Financial Caregiving: 10 Essential Tips

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Your parents took care of you, and at some point, there’s a very good chance you’ll do the same for them. According to a recently released report by Merrill Lynch and Age Wave, in 2016 alone, roughly 20 million people became caregivers. It’s a life changing event, not only emotionally, but financially.

“Taking care of your loved ones is a burden and a blessing, and not without sacrifice,” says Surya Kolluri, managing director at Bank of America Merrill Lynch.

In the nationwide survey of more than 2,000 caregivers, the Merrill Lynch/New Wave study found that 92% of caregivers are also financial caregivers. They take on a variety of money-related tasks, like paying bills, monitoring bank accounts, handling insurance claims, filing taxes, and managing invested assets.  

Preparation is key. Taking the proper steps before a parent or other loved one needs your help or becomes seriously ill, and knowing what to do once they are, can ease the transition.

1. Open communication

Before your loved one becomes ill or incapacitated, talk openly with your family to discuss crucial matters, such as where someone prefers to receive care, what type of bills and expenses they have, and their preferences and plans related to end-of-life planning, from medical care to funeral planning. It’s not always easy to ask your parents questions like how they might feel about being in a nursing home one day or whether they’d rather be buried or cremated, but it’s essential to try. “Once an open dialogue is underway, it’s much easier to plan for your family’s future and avoid financial burdens down the road,” says Kolluri.

2. Familiarize yourself with their finances

As a caregiver, you could end up taking over everything from your parent’s everyday living expenses to their medical bills, so you will need to know where and how to access their financial records. This includes who prepares their taxes, who are their financial advisors (get introduced if you can), what are their login ids and passwords, where do they bank, and what source(s) of income they have.

This is also a good time to discuss how much debt they have, and what amount they spend each month on living expenses (mortgage, utilities, groceries and more).

For reference, create a list of assets (including bank and investment account information along with sources of income, such as Social Security and pension payments), as well expenses, which should include the name, address, and account number of the payee along with the due dates. (Use this checklist to make sure you’ve got everything.)

3. Simplify bills and deposits

Go ahead and arrange for automatic bill payments and direct deposit of any income they receive. This not only makes things easier for you, it also removes the worry of forgetting to pay bills and racking up late fees. Direct deposit also helps protect your parent or loved one from having checks stolen out of their mailbox.

4. Understand their insurance

Find out what type of insurance they have—health insurance, life insurance, and long-term care insurance—and what the insurance covers, including whether long-term care is covered should it ever become necessary. Many types of health insurance, including Medicare, will not pay for long-term care, such as a home health aide to assist with bathing and toileting, an assisted living facility, or long-term nursing home care.

If you feel their coverage is insufficient, it’s better to know now instead of later. “This information is vital to making good decisions for your parents in terms of their care in the future, and it will protect you from paying unnecessary out-of-pocket expense,” says Byron Ellis, a certified financial planner with United Capital Financial Advisors in The Woodlands, Texas.

5. Get documents in order

According to the Merrill Lynch/New Wave survey, 49 percent of those providing financial caregiving didn’t have legal authorization to perform this role. That’s why you need a power of attorney, which officially designates someone (called an agent) who can manage the parent’s financial and legal affairs. The power of attorney should be durable, meaning it will still be in place if the parent becomes incapacitated. The forms for power of attorney allow you to lay out the specific responsibilities and approved financial transactions the agent can take part in.

Similarly, a medical power of attorney, also known as a durable power of attorney for health care or a health care proxy, designates someone to make medical decisions if your parent or loved one is unable to do so themselves.

“Make sure you have the financial and medical power of attorney. Know where the documents are stored and make sure you have the originals. Register at the bank and/or financial institution as the POA so that your signature is already in place,” says Liz Crystal, owner of the LC Group in Green Brook, New Jersey, which provides personal bookkeeping and daily money management services.

6. Consider a living trust

In addition to having a durable power of attorney, a revocable living trust can allow for someone else to manage the parent’s financial affairs when they need help or lose the capacity to do it themselves. “Make the parent(s) the trustee so that they can have control as long as they are able, but have one or more of the adult children listed as back-up trustees so that they can step in and manage the parents’ finances when they are no longer able,” says Lawrence Solomon, director of investments and financial planning at OptiFour Integrated Wealth Management in McLean, Virginia.

A revocable living trust can also help you avoid the time, headache, and costs of taking assets through probate when the loved one eventually dies. However, it’s not the right move for everyone; consult an estate attorney or elder law attorney to see if it makes sense in your situation.

7. Keep track of everything

Use online programs like mint.com or online programs provided by your bank to help track of assets and expenses. “Once you start signing checks as POA change the color and sequence of the checks.  Keep those checks in your possession.  Destroy any old checks,” advises Crystal.

Make sure your financial records are organized. “Everything from account numbers to renewal dates for insurance policies should be easily accessible and kept in a secure location. Losing vital paperwork is a big issue for financial caregivers,” says Chris Wong, CEO of LifeSite, a virtual safe deposit box.

8. Assemble your team

“Managing a loved one’s finances in addition to your own is often too big of a task for any one person, and it’s OK to reach out for help,” advises Wong. In fact, the Merrill Lynch/New Wave survey found that 66 percent of those polled said they could benefit from financial advice. Forty-five percent couldn’t even estimate how much they spent on caregiving-related expenses in the last month.

Your financial team might include a financial advisor, an attorney specializing in estate planning or elder law, and an accountant or CPA. Reach out to trusted professionals your family has worked with in the past. For general caregiving, identify other family members and friends who can be on hand in times of crisis, as well as resources and contacts that your loved one can easily access in an emergency.

9. Stay on top of your own finances

Says Mike Berry, a certified financial planner with Voya Financial in New York City, “Pay yourself first. This is analogous to a flight attendant telling you to put on your own oxygen mask before you help others. If you don’t ensure you’re putting away enough for retirement prior to providing financial support to others, you could end up depending on your own children to support you down the road.” You may want to get a financial advisor to help you so you don’t feel overwhelmed trying to figure out on your own if you are where you should be financially.

10. Take care of yourself

This is a tough time; don’t think you have to go through it alone. Seek out peer support groups and check with your employer to see if your company has any programs to help caregiving employees manage care responsibilities. You can browse caregiver support groups in your area using our service finder:

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