Support from family and friends is vital for many older individuals, especially those with serious health conditions and disabilities. Most often, caregivers are family members who take care of their parents or close relatives as they age and can no longer take care of themselves. Other times, friends or neighbors step in to provide care when there is a need. If you are not currently a caregiver, there is a good chance that sometime in the future, you will be. It can happen at any time, but often happens as you are closing in on your own retirement. You could end up becoming part of the “Sandwich Generation”, which refers to individuals who care for aging parents when raising children of their own. According to Pew Research Center, adults ages 45 to 64 are the most likely to become caregivers, which are about 23% of individuals in this age bracket.
Being a caregiver can be extremely rewarding, but can also be stressful. It is important to take steps to avoid compromising your own future financial security as well as your mental and physical wellbeing.
Tips on where to start:
1) Start the conversation now. Ask your loved ones what their wants are. This will help guide your future decisions. Create a “back-up” plan in the event that you may not be able to be a future caregiver at some point or decide that the situation, if presented, is not possible for you. Who will be the caregiver in this case? Will an outside service provide care?
2) Get organized. Know where the care-receiver’s important documents are, such as birth certificates, deed to home, title to vehicle, insurance information, durable POA, investment information, loans, and wills. Securing these documents is vital when managing financial and medical situations and it can be frustrating and time-consuming having to hunt them down. It is also important to have a contact list of their friends and family to develop a support team.
3) Educate yourself. Two of the most important needs of caregivers are information and support. There are many resources out there to help you gather information, coordinate care, and locate support groups. You may need information on areas of care that include medical, financial, companionship, transportation, mental health, social services, and nutritional needs.
The following are examples of such resources:
AARP’s Family Caregiving Website
Caregiver Action Network
Dailycaring
Eldercare Locator
For more information on the key care needs for your aging loved one, please refer to the article, The Key Care Needs for Your Aging Parents.
4) Use Professional Services. There are many financial, legal, and medical decisions to navigate through. A financial counselor can assist in the planning of how best to utilize assets for care, provide strategies to preserve assets, and avoid making financial mistakes. Elder Law Attorneys are advocates for the elderly and their loved ones and assist in such legal matters as Medicare/Medicaid, health care, setting up POA, wills, and estate planning. You may also want to seek advice from an accountant regarding any tax credits for caregivers.
There will be financial decisions to carefully consider.
Should you quit your job or reduce your working hours?
This will not only mean losing compensation, but can have other financial repercussions as well, such as:
• Losing work related skills
• Losing important contacts
• Leaving behind a pension plan or the opportunity to be vested
• Loss of Social Security income
• Loss of benefits (health insurance, 401k match, vacation)
• Not being able to pursue additional education and degrees
• Passing up on a job or training opportunity that requires travel
This is a drastic financial decision, so be sure to exhaust other options. It may make more financial sense in the long run to hire help. If you do decide to quit your job to be a full-time caregiver, resist the urge to spend your retirement savings. If you reduce your working hours, budget for regular contributions to an individual IRA to make up for any lost contributions and consider asking family members to contribute to a retirement plan for you.
If you will be providing most of the care, consider a “personal care agreement” to help manage responsibilities and arrange compensation for caregiving. This is a formal contract that states what care you will be providing and how much you will be compensated by other family members as an independent contractor. This can help avoid family conflicts on financial issues since the arrangement has been formally discussed and agreed upon. The contract can specify the process of paying down your loved one’s assets for the cost of care and also specify how to track the cost for you to be the caregiver.
Should you consider a reverse mortgage?
A reverse mortgage is another option that can help financially, but must be considered carefully. Look for a reputable lender who is a part of the Federal Home Equity Conversion Mortgage (HECM) program and be sure to understand the terms of the loan.
How will you manage the care-receiver's finances?
You may be tempted to set up a joint bank account to make bill paying more convenient, but there are some downfalls to this arrangement. Joint account owners have equal and full rights to the money as well as equal and full rights to tax issues and can be used as collateral to a loan. Also, if the caregiver gets divorced, the money is considered part of their assets. Consult an attorney regarding establishing yourself as the POA and verify the correct legal way to sign checks on behalf of your loved one. A convenient way to have a system in place for paying bills is by utilizing bill pay online.
Elderly individuals are particularly vulnerable to scams and fraud, so it is important to review any transactions and credit reports to help ensure their finances are in good order. Speak with the financial institutions involved to set up authorization for you to access account transactions, and be alerted if there is any suspicious activity.
Be careful not to sign away your personal assets.
As a caregiver, you may find yourself at doctor visits, assisted living facilities, and trips to the emergency room. Be careful when filling out forms that you do not inadvertently make yourself personally responsible for any unpaid bills. You may feel pressure to sign quickly, but this is one of the biggest mistakes for caregivers. If a signature is required of the person who will be responsible for paying the bills when insurance does not, if you sign your name, you are responsible. Never sign just your name, for example “Jane Smith” or even “Jane Smith, daughter". Talk to an attorney about alternative ways to sign any documents as a caregiver, such as signing the care-receiver’s name “by POA”. It is always a good idea to seek advice from professionals to help ensure this very important act of care for someone does not cause a financial crisis for you.
Carol Chaudet
(Last Update: 4/04/2017)