Financial Planning: Strategies for Caregivers and Their Parents


Gail was surprised, but also relieved, when her father, then age 64, told her that as part of his legal and financial planning, he had put in place a durable power of attorney and advance care directives. Now at 78, her father suffers from the early stages of Alzheimer's disease. Having the foresight to make arrangements years ago is saving the family both emotional and financial distress.

It is a scenario that Certified Financial Planner Larry Botzman, Chartered Retrirement Planning Counselor (CRPC) and board member of the Financial Planners of America, sees often. Sadly, many families are not as prepared as Gail's.

"What is at risk is the adult children's inheritance," Botzman says. "If the parents' life savings goes toward paying for a nursing home, then there is nothing left to leave the children, which can be heartbreaking for the parents."

The lesson here for caregivers is to start planning now for your own future care. Research by the University of Kentucky's College of Human Environmental Services found that only 40 percent of people thought a lot about retirement. A full 77 percent said they felt they were saving too little and poorly prepared for their own retirement.

The study also suggests the caregiving experience brings heightened awareness about one's own retirement needs and is a time in which many caregivers need guidance regarding retirement planning activities and information.

3 Financial Strategies for Caregivers and Their Parents

Botzman recommends three strategies that he says caregivers should consider for their own finances and for the finances of their aging parents, if they have not already been addressed:

  1. Power of attorney (POA). This enables a person to appoint an "agent," such as a family member, to make legal, financial and health decisions when the person is no longer able to do so themselves. The document might enable the caregiver to pay bills or sell certain assets, or it could extend to all financial decisions, including selling an elderly parent's home and managing all assets. There are two kinds of POA: financial and medical. One child can be the designated agent for both of these types of decisions or two siblings can each be responsible for one type.
  2. Gifting. A gifting clause is very important because an agent is not permitted to gift or transfer any money, personal property or real estate to himself unless the POA document contains specific authority to do so. Botzman says he has clients who have gifted their home to their children, but still live there. It is called a life estate, a grant or reservation of the right of use, occupancy and ownership for the life of an individual. Parents can live their entire lives in the home without the children, but the home can never be taken by authorities to pay for medical expenses.
  3. Long-term care insurance. Long-term care insurance helps you pay for health care services, which can be very expensive. A policy also ensures that you can make your own choices about what long-term care services you receive and where you receive them. This is another example of a time when early planning is key. The best rates and ranges of services are available when a person is still healthy. Middle age is the best time to think about buying long-term care insurance because that is when a person is most likely to qualify for a policy and when premium costs are at their lowest. Caregivers can also purchase long-term care insurance for their parents, but again, price is the issue for many seniors. Botzman also recommends checking with employers since more and more are offering this as a benefit, with reasonable group rates.

Of course, the problem with this type of financial planning is figuring out how to open the discussion on a topic many families never discuss. Botzman calls family financial planning "the grey elephant in the room that everyone knows is there, but no one wants to talk about."

One suggestion to open the lines of communication is to reference something you saw on the news or read in the paper. For instance, "I read about long-term care insurance yesterday in the paper. Do you know about this?" Another option is opening up to your parents about your own plans for retirement and long-term care. This can help break the ice if they know you are making moves for your own financial future and care.

However you approach it, planning ahead for certain types of assistance is an enormous help. This becomes one less thing a family has to worry about during trying times. Financial planning laws and insurance programs vary widely depending on location, though. Always seek advice from experts in your area before making significant financial decisions.

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One of the things that I disagree with is that so many people are concerned about leaving an inheritance for their children and do not want to pay for a nursing home. I think this is very wrong. The money that they earned and saved was for their older age and to being taken for care. Many people then end up on medicare (welfare if you will) and we end up paying more in for their care. I am very frustrated because my brother's children have taken over almost all of his $500,000 estate. He will need to go into a nursing home as they will not want to care for him much longer. Two of his children went to an attorney and told them what they wanted and the attorney wrote up everything and did not talk to my brother. He already had Alzheimers and had lost his wife a few months prior in an accident when they came to him asking for things. He had NO ONE to talk to him and did not fully understand what was happening. He signed the papers when asked if he understood and he said yes. Any one, particularly the attorney should have known that he did not understand. Not much I can do about it at this point as he will be going to a veterans home that is 50 miles away and I won't be able to visit him muchand they only go back one year to take things. SO they made sure they got things done as soon as they could.think what makes it harder for me is that I am a retired social and familiar with the things that happen. Thanks for a chance to unload my frustration.

Did your brother's children utilize the attorney to "spend down" his net worth to qualify your brother for Medicaid? Was their intent to get the money NOW or was it the children's intent to avoid having to waste the $500,000 on a nursing home?

Bryan Wisda
There are many reasons why family's do Medicaid planning and one of the most important is to preserve assets for the spouse at home's future care needs. It is not wise to spend down all your assets and have nothing left should there be a change in condition and they were able to go home. As an admissions director for a nursing home I witnessed this. People who Medicaid plan are only taking advantage of the allowable exemptions just like you do on your taxes. Veteran's have the Aid and Attendance pension that can help pay for care and they allow transfer of assets to qualify.