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Financial Planning for Aging Parents

by Chris Cooper, Financial Planning Expert
May 14, 2015

Question: What kind of budgeting should I include in a financial plan for myself and my aging parents?

Answer: Before you can budget, you must first ask yourself “what kind of support will I give my aging parent?” Support means your time, efforts, talent, as well as your money. Long distance caregiving is costly in terms of time, money for travel, lost time at work, as well as not being there when you are needed most;  to oversee the care and services your parent receives.

If you plan on paying for the care your aging parent may need, as some do, then your budget would also need to include updating your estate planning documents to provide for your parent(s)  in case of your demise or disability. 

So, first, take stock of where you are. Do your “balance sheet” meaning list your assets and your liabilities. Next do your “income statement” -  take your last tax return and write down your income from work, investments, pensions, social security and others. Then do the same for your parent(s).

If your parent has long term care insurance, write down the amount of benefit that could be received on a monthly basis (usually it is expressed in the policy as a per day figure and it could be adjusted by a cost of living rider, so you will need to call the company and start a claim to find this out.)  Also, you need to know how long the insurance will pay for, such as 5 years, or hopefully longer.

Now, where does all the money you make go?  And what is your parents income being spent on?  Is there any surplus for either of you? Will you have to reduce your work income to take time off to care for your parent(s)?

When I prepare tax returns for my long term care clients, I see residing in a nursing facility, along with transportation to medical appointments, supplies, and prescriptions costing $120,000 a year in both the Midwest and on the West coast. This is the highest level of long term care. A more intermediate level of care, called “assisted living,” can seem less costly, but often costs more, because of all the add on costs and services not available at this level.  Home care on a 24 hour a day basis is over $150,000 and is more expensive because of the costs of maintaining your parent’s home, and having to supervise the workers.  Public assistance under Medicaid (not Medicare) only pays for nursing home care and limited home care services(not 24 hour/day) and is not uniformly administered in all 50 states and the territories of the USA.

So for you, the caregiver, time off from work, travel costs, lots of time on the phone with providers, and possibly paying for some of the costs of your parents care are items for your budget. For your parents, the costs of paying someone to do what they used to do for themselves, like bathing, eating, housekeeping, bill paying, grocery shopping, medical appointments, social appointments, transportation (and that’s a Biggy!).  

Chris Cooper is the owner and founder of Chris Cooper & Company, Inc., a fee-only financial planning firm for elderly persons and the owner and founder of ElderCare Advocates, Inc. a private geriatric care management and long term care consulting firm. As a California Licensed Professional Fiduciary, Chris can serve as  Conservator of the Person and Estate under court appointment,  as Agent under a Durable Power of Attorney for Financial matters and Health Care matters.

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