Ugh…the thought of our senior loved ones not having enough money to cover their basic needs such as shelter, food and health is something we don’t even want to consider.
Far too many family caregivers have that worry regarding aging loved ones, however.
Our seniors wish to age in place and we are making that a reality. Unfortunately, that doesn’t come without a cost in dollars.
Keeping an aging home in livable condition or updating it through renovations or remodeling in order to accommodate aging in place can cost more than our seniors have set aside or have left anymore.
Retirement funds and pensions have taken a financial hit in the recent economy and may not have enough time to rebuild for many so that what they thought would carry them through is now lacking.
You, as a family caregiver, want to step in and help them carry their burden but don’t exactly know the best way to do it so that you still some money for your own retirement or aging process.
Economic Reality of Aging
According to various reports, more than half of all people over 65 feel pressed to pay for life essentials such as housing, transportation, food and healthcare needs. More than half!
Many seniors have lived longer than they anticipated. The reality is that our life expectancy continues to rise in this country, due in large part to medical advances and living conditions. We are a pretty healthy society that has access to medical miracles which keep us alive much longer than prior generations. The current average life expectancy is 78.7 years in the United States as of 2012 (men 76 and women 81).
The latest report from the Organization for Economic Cooperation and Development (OECD) ranks life expectancy in the United States 26th of 36 member countries but we have the highest health expenditure of all the countries. This is seen as related to the fact that the US has the highest rate of obesity among the member countries (36.5% versus 22.8%).
The National Aging in Place Council research indicates that the cost to seniors of aging in place at the home of their choice (not in a facility) averages $23,000 each year.
Aging in place home modifications can run the gamut of cost, depending on what changes need to be made. The simplest basic modifications, such as adding grab bars or lighting, can be $300-3,000. Entry way changes, including a ramp, could cost $1,500-3,500 and up. Home renovations can run up to $70,000 or more depending on extent of needed modifications, such as elevators, room additions, kitchenettes, widening doorways or handicapped accessibility changes. A walk-in tub could cost as much as $10,000-20,000.
According to a Fidelity Investments study, 24% of children said they believe they will have to help their parents financially, while 97% of parents said they won’t need help. With that difference in perspective, discussing their financial plan could be tricky!
Strategies to Pay the Bills
One of the most important considerations when helping your senior loved ones with financial issues is to be sure that you continue to protect your own financial future. Your personal taxes and your senior’s taxes should be a consideration — actually minimizing them.
- Tax exempt annual gift – You can set up a tax exempt gift to your parents. You can gift to an individual up to $14,000 a year (when in doubt, ask your tax expert). If you choose to do this to help them pay certain costs of living, be careful to check into the possibility that this gift could result in the loss of other benefits, including Medicaid.
- Pay their bills – If you have adequate funds to pay the bills incurred by your seniors, you can pay for their medical bills in the hope of receiving reimbursement from their assets upon their death. Your siblings could also get together to assist as well.
- Loan – You could make a loan to your family as long as you follow the IRS guidelines for appropriate interest rates. It is safest to document everything. It doesn’t have to look like a bank loan contract, but you may find dealing with an awkward situation early can avoid problems later.
- Reverse mortgage – You could assist your senior loved one to determine whether a reverse mortgage would be appropriate for them. Do they have equity in their home to make this plausible? Be careful to understand all the rules and restrictions about this type of lending and be sure the family members are aware of the result, the potential loss of the home once your senior loved one no longer lives there unless the loan can be repaid. There are also upfront fees that may be higher than desired in your senior’s situation. While not for everyone, some seniors find this to be the right option for them.
- Buy a home for your senior then charge them rent – If you can afford to buy a home suitable for your senior then charge them a rental fee, your senior could sell their own home and live on the money gained. This could save money on renovations or remodeling of an older home and give them a smaller home or condo that has universal design and better access to shopping. As landlord, you would receive tax gains for repairs and other costs of ownership.
- If desired, your senior could move in with you. This would save them the cost of housing and might allow them to sell their current home and use the money for their personal expenses. Before taking this step, we suggest everyone honestly evaluate the pluses and minuses so you can prepare for what is ahead.
- Search for benefits – Is your senior loved one getting all the benefits to which they are entitled? Are there untapped resources out there such as Veteran’s Aid or subsidized housing? Check out BenefitsCheckUp.org.
We recommend that you seek the advice of an elder law attorney or certified financial planner who is knowledgeable of the rules in your senior loved one’s state, as they do vary. It is important to be sure that all implications for present and future benefits are thoroughly considered.
Talking Money with Senior Loved Ones
We also suggest you take the often uncomfortable step of asking questions of your senior loved ones about their current financial status. Are they still capable of balancing their checkbook or handling their assets? Are they paying their current bills on time or running up fees for non-payment? Do they have a financial plan, pre-paid burial plan, life insurance or other assets that may be needed? Do they have a safety deposit box, IRA, pension, or other funds that you should know how to access?
Don’t just listen to their answers, though, because you may hear what they want you to hear rather than what they need you to hear. Pay attention to how they respond, their body language in addition to words, and watch for signs finances might not be as they indicate.
Talking about money is not easy for older adults (nor many younger ones, for that matter) so you probably will get further with a delicate approach. Having honest conversations about what funds are available, how to access the funds and who is in control of them if your senior is not competent are all questions you would want to have answers for before an emergency arises. Are you the designated financial power of attorney should something happen to them?
Helping with Money Management
If you think it would be in your senior loved ones best interest (and likely is), set up direct deposit of funds for them so that you know that money is deposited safely and not stolen from the mailbox. Then you can set up automatic bill paying from the bank and know that bills will be paid on time. Knowing the money coming in and going out will help you help them establish a budget.
Don’t forget that your senior loved one may still wish to have some control or input into their finances. Your role as caregiver is to lighten their burden if possible not to take over. If they need some help and eventually need you to take over completely, meet the current need.
It is their money and their life, after all. They earned the right to watch out for themselves if they are capable.
Even so, your assistance may be necessary for them to continue to live as they desire in the home of their choice, but you need to do it wisely and with your eyes wide open to all the consequences and impacts, not only for them but for you as well.