Financially Supporting Your Parents: 7 Steps to Take
It’s a fact: multigenerational households are becoming more common in the United States. In the ’50s, it wasn’t unusual for older adults to live with their grown children and possibly grandchildren. That living arrangement trended downward for several decades, but saw a big upswing between 2000 and 2014. In fact, in 2014, 19% of Americans — 60.6 million people — lived in households that included at least two generations of adults.
The economy explains some of these trends. When retirement funds crashed during the Great Recession, older adults may have suddenly found themselves unable to financially make it on their own. Couple that with rising housing costs and a shaky job market and the result is that many in middle-age who are caring for elderly parents can’t afford to put mom and dad in a care facility.
You can’t trace the entirety of this trend to the economy, though. Actually, some of it is due to increasing diversity in America. The Pew research shows that more families with Asian, African American, and Hispanic backgrounds are likely to live in a multigenerational household. This is likely due, at least in part, to upbringing and the cultural expectation that adult children are to support their elderly parents.
Regardless of culture or background, many adults expect to have at least some role in caring for their parents when they’re no longer able to do so themselves. But what this looks like — and the financial and emotional toll it takes — can vary from family to family. If you think you might be in this situation in the coming years, start taking the following steps now:
1. Consult your spouse and siblings
The first step in deciding how to help your aging parents financially isn’t necessarily to talk to your parents. Sure, the conversation might come up. But before you commit to anything or set expectations, consult with your spouse and any siblings who are in the picture.
It’s essential to be on the same page about elderly care with your spouse. Financially and practically supporting one (or more) parents can put some serious strain on your marriage. So, talk to your spouse about what you would like to do for your parents. Then, reach an agreement on what you, as a couple, are willing and able to do — financially, but also practically and emotionally. Also, decide ahead of time what boundaries you need to put in place in order to preserve healthy relationships all around.
You’ll definitely want to pull in your siblings for this. See how much they’re willing and able to contribute to your parents’ care, financially. But again, also consider the practical aspects of caring for them. Who is most able to take on emotional support roles? Who is best at dealing with practical details? Does one of the siblings prefer to have mom or dad live with their family, or do you need to work together to support your parents in a care facility or retirement community?
Having these conversations before approaching your parents can help everyone stay on the same page.
2. Talk with your parents
Next, you’ll want to have a frank conversation with your parents. You don’t have to start by laying out the nitty-gritty details of their budget. Instead, try talking more generally about your parents’ goals and needs as they approach old age. Do they want to live on their own as long as possible? Have they considered retirement or assisted living facility, depending on their physical and medical needs? Do they expect to be healthy well into old age, based on their ancestry? Or are health problems already cropping up and complicating matters?
Read More: How to Afford Healthcare in Retirement
During this conversation, you might bring up some of the options you’ve already thought out. Whether that’s helping your parents settle into a nearby assisted living facility or adding an in-law suite to your home, present these options as just that… options. Unless your parents are at the point where they are no longer capable of making sound decisions, you should try, wherever possible, to defer to their judgment and preferences.
3. Understand the financial situation
Once you’ve gotten a feel as a whole family — spouse, siblings, and parents — for everyone’s needs, preferences, and boundaries, it may be time to have a frank conversation about money. By this time, you should already know what you are willing and able to contribute to your parents’ care and well-being. Hopefully, you also have an idea of what, if anything, your siblings can contribute.
Now, it’s time to figure out where your parents are financially. You might even want to consider pulling in a financial planner who can look holistically at your parents’ investments, retirement accounts, and other assets. This can help you get a more objective view of the best way to allocate resources.
If you don’t already have a trusted financial planner, the process can be overwhelming to find the right match, especially if you are dealing with stressful issues about the long-term care of your parents. One way to make this step easier is to use a trusted platform like Paladin Registry, which matches users with vetted financial advisors. I like this platform because its easy to use, free, and only matches users with five-star rated financial advisors. See our full review of Paladin Registry here.
Digging into the financial details may be awkward. But it’s essential in this decision-making process, as the available resources — including government-funded benefits, Social Security, and assets — will tell you what options are available to your family now and in the future.
4. Consider your insurance options
Once you have a better understanding of the financial situation, you’ll want to consider what type of insurance your parents have. Don’t skip this piece because it seems complicated – it can be easier to do than you may think and it’s so important.
If mom and dad are over 65, they qualify for Medicare. But basic Medicare probably isn’t enough to shield them from big medical expenses — it doesn’t even cover for things like prescription drugs or visits to your family doctor. You’ll want to look into Medicare Advantage – this gives your parents additional coverage for things like hospital visits and prescription drugs (which is so important since the older they get, the more likely it is they’ll be on prescription drugs).
Another program to consider for your parents is Medicare Supplement – this covers more out of pocket expenses than basic Medicare and allows your parents more choice when it comes to the doctors, hospitals, and specialists they see.
You can find both Medicare Advantage and Medicare Supplement plans from many providers, so It is recommended to shop around and compare the rates, before making a decision. A good place to start with is Assurance. You can compare different quotes, tailored to your specific needs, by a sophisticated algorithm.
Beyond Medicare, you’ll want to consider long-term care insurance. This is an insurance product specifically for paying for long-term healthcare, often including assisted living and in-home care that isn’t covered by insurance or Medicare. Depending on your parents’ current health status, premiums may be relatively affordable. And you could consider paying for premiums yourself — or with the help of siblings — to reduce the risk of having to pay out loads of money for long-term care in the future.
5. Put a plan in place (and have a backup)
Once your family has worked through all of these issues — probably over the course of several months or even years — it’s time to put a formal plan into place. This might include steps like adding an in-law suite to your own home or converting some space you already have in order to move your parents into your home. Or it might require you to visit local assisted living and retirement communities, to be ready to move mom or dad there when the time comes.
Whatever you plan, though, make sure you have a backup. This is especially true if your goal is to move your parents into your own home. Often times, this is an excellent fit and winds up benefiting everyone. But if medical or mental health needs become more complex, this arrangement may not work out as well as you’d hoped. Always hope for the best, but plan for the worst. In this case, you may need to plan for an alternative living situation or figure out how you could afford in-home care to help lighten the load.
6. Make it all legal
After the plan is made, it’s a good idea to ensure that a responsible sibling has medical power of attorney and financial power of attorney for your parents. While you’re helping your parents get these documents drawn up, it’s a good idea to have them go over their will with an attorney, as well. If they don’t have an attorney or can’t afford one, a great option is to use Trust & Will, an online site that makes it easy to create a trust, will, and other legal documents.
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In the end, it’s up to your parents, as long as they are of sound mind, to decide who has power of attorney and how to spell out their own will. And they may prefer to work these documents out directly with an attorney. If that’s the case, simply make sure you know who has power of attorney and where copies of their documents are stored, in case you should ever need them.
7. Start helping out early
As memories start to fade or medical needs get complicated, older adults occasionally have trouble managing their finances. If you notice this happening to your parents, you may want to start helping out with their finances sooner rather than later. Sometimes this is as simple as helping them write a budget and set up automatic bill payments so things don’t get missed. Or it may be more complicated, like managing investment accounts to make the most of the savings.
Caring for elderly parents can be stressful — both emotionally and financially. Taking the time now to plan ahead for this eventuality will help take some of the stress out of the situation for everyone.