It's inevitable that our parents will age. And, whether we're prepared or not, there will come a time when we have to seriously think about plans for their long-term care. As that happens, we need to figure out how caring for them will affect both our finances and our lifestyle.
There are quite a few government plans that will allow you to pay you for your time and to have your expenses reimbursed. This will allow you to give your parents the care they need without worrying about your own finances.
We like to think of our parents taking care of us. But as they age, the roles may reverse and it may become time for us to take care of them. This includes taking care of them financially. And some states have Filial Responsibility laws, which place the fiscal responsibility for aging parents on their children.
Not every state has them and very few enforce them. But, you should find out more about these Filial Responsibility Laws and whether or not your state has enacted them.
Most of the things these laws say children should cover are:
- Medical needs
- Regular assistance
However, there are a number of programs you can access that may be able to help you care and provide for your aging mom or dad. This may be the perfect balance between helping your parent and not putting a dent in your own financial plans.
Related: Estate Planning–Wills Vs Trusts
Get Compensated For Eldercare
Even though caring for your aging parents is one of the most loving things you can do, it can cost a lot. Consider looking into some programs to offset those expenses.
Medicaid, one of the most common programs used to help with the costs of elder care, offers a number of financial options. While they are primarily considered a source for helping with nursing home costs, it covers other programs as well.
Medicaid Personal Care Services
Most Medicaid programs offer this type of assistance for eldercare. Since this program is an entitlement program, if your elderly parent meets the eligibility requirements, they will automatically receive assistance.
After your parent is assessed to determine how much care they regularly require, you can be named the caregiver. This allows you to receive compensation from Medicaid for your time spent caring for your parent, rather than paying an agency or a private aide.
These Home & Community Based Service (1915) waivers allow states to pay for care and support outside of nursing homes. This support is typically assisting with daily living activities or chores, and if you are helping your parent with these activities, you could potentially qualify for one of these waivers.
However, the rate of compensation isn't great. Depending upon the state you reside in, it could be anywhere from $9.00 – $19.25 per hour. These waivers typically have a cap on how many participants they can assist annually, so you may be put on a waiting list. But it is still definitely worth looking into.
Adult Foster Care
This option can be fairly limited as it is not offered in a lot of states. But for those states it is offered in, it can be one of the best ways to seek compensation, particularly if you are willing to live with your aging parent and provide all of their care. If so, then you could qualify for the adult foster care compensation for these activities, as well as another state supplement for your room and board.
Depending upon the state and your situation, you could net anywhere from $1,550 – $2,550 per month.
Medicaid Caregiver Exemption
This option is a bit more complicated than other Medicaid options. Under this provision, you, as an adult child, will not receive compensation for caring for your elderly parent. Instead, you can inherit your parent's primary residence once they pass rather than the state taking it for reimbursement for nursing home care.
However, there are few strict guidelines you must adhere to first in order to qualify for this option, so you need to plan in advance if you want to use it.
Please note that not all of these may be available your state. Check with your local Medicaid office first to see what programs they do have that you may qualify for.
If your aging parent is a veteran, there may be a couple of other options to assist you with financial compensation:
- Veterans Aid & Assistance and Housebound Pensions: this option can be used for veterans who are receiving a pension. Under this program, you can submit an invoice to your parent monthly for the regular care you provide for them. Your parent will then pay your invoice out of their pension, and the VA increases your parent's pension check by the amount they paid you. For more in-depth information about this program, please see the VA website Aid & Attendance and Housebound Pensions page.
- Veterans Home and Community-Based Services: to qualify, your parent must be a veteran enrolled in the VA Health system and be in need of nursing-home-level care. If so, your parent can choose you as their caregiver and the VHA will compensate you financially. This rate will vary by state and case, depending upon how much care your parent needs. For more information regarding this option, please see the VA website Services at Home and in the Community page.
If your parents don't qualify for the Medicaid or VA programs, there could be another potential option at the state level. Most states offer some sort of nursing home diversion program. These programs provide compensation to caregivers caring for the elderly in their own home instead of sending them to a nursing home.
These plans allow the participant to designate their caregiver, which could be you. The caregiver will then receive compensation comparable to the market rate for nursing home care in their area. While this sounds like a great option, it may not be available in your state or there could be other limiting factors for eligibility.
Life insurance can be a sticky subject to navigate. There are a couple of different ways that your parents' life insurance policy could potentially help.
The first one is through the Accelerated Death Benefit. Not all policies have this. But if they do, it can help if your parent has been deemed terminally ill and has less than two years to live. In this scenario, the insurance policy recipient can receive a portion of their death benefit as long as they continue to make their monthly premium payment.
Here is a great source to find out more about the Accelerated Death Benefit and the pros and cons.
The second option is less than ideal. But if your parent has a life insurance policy valued at over $50,000, then there is the option to use it for caregiving expenses while they are still alive.
How? Your parent sells their life insurance policy to a third party for a cash-out lump sum. Once they pass, the buyer will get the full value of the life insurance policy in return.
It's probably best to use this as an option of last resort.
Long-Term Care Insurance
Long-term care is another option for getting paid to care for your again parents. Although, this one can be tricky.
Not all long-term care policies will allow for a child to be the caregiver. And, in some cases, the caregiver must be licensed. Looking closely at your parents' policy will help determine if this is a viable option for you or not. But keep in mind that whatever money you are paid will have to be claimed as taxable income.
If you work for a company that is bound by FMLA (Family Medical Leave Act), then you may qualify for this option. This act allows you to take 4-12 weeks off of work to care for your elderly parent. If you have siblings, and you all work for companies bound to the FMLA statute, you can all take advantage of this option.
Tax Credits And Deductions
This works best if your parents are reliant on you for financial assistance as well as regular caregiving. If so, you can write off medical and care expenses when you do your taxes.
The other way to make this work, if it makes more financial sense at tax time, is to take the Dependent Care Credit instead.
When you have aging parents, it's a fair assumption that your lifestyle will change. Your parents begin to require more of your time and attention. This can make balancing and juggling life a bit more difficult.
As you're planning for their daily and financial care, you also need to discuss legal documents and end-of-life wishes. While it's ideal to have already had the conversation before they need your help, the reality is that, for most people, they haven't. Parents don't want to talk about it, or as their kids, we're not ready. But those tough discussions need to happen.
And since these types of discussions can sometimes cause strife, they need to be handled with care.
One of our ChooseFI FB group members, Laura Vedder, voiced some of the issues she came across dealing with her aging parents. In a thread about caring for aging parents, she says, “…indirectly there is certainly additional stress points and requires more flexibility in my own planning… For my parents, one still has retirement income, but the other is on Medicaid in LTC because there was not enough savings/income to afford it otherwise. Since I live locally, I was appointed guardian of one, and therefore am required to file reports, maintain accounting, and by law, must be a resident of the same state.”
Laura's situation serves as a reminder of all the things to account for as you prepare to care for aging parents.
Talking To Your Children As Aging Parents
As parents, we need to prepare our children for the time when we can no longer take care of them. This includes talking to them about our plans for our older years when we may require more care and assistance. If our children understand the plans we have in place and how we want things done, this can greatly reduce their stress.
Things To Have In Place Now
There are some things us parents can have in place now to make it easier for our children. The major things to get into place now are:
- Will. This is the legal document you have drawn up to state what you want done with your property, assets, and children. One of our ChooseFI FB group members, Dan Huffman, mentioned this in a thread about caring for aging parents. He said, “I think one of the most important thing aging parents can do is have a will, powers of attorney, and medical directives. My wife’s family has been hit hard the last three years and each time it was not having those three things in place that made a really sad horrible situation twice as bad and way more stressful!”
- Long-term care insurance. This insurance coverage provides various levels of care for those who need constant assistance and supervision. It is important to make sure you have this as you age.
- Life Insurance. These policies can be structured in many different ways, depending upon your needs and medical situation. Here is an awesome article laying out how to get the best prices on the best life insurance.
- Medical directives. This is what you use to name the person who will make decisions for you when you are no longer able. You will also detail how you want to be treated, medically, including DNRs (do not resuscitate).
- Legacy binder. Any sort of binder or pouch containing all of your legal and important documents. Having them all in one place makes it easier to find and sort through when the time comes. We have a great article about what your legacy binder should contain here.
Once you have all of these things together, hold a family meeting with your children. They may not want to hear it, but they do need to know where to find all of this information should something happen. They also need to know your final wishes and how you want things to be handled.
Overall, caring for aging parents changes aspects of your lifestyle and your finances. But there ways to make it less stressful and more affordable.
What are some of the ways caring for your aging parents has affected you financially? How has it changed your lifestyle?
- ICE Binder–The Done For You Legacy Binder You've Been Looking For
- Podcast Episode: Estate Planning With Mark Moss