Understanding your elderly parents finances

By Shane Larson

financial-planning

If you are a working professional who is tasked with the responsibilities of assisting an elderly parent who has been diagnosed with Alzheimer’s, you may have to make some financial decisions for them.  If this is the case, having a plan is going to be your saving grace to make sure they receive the best care possible, without interruption due to finances.  for them.  

First thing first, you need access to your financial-planning-4_editloved ones information. Power of Attorney is
critical in managing day-to-day finances for someone who has Alzheimer’s, however, having the document is not the only step. Make sure banks, financial advisors, CPA’s and anybody dealing with privileged information receives a copy of it and approve you to act on their behalf.   

Now that you have access to their information, you may have to make decisions about what assets to use to pay for their care.  Below is a summary of some common assets you may use or need to know about:

  • Social Security: U.S. citizens are eligible for payments from the Social Security starting at full retirement age (typically age 67). The payments are based on their lifetime earnings and are paid out monthly. If someone is disabled prior to full retirement age, they may be eligible for Social Security payments as well.
  • Medicare: Basically, there are three parts: Part A: hospital insurance, Part B: doctor visits and Part D: prescriptions. This is available to individuals once they reach the age of 65. Once thing to keep in mind with Medicare is that there is no long-term care insurance. They are eligible for Skilled Nursing Facility Care only after a hospital stay and only up for 100 days.
  • Medicaid: This is a program designed for needy and vulnerable individuals and families. It is a federal program however, each state is in charge of administering the Medicaid dollars and determining need. What is nice about Medicaid is that it does offer Skilled Nursing Facility Care. However, since this is designed for low income population it is very hard to qualify. Families sometimes try to “spend down” a loved one’s assets to qualify them for Medicaid however, states now have a five year look back period to see how much assets an individual may have had to pay for care. Consulting an attorney is the best way to to implement a strategy to have a loved on qualified.
  • Retirement Plans: Your loved one may have saved money into a retirement plan during their working years or may have a pension from an old employer. It is important to use this as additional income if Social Security is not going to be enough. Some accounts you may typically see are 401(k)’s, 403(b)’s, Pensions, IRA’s and Roth IRA’s.  All distributions from these accounts are considered to be taxable income (except the Roth IRA), so tax planning may be involved.
  • Reverse Mortgage: Typically thought as a last resort, using a reverse mortgage on your parent’s home may be a great way to get some supplement income to cover the cost for care. If your family has decided not to keep the home after death and if there is little to no mortgage, this is a great way to create income off an asset that is highly liquid.  Reverse mortgages are only available to those 62 years and older and may only take up to a certain amount on the value of the home.  If you’re considering this option discuss it with a financial planner as well as a reverse mortgage broker.

financial-planning-2In my experience, the more prepared your, the less likely caring for someone can become a nightmare. Make sure you create a plan and periodically check in to make sure you are on track.  Don’t be afraid to ask for professional help as well. There are many professionals with expertise in these areas that can help ease the stress of trying to figure it out on your own.

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