Caring for elderly parents and the sandwich generation

It’s hard to see your parents get older. This is especially true as they begin to decline physically and mentally. Their need for help can also create unexpected stresses and financial challenges for you and your family. Making sure your financial house is in order can help minimize the financial burden on you, so you can focus on giving them the love and care they need.

Make a plan

Creating a pro-active plan that meets your parents’ needs and your own can help you manage a difficult situation with minimal disruption and difficulty. For your own future, it’s important to keep focused on your retirement savings strategy and other savings goals you have.

Talk it over

Depending upon how openly your family discusses money, talking about finances with your parents may be uncomfortable. But understanding their financial situation is essential even before they may require your help.

Start by working with your parents to create a profile of their finances. Find out what their benefits are and whether they’re currently receiving all of these benefits. Ask them for insurance records, medical and financial documentation. Make sure you have contact information for their professionals, such as an attorney or an accountant. It’s also important that your parents’ estate is in order. This can reduce the burden on you when they can no longer take care of their finances and household matters. The more facts you have regarding your parents’ finances, the better equipped you’ll be when they can no longer care for themselves.

Long-term care

When your parents can no longer care for themselves, long-term care (LTC) is something to consider. Do they plan on moving? Will they want in-home care when the time comes? The answers to questions like these will help to narrow down the right options for your parents. Costs for assisted living and skilled nursing homes vary widely depending on location, the facility, and the level of services and care required

What’s it cost?

Most senior care facilities charge on a month-by-month basis, but some require a longer-term lease. Assisted living is often more expensive than home health care, while skilled nursing homes are typically the most expensive. The majority of assisted living facilities use a tiered pricing model with bundled services — residents requiring the least amount of assistance pay the lowest rate.

LTC and other options

LTC insurance pays a fixed amount for assisted living, skilled care and in some cases in-home care. Depending on the policy purchased and the level of care needed, it may not pay the total cost incurred. Some policies offer lifetime coverage, while others provide coverage for a set number of years or for a total benefit amount. Prices vary, so it’s wise to shop around. Your premium will depend on a number of things, including your health and age — the longer you wait, the higher the premiums may be.

While a growing number of Americans are buying LTC insurance, the majority rely on a combination of personal savings, Social Security, pensions and government benefits to cover costs. Some will liquidate significant assets, or sell or rent their homes to pay for assisted living or nursing homes. Another option is the reverse mortgage, which lets the homeowner convert a portion of their home equity into cash. This requires one spouse to remain in the home though, and there are many other factors to weigh carefully, including the fact that you are putting your home at risk. Another option is to borrow against cash value in a life insurance policy¹, though this will reduce the death benefit paid to survivors. Again, the benefits and disadvantages should be evaluated thoroughly.

Medicare and Medicaid

Medicare does not cover typical costs for assisted living or nursing homes. However, the medical expenses incurred at the time may be covered, just as they would if treatment occurred in a doctor’s office or hospital. Medicaid coverage for long-term care is sometimes available to low-income seniors or seniors with very minimal assets. This varies by state.

Veteran’s benefits

If you are a U.S. veteran you may qualify to receive long-term care support through the VA. Eligibility is based on need for ongoing treatment, personal care and assistance, and the availability of service in your location. Financial eligibility and other factors also apply. To learn more, visit the U.S. Department of Veterans Affairs website at http://www.va.gov.

A professional can help

If you help provide for your parents financially, you may qualify for federal income tax benefits. It is best to work with a tax professional to determine your eligibility to claim these benefits. Working with a financial professional can also help you determine other sources of potential income, care benefits and the best options. Remember, creating a pro-active plan that meets the needs of you and your parents can help you manage a difficult situation with less disruption and difficulty.

¹ Policy loans and withdrawals may have tax implications and may cause the policy to lapse.