According to a 2019 study by the Transamerica Center for Retirement Studies, 8% of Gen Xers and 3% of Boomers say supporting their parents is a top financial priority in their lives. Similarly, a study from TD Ameritrade found that 13% of Americans are supporting a parent, including 19% of millennials. With so many individuals taking care of parents, it is important both everyone to be prudent
Next Avenue’s recent article entitled “When Your Parents Need Financial Help” says that if this is a financial priority for you, try a respectful approach to see the extent of your parents’ money issues and what you might be able to do to help.
There is one financial issue that your parents may have. They may have failed to set aside money for long-term care, because of their debts. Ideally they would start planning well before they are dependent, but there is no time like the present to address a problem. For long-term care assistance, ask an elder law attorney for help. We can investigate your parents’ eligibility for Medicaid or other benefits to help pay for care. This article has a much fuller overview on those issues. https://galligan-law.com/long-term-care-whats-it-all-about/
However, before you jump in with both feet, consider your own money situation. Remember your own finances come first, because it you don’t, you risk your own finances by overcommitting. Therefore, if you can afford to help them, you have to establish boundaries. If you have siblings, bring them into the discussion and ask about sharing the responsibility. After you figure out to what extent you can afford to help financially, reach out to your parents — with care. You don’t want to come off as criticizing or judging them for making financial mistakes or bad financial decisions.
It’s important to begin the conversation early when taking care of parents, especially financially. You also may want to refer your parents to a financial planner or to a credit counselor. If housing is a major expense, it may be time for your parents to downsize to a more affordable home. You can also look into having them move in with you. If not a topic of discussion, perhaps you’re able to review their expenses to see what they can cut and help them find ways to improve their financial situation. You should also look into federal, state, and local resources, like benefits for which your parents may be eligible.
It may be an issue of diminishing capacity and worth discussing with your parents’ doctors. I once had a client who almost overnight spent thousands of dollars on QVC. She spent because it was on TV and had no concept of how much she purchased or how much she spent. Having family involved before hand may help eliminate or reduce those issues.
After you’ve delved into all the resources, and you’re also ready to help your parents financially, make sure you incorporate all of this into your own financial plan. Instead of handing your parents cash or a check to pay outstanding bills, pay the bills yourself. This will allow you to be certain that the money is actually used for the bill, rather than something else. You can best accomplish this as the agent for your parents under a power of attorney or as trustee of their living trust.
Many people taking care of parents also choose to provide for their parents in their estate plans. It is very common to do so, but if you do, consider leaving assets to your parents in a trust, such as a supplemental needs trust. That way, they receive the benefit of the money while protecting assets, preserving Medicaid eligibility and avoiding many of the problems this article is addressing.
Ensure that your parents know that you have their best interests at heart, when assisting them with long-term care. Be respectful of your parents and tell them you’re not trying to take over. Taking care of parents doesn’t have to be a fight, it should be about everyone helping each other.
Reference: Next Avenue (Jan. 30, 2020) “When Your Parents Need Financial Help”