According to a study by the National Alliance of Caregiving (NAC), New York Medical College and Metlife, nearly 10 million adult children over the age of 50 care for their aging parents.
Often adult children unexpectedly find themselves in the role of caregiver for their aging parents because of a sudden illness or diminished capacity for decision-making, putting a financial strain on the entire family. Unfortunately, many families do not talk about their parents’ financial future until it is an emergency.
While it is important for parents to remain independent while they are still able to be so, it is equally important for adult children and their parents to work together to assess their parents’ financial situation and determine if an appropriate plan for their future is in place. Creating an ongoing dialogue will help adult children and their parents confirm a plan for emergencies, organize finances and legal affairs, as well as understand long-term care and medical needs before they reach a point where they cannot make decisions on their own.
If you are an adult child of an aging parent there are four steps you can take now to help them plan for the future.
Step 1: Listen and Learn
The first step is to listen in a non-judgmental way. Aging parents may be hesitant or suspicious of their child’s interest in their finances. Approach the subject in a conversational and non-confrontational way, taking time to listen to your parents’ concerns or feelings. Don’t try to learn everything about your parents’ financial plans in one discussion – break it down into short, detailed conversations. And, remember to take notes!
Be sure to ask if your parents have a budget? Do they support any other family members financially at this time? Are there any health concerns? Do your parents have plans for long-term care? In a situation where your parents are unable to make decisions, will you or other siblings have that responsibility?
Step 2: Organize
After you listen and learn about your parents’ intentions, organize their budget into a spreadsheet. Note income sources and expenses, and even assets such as stocks, IRAs, and bonds. Remember to try not to be judgmental as you learn about their finances. Take into account any medical concerns and expenses. Doing this will help you and your parents identify the total the amount needed to sustain their lifestyle and/or plan for long-term care.
Step 3: Identify and locate
In the event of an emergency, you do not want to search for information and contacts such as health providers, financial institutions, insurance agent and place of worship. Ask your parents to share where they store their wills, trusts, insurance policies, real estate deeds, and even pre-paid funeral arrangements. Also, create a contact list of important people that should be contacted if needed to on behalf of your parents.
It is often best to involve an estate planner during this step so your parents are confident a third-party professional is involved in the planning.
Step 4: Educate
Adult children should take the time to understand about Medicare, Medicaid, assisted living and long-term care offerings, and estate planning strategies so that you can understand effective long-term planning of your parents. Ask your parents thoughts on each of these areas.
It is important to have an understanding of these areas before an emergency, helping you make better and informed decisions.