As you get closer to your retirement, you may come to realize that your parents will not be able to take care of themselves or their finances for much longer. Caring for your aging parents can have a significant impact on your own finances.
To offset the potential impact of caring for your elderly parents, you need to plan carefully. Take a close look at your parents’ finances as well as your own financial situation.
Here’s some financial advice to help you prepare for the financial implications of caring for your elderly parents.
Weigh The Financial Impact Of Where Your Parents Will Live
As your parents age and become less independent, where they live has a significant impact on their financial situation. Unfortunately, people often make rash decisions when it comes to their aging parents’ living situation.
Selling the family home, which is often the aging parents’ largest asset, may in some cases be the best option as it could offset the costs of elder care. But, for many families, selling the home too quickly could do more harm than good.
This decision needs to be weighed against the potential costs of having your parents move in with you, or placing them in a long-term care situation such as a nursing home or assisted living facility. However, these choices pose risks as well, with the significant costs of long-term care and the possible personal strain of having a parent move in.
The key is to examine the personal and financial impact of each option very carefully before deciding. Talking to a financial advisor can help your family evaluate the best options.
Don’t Let Short-Term Debt Pile Up
When your parents’ health begins to deteriorate, it’s important to keep short-term debt in check.
You or your parents may react hastily to their new situation by letting debts pile up, thinking that you have plenty of time to correct this situation. However, it’s very difficult to recover from the financial drain this puts on your long-term financial prospects.
If the economy weakens as your debt remains high, the effect can be quite detrimental to your financial health. Whenever possible, make sure you and your parents have an emergency fund that covers six months of living expenses.
Familiarize Yourself With Your Parents’ Accounts And Advisors
It’s important to get as much information as possible about your parents’ financial accounts and advisors.
Try to familiarize yourself with their assets, the state of their will, their account information, their estate lawyer’s contact information and their financial advisors. Having this information helps make the transition much easier once your parents are relying on you to take care of them. At the very least, you should know which bills will need to be paid, which accounts to write checks from and any passwords needed to ensure their accounts remain in order.
If your parents are reluctant to share this information, it’s often helpful to take an indirect approach to starting this conversation. Telling your parents about your own planning for when you will no longer be able to take care of yourself may convince them to open up more about their finances.
You should also make it clear to your parents that you’re not trying to take control of their lives or their finances for any personal gain. Rather, explain that you simply want to make sure you are prepared to take care of them in the event they become unable to care for themselves.
Have A Financial Advisor Call A Family Meeting
For families with competing agendas, having your parents’ financial advisor call a family meeting can be especially beneficial.
At this meeting, your family and your parents’ financial advisor can work to get everyone on the same page. It should help your family fully understand the financial impact of your parents’ different long-term care choices. This meeting also gives your parents an opportunity to tell you and your siblings exactly what they expect from everyone when it comes to their care.
With open communication, it’s possible to manage your parents’ care and finances without hurting your own financial situation. To get the best financial results, careful financial planning is the key.
To secure your family’s financial future, you need a smart strategy and plans to mitigate potential risks. Download our Checklist For Securing Your Family’s Financial Future.
