Caring for Aging Parents: A Financial Prep Checklist

While advertisers and most of pop culture are focused on the musings and behaviors of Gen Z (as well as the new-to-the-conversation Gen Alpha), an estimated 2.5 million of us are now a part of what’s known as the “sandwich generation” — those Millennials and Gen Xers who care for at least one parent over age 65 and at least one minor child at the same time. Oh, and also still holding down a job ourselves.

That pressure from both sides, while often ignored by others, can have some dramatic effects: Members of the sandwich generation reported twice the rate of financial difficulty and are a third more likely to experience emotional challenges than adults of a similar age only caring for a parent. And while we might feel confident in our child-rearing skills by this point in our lives, caring for an older adult is often new territory.

One of the biggest challenges? That sense of self-determination, that ability to make our own decisions – a trait we see our growing children exert as they age – is still present in our aging parents. The need for independence is still there and still quite strong. They don’t want to give that up.

Yet, self-sufficiency is often at odds with the realities of aging — and you may already be seeing the signs: Paying bills late. Giving money away. Neglecting the housework. Signs of hoarding. Maybe increased isolation or pulling away.

As you grapple with the emotional, physical and medical care of your aging parents, don’t forget to include their financial affairs as well. Preparation should begin now — not only for their financial security but also your own.

Proactive steps for financial caregiving

With most aging parents, if they're doing well and still in decent health, you can really let them run their life. But it's always good to have a second set of eyes on their financial matters if they’ll allow it. Review this elder care checklist to help you get a better handle on your parents’ financial matters. The more preparation you do now, the easier the aging process will be for everyone.

• Know their wishes – When dealing with parents, you always want to understand their wishes because at some point they’ll likely be handing control over to you. Talk to them early and often to get a better understanding of their preferences: How do they want to be remembered? What happens in certain medical scenarios? Do they have a Do Not Resuscitate (DNR) order? Do they want to age at home as long as possible? The earlier you can plan for different scenarios – getting all your ducks in a row before your parent has a medical challenge or a mental clarity issue – the more solid your plan will be when you really need it.
• Investigate tax advantages – Talk with your tax professional about exploring federal tax deductions for specific health care costs, including medical equipment, hiring home health professionals, and even out-of-pocket expenses that insurance won’t cover. If you have to remodel your home to make it more accessible, for example, you may qualify for tax breaks for those costs, so explore all your options.
• Look closely at insurance and retirement plans – Make an inventory of any disability coverage, long-term-care insurance, pension benefits, life insurance and health insurance your parent may have. Look into what those policies cover regarding home health, mental health services, physical therapy and other assistance.
• Add a POD or TOD beneficiary – If your parent doesn’t have a trust, it’s especially important to add a Payable on Death beneficiary to all their checking, savings and money market accounts. A POD beneficiary is the person (or persons) designated to receive those funds upon your parent’s death. This helps you avoid the lengthy and expensive probate process, and the designation simplifies everything for both you and the bank, allowing the assets to go directly to the beneficiary. Similarly, TOD (Transfer on Death) is used for investment accounts or even on the house deed and car title. Just like POD, TOD ensures the asset passes directly to the heirs listed and avoids probate. I'm a big advocate of POD and TOD because, unfortunately, the vast majority of the time, somebody misses something, leaving them stuck with the probate process and disagreements within the family, which can get ugly.
• Become an authorized user on accounts – Age-related decline and confusion can often lead to missed or incorrect bill payments, scams and more. If your parent is comfortable with it, ask them to add you as another user on their credit cards and bank accounts. This allows you to pay bills if they become incapacitated and just be that second set of eyes to oversee financial matters.
• Collect all important documents – Ask your parent about the location of key documents, and organize them so they’re available when you need them in the future. Include things like birth certificates, death certificates, deeds to cemetery plots, marriage certificates, divorce decrees, insurance policies, pension benefit documents, property deeds, military discharge paperwork and others specific to your family.

Proper planning to be better prepared

Whether you need to prepare for an assisted living facility, home renovations for a wheelchair, the hiring of home health professionals, or just protecting your parents from the increasing likelihood of elder scams, the financial preparation for caring for an aging parent needs to begin now.

Remember, however, that you’re never alone in this challenge. Our team of financial professionals can help guide you every step of the way, so you can embrace your membership in the sandwich generation with a sense of empowerment and, most important, peace of mind.