integrative financial planning

Holistic Help for Caring for Aging Parents

July 20, 2015

elder-careAlong with college and retirement, care-giving can take a big toll on a family finances. Long-term care insurance can help mitigate some of the risks of aging, but not until the insured is unable to perform two of six specific activities of daily living—bathing, dressing, eating, transferring from bed to chair, toileting, and continence or has sufficient cognitive impairment that it affects the person’s health and safety. Older people who simply need help getting to doctors’ appointments, remembering to take medications, fixing meals, shopping, cleaning and maintaining the house, paying bills, opening jars and myriad other daily challenges do not qualify for benefits under a long-term care insurance policy. But their needs are no less real. And they could go on for many years as otherwise healthy individuals gradually lose capabilities to the normal aging process. When aging parents become dependent on adult children, financial planning becomes more integrative. Now you have two families (or more, if there are siblings) who are all working toward the same goal of making sure the parents’ needs are met without compromising the adult children’s—and their children’s—financial well-being. Although each family may want to continue to keep their finances separate, holistic planning may allow resources to be shared or conserved for the benefit of everyone.

Assemble Your Resources
According to a national study, caregivers often underestimate the time required for care-giving and the impact of their obligations on their work. They go into it providing only a small amount of care and then gradually take on more and more responsibility, incurring significant losses in career development, salary and retirement income and substantial out-of-pocket expenses. Another study found that caregivers spent an average of more than $12,000 per year on direct expenses associated with caregiving. Some families may be able to absorb such expenses, but over time they can represent a significant drain on resources. This is exactly why it is important to address the whole family’s needs whenever a caregiving situation arises. Ideally, you’ll want to begin asking about parents while they are still active and healthy so you can emphasize the importance of planning ahead. It is never too soon to start assembling resources so clients will be ready to help their parents when the time comes. Those who are already caring for parents will appreciate the attention and perspective you bring to the matter. Caregivers are notoriously reluctant to ask for help and may be unaware of resources that can help ease the burden.

Planning Ahead
According to a USA Today/ABC News/Gallup Poll, 41% of baby boomers who have a living parent are providing personal care, financial assistance, or both. Of those boomers who are not providing care for parents now, 37% think they will someday. And about half of them say they are concerned about their ability to do so. Boomers who are still putting kids through college and saving for their own retirement may need help sorting out their priorities. How much help can they realistically provide to their parents? How much do they know about their parents’ finances and the resources available? What changes are they willing to make in their lives to help their parents? These are all tough questions that should be addressed as early as possible.

Living Arrangements
Housing options for older parents who are basically healthy but need help with certain activities due to frailty or forgetfulness include: (1) staying in their own home, (2) living with their children, or (3) moving to an assisted-living facility. Each family must decide for itself which option is best based on costs and quality of life for all. Costs may include modifications to either the parents’ or the children’s home to enable the parents to get around safely, plus the cost of bringing in outside housekeepers or caregivers to the extent needed. Compare these costs with the cost of an assisted-living facility. This can help your family decide which arrangement would work out best for everyone. Some children may want their parents close by, even under the same roof, while others would find such an arrangement too disruptive.

Providing Care
Regardless of where the parents live, some form of care will need to be provided, such as cleaning, cooking, paying bills, shopping, transportation to medical appointments and so on. Determine the exact needs of the parents and who should provide the needed services, a family member or an outside paid caregiver. Consider the toll on adult children who work—if they must take unpaid time off, it may be more cost-effective to hire someone to perform certain services such as transportation or housekeeping. On the other hand, some adult children have difficulty turning over any form of caregiving to an outsider. Some 5% of men and 7% of women quit their jobs to care for aging parents.

Paying for Care
We suggest to evaluate their overall resources and determine who will pay for what. If your parents have sufficient assets to cover the cost of their own care, help them map out a withdrawal strategy that makes sense from a tax- and estate-planning standpoint. If you will be contributing to the parents’ care, inform them of the tax rules for claiming parents as dependents: if they provide more than half of their support, even if the parents do not live with them, they may claim the parents as dependents and deduct medical costs. The goal in any integrative financial plan, providing all family members agree, is to dissolve the boundaries between what belongs to the parents and what belongs to the children and consider strategies that build and conserve resources for all. This is the idea behind true wealth enhancement, whereby wealthy families consider children, grandchildren and even unborn descendants when making decisions about spending, saving, investing, philanthropy and wealth transfer. The occasion of a parent needing help gives families of all means an opportunity to come together and integrate their financial and life plans for the benefit of all.

At HFG Wealth Management, we embrace a more holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage.