Are you concerned with how your aging parents will manage their finances? Will you be able to help your parents’ when the time comes? Is managing your parents’ finances on the horizon for you or one of your siblings?
I started managing my parents’ finances over three years ago, they were in their mid-80’s. The catalyst for this was my father’s diagnosis of dementia and the need to move him into a nursing home. At the time my parents were living on the family hobby farm they purchased over 50 years ago. The hobby farm is located five miles out of town in the country on a dead end road. His need for round the clock care could not be met on the farm. My father’s move off the farm led to my siblings and I deciding it was time to move my mother into a new home, an assisted living facility. The home was located in town, closer to medical facilities and she was closer to my father, so she could visit him every day.
My mother had always managed the family finances, but with all the lifestyle changes created by the moves managing the finances became overwhelming for her – there were too many changes happening to fast. So I decided to help out and take over the management of their finances on a day-to-day basis.
I think for most of us, throughout life we view our parents as “ten feet tall and bulletproof”. That is, that regardless of the path we take with our own lives – school, relationships, our own family they are the one constant that is always there. Moving my parents off the family farm was a defining moment for me. When I realized that the years my parents’ had left, were fewer than the years they had behind them. That their clarity of thought had started to waiver and the pace of the day to day routines started to become a bit confusing. A time when I started to grasp that they were no longer the caretakers, my siblings and I were.
Throughout their life, my parents’ were always disciplined and overachievers when it came to planning for what might come next. I still remember when I started playing football and basketball in seventh grade my mother started marking all my athletic clothes with my initials. It was an effort to minimize the expense of having to re-purchase shoes, socks and even underwear due to me misplacing an item, or in the event, someone else needed a pair of slightly used athletic socks. I remember being embarrassed and questioning her why she felt she needed to do that. Years later I realized it was just her way of planning and thinking ahead, anticipating and preparing for what may come next. In hindsight, it didn’t hurt anything and I guess it served its purpose I never did lose any underwear during my sports career.
In regards to their finances, planning and anticipating what may come next was no different. My parents met with a lawyer many years ago to establish their Will, made the decisions concerning their estate, burial plans, and advanced medical directives. My siblings and I were well aware of their wishes and felt we were all well prepared for whatever may come down the road.
What I wasn’t anticipating was just how important their planning and the documents they had put together would impact my ability to help them manage their finances later in life. You see what I didn’t know then, but now know today – what I have learned, is that although we like to think we know how the aging process might progress the reality is things never go as planned. The only thing you can do is hope the plans you put together help you navigate all the uncertainty that comes along with the journey.
If managing your parents’ finances are on the horizon for you or one of your siblings here are five simple guidelines I recommend you should understand and be prepared for to make the whole process easier.
#1 Power of Attorney (POA)
This is a must have and by far the most important document. The Power of Attorney or POA is simply a legal document that allows you to act on your parent’s behalf when it comes to their private affairs. Your parents should have a financial and medical POA.
The financial POA allows you to make decisions in regards to their finances. Some of the decisions you may need to make may be as simple as moving money from one savings account to another. Or you may need to call the hospital to discuss charges or changes to their bill. Regardless, if your parents don’t have a POA established in advance none of your parents’ accounts will be accessible to you.
My father’s transition into a nursing home and my mother’s move into an assisted living facility required changes to their insurance plans, Medicaid benefits, hospital billing accounts and new expenses from the nursing home. If my parents had not established a financial POA there would have been no way for me to help them manage all the changes.
A POA document should be established well in advance of when it may be needed. Any attorney can draft the document and provide your parents and you with copies to keep on file. The POA can then be invoked when the time comes that your parents need your guidance or are unable to make their own financial decisions.
#2 Checking, Savings and Investment Accounts
Understand where your parents’ bank and have their checking, savings and any investment accounts. The time may come when you need to order new checks, transfer money, or access investment accounts due to unexpected medical expenses – like in my situation my father’s long-term care.
When my father needed to move into a nursing home it required my parents to pay for his stay until Medicaid/Medicare benefits “kicked” in. Therefore we needed to transfer investment funds to the checking account to make the monthly nursing home payments. Understanding where they banked and the various accounts they had allowed me to transfer funds and manage the payments for the additional nursing home costs. (By the way, my father’s monthly nursing home bill was $7,000 a month.)
Not knowing where my parents banked, what they had for checking/saving accounts or what investments they had would have seriously delayed and potentially impacted my ability to transition them successfully to their new lifestyle.
#3 Monthly Expenses
The cable bill, the telephone bill, money for groceries are all common expenses we can expect our parents to have. What’s harder to navigate and anticipate are the additional expenses associated with long-term care.
If your parents are covered by Medicare, Medicare will pick up a portion of their expenses, but not all of them. Supplemental insurance for long-term care, dental, vision and prescription medications may all be an additional expense, which your parents may not have initially foreseen. Who does? Understanding all aspects of your parent’s current expenses will help you better budget their money as unexpected expenses arise.
One resource I found invaluable for navigating and understanding the options available for my parents was my County’s resources on aging. Many counties provide personnel that can assist and provide direction on where to gain more insight on where to receive financial assistance or for housing options should the need arise. In addition, AARP provides a wealth of resources.
Understanding your parent’s monthly expenses is critical to helping them and you plan for the unforeseen expenses of what may come next.
#4 Income and Assets
Similar to monthly expenses, understanding where their monthly income comes from is equally important. Both my parents receive social security payments and my father received a pension payment both of which were direct deposited into their checking account.
The necessity to understand your parent’s monthly income arises from the need to help them budget their money today and into the future. If your parents will need financial assistance from Medicaid or Medicare the process for applying for benefits can be lengthy. Your parents’ sources of income, past tax filings and the assets they have owned for the past 5-7 years are all part of the application process.
Knowing where your parent’s income related information is and how to access it will help you simplify the overall process should the time come that you need to provide such information to state or local agencies.
#5 Health Insurance
Depending on the age of your parents and their individual medical needs they may qualify or not qualify for various insurance programs. Medicare Part B covers a host of medical expenses. However, your parents may need supplemental coverage through another plan to cover the remaining medical costs.
Unfortunately, I have found no single resource that can provide you with all the answers to what is, or isn’t covered. Most of this is due to the fact that individual circumstances vary and that there are so many different insurance plans. Initially, I spent an enormous amount of time understanding what Medicaid/Medicare would cover, what costs the nursing home would not cover, what the hospital’s supplemental plan would cover. It is literally a maze and regrettably can only be experienced as you walk through it.
The best recommendation I can provide is that you fully understand what insurance benefits they currently have and then reach out to your county or state health department officials to better comprehend what may be available in the future. AARP can also provide you with a wealth of resources and help you anticipate the options available.
Plan for the Unexpected
If your parents are still managing their own finances, asking questions or attempting to gain insight into their finances may be considered a bit premature and be met with some resistance. After all, as adults we all want to be independent as long as we can, do our own thing and take care of our own needs.
However, I can tell you from experience that there is no roadmap for the aging process and what may come next. My father’s diagnosis of dementia, his move into a nursing home and my mother’s transition to assisted living were not expected. Things can happen and do change overnight. I was fortunate that because my mother had always managed their finances I was able to rely on her as a resource as I started managing their finances. However, as time went on I found I needed to take on more of the responsibility in regards to the decision making process.
If your parents are reaching the point where they may need your help to take care of them and their finances understanding their current financial environment and what they have prepared for will go a long way in helping them and you manage their finances when the time comes.