First Person: Financial Planning for Elderly Parents

Baby Boomers are getting old, we are not financially prepared to care for our elderly parents, and our children don't know how to plan for our aging. Most of us have not prepared for retirement, much less getting sick and the possibility of having to be placed in a rest home for years. According to John Hancock, 41% of those who need some type of long term care are under the age of 65. For those over 65, about 70% will need some type of long term care in their lives.

I was talking to one Baby Boomer at work who is caring for his 85-year-old father currently in a rest home. My coworker is an only child and he and his parents never discussed the family finances, nor did they discuss how to prepare for a long term medical care needs as his father aged. His desperate comment to me was, "I don't know how to manage his money, his assets and his affairs before they take it all away."

Another 55-year-old friend of mine is caring for her 88-year old father who wants to live and die at his home. She and her brother are paying $4,500 a month from their own income for 24/7 in-home care by three different caregivers who are not licensed home health aids. They cannot afford licensed home health care and have no insurance to pay for that. The father has savings above the limit to qualify for Medicaid and his home is paid for, so to get government assistance would jeopardize the family estate. Yet, the savings their father does have is dwindling to help pay his living and medical expenses. They are hoping there will be enough left in the end to pay for a funeral.

My own mother and father had to spend their last days in a nursing home against our wishes, but on the demand of the doctors who would not release them to a home setting due to their severe medical condition. In our case, neither parent had enough assets to pay for their care, so Medicare and Medicaid paid for the nursing home expenses. We did not prepare financially to assist our parents with this end of life outcome that we did not expect.

So, what can you do to be prepared to care for your elderly parents or help your children be prepared to care for you?

Share Information
While some families are not comfortable sharing their financial details, it is imperative that parents share all information with their children about bank accounts, life insurance policies, investments, pensions, retirement accounts, debts, assets, wills, trusts, powers of attorney, and any other estate matters that will be affected should a parent have to enter a nursing home. Children of elderly parents should make sure that not only do you have a medical power of attorney, but also carry a copy of a parent's living will that describes what the parent's wishes are for life support in the event of a medical emergency.

Talk About the Finances
Discuss with your parents whether it is time to get a durable power of attorney or a full power of attorney that allows you to take care of ALL the financial affairs of the parent and not just the medical affairs. If you or your parents have questions about what rights each party has under these types of powers of attorney, consult legal advice and decide together what is best for your personal situation. Read more about financial requirements to qualify for long term medical care from Medicare and Medicaid. We learned the hard way what all they can take away from your parents if you do not have enough money to pay for nursing care. If you apply for Medicare and Medicaid, you must list any assets you transferred or disposed, so you cannot wait until the last minute to plan for assistance.

Get Insurance
If you are an aging parent with some savings, a home, some investments, and even jewelry that you would like to pass on to your children, think about getting Long Term Care Insurance that will pay for your nursing home expenses in the event you need that medical care. I live in Texas where the average cost of a nursing home is $200 per day. I pay $62 per month to John Hancock for Long Term Care Insurance that will cover $200 per day should I have to go into a Texas nursing home. This rate is offered because I am a state employee, but most major employers offer some kind of supplemental Long Term Care Insurance program through an outside insurance company. Whichever insurance company you choose, they will be able to give you cost estimates of typical nursing home costs in your state. I now have peace of mind that my children will not have to pay for my nursing home care.

If you are fortunate enough to keep your parents at home during their aging years, even living with you in your home, plan to spend about $3,000 to $5,000 a month to help pay their living and medical expenses along with in-home care givers. If you do not have Long Term Care Insurance, and your parents have any assets at all, plan to liquidate the assets and turn them over to Medicare and Medicaid to pay for the nursing home before the assistance kicks in. If you want to pay the nursing home yourself, plan for at least $200 to $400 per day depending on what state you live in.

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