. Where possible, request to get duplicate bank statements and credit card bills, and ask insurance companies for copies of statements and premium notices. Often, if you have a durable power of attorney, you can get copies of these documents.  

By starting slow, you can begin to create a new dynamic with your parents where you are gradually transitioning to a caregiver role while keeping them involved and active.