How Will You Pay for Your Parent’s Long-Term Care?
Much has been made of how much financial support baby boomers provide to their adult children. However, there could be another form of financial aid that is straining the budget for retiring boomers. It’s financial support for their parents, specifically aid for medical costs and long-term care.
According to a study by TD Ameritrade, 25 percent of baby boomers provide financial support to someone outside their household. Eight percent of that support goes to parents.
Among younger age groups, the demand to support parents increases. Thirteen percent of support provided by Generation Xers goes to parents, and that figure rises to 19 percent for millennials.1
Obviously, you don’t want to see your parents suffer or receive care that doesn’t meet your expectations. However, you also don’t want to threaten your financial stability or your retirement.
Fortunately, there may be some alternatives to help fund your parent’s medical needs. Before you dig into your own bank accounts, explore all options available. Below are three strategies to consider:
Less Obvious Assets
Even if your parent doesn’t have a significant amount of investments or savings, it’s possible they could have other assets that could be used to pay for care. Take some time to inventory everything they own to see if it could be tapped into for funding.
For example, your parent may have cars, furniture, jewelry or other items that could be sold to raise money. You may not want to sell your parent’s possessions, but if it’s unlikely they’ll ever leave care, it may be the most reasonable option. You may even consider selling the home to raise funds.
Also, look into your parent’s life insurance policies. They could have substantial cash value that could be used to pay for care. Again, you may not want to surrender your parent’s policies. However, if the death benefit isn’t needed, perhaps that cash value could be used more effectively by funding your parent’s care.
Government Assistance
If your parent is over age 65, they likely participate in Medicare. In most cases, Medicare doesn’t cover long-term care costs. However, it can in some cases. Medicare is usually applicable if the care is directly related to a hospitalization. In that instance, Medicare will often partially cover costs for a limited period of time, often several months.
Medicaid could also be a possibility. Medicaid does cover long-term care costs. However, your parent needs to have very little in assets to qualify. It’s possible, though, that your parent could spend down their assets on care and then use Medicaid for funding once their assets have been depleted.
You may also want to investigate the Aid & Attendance (A&A) program offered by the U.S. Department of Veterans Affairs. The A&A program is designed to assist veterans and their spouses. It provides additional monthly income to help pay for care.
The A&A program relies on a complex formula to determine payments. Contact your local VA office for more information.
Family Agreement
Do you have siblings or other family members who are willing to help? There’s no reason the burden of caring for your parent should fall on one person’s shoulders. Sit down with your siblings to discuss your parent’s needs and how you can all contribute.
For example, there may be one sibling or spouse who has the free time and the skills to provide in-home care. Or perhaps a group of siblings could rotate in and out to provide care. If one sibling can’t physically assist, maybe they could provide a share of financial assistance.
Come together as a team to develop a care strategy. Then put your agreement in writing so the strategy has a formal structure.
For more information on how to care for your parent, contact us. We’re happy to help you develop a plan that protects your parent and your own financial stability. Let’s talk soon to address your challenges.
1http://www.cnbc.com/2015/08/13/paying-the-price-for-supporting-adult-kids-aging-parents.html
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15967 – 2016/8/4
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