Fair Financial Arrangements when Caring for an Elderly Relative
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Moving in with an elderly relative can be an appropriate solution to his or her long-term care needs. Depending on your financial circumstances and personal relationships, arranging to pay for the additional costs of a multigenerational family may be easy or difficult.
For most people, it's a matter of considerable sensitivity and may bring up deep-seated feelings about what is valuable, what is not, and what expenses should be assumed by one or another party. If you are the adult child, you may feel it is your responsibility to pay for everything, even if you don't have the resources to do it or you have competing demands.
Your parent may feel the same way or quite differently. Many older people say that they don't want to be a burden, and they often mean that as a financial burden. And then there are your siblings, often living at a distance and watching this arrangement with both relief and suspicion.
The advice from financial planners, social workers, attorneys, and others is consistent: Make money matters transparent and as equitable as possible. This doesn't guarantee that there won't be conflict, particularly with your siblings, but it does help to minimize it.
Here are some specific steps you can take:
Determine a set contribution. Sit down and figure out how much your parent can or is willing to contribute toward household expenses and whether that money will be designated for a specific purpose, such as rent, food, utilities, or household help.
Having at least most of the parent's contribution as a fixed sum makes the arrangement more predictable and less threatening to someone who may be accustomed to saving every penny for a rainy day.
If you are moving into your parent's home, clarify what you are going to contribute financially and who is going to pay bills and monitor expenses. Be sure to put the agreement in writing. This will help avoid misunderstandings later. The agreement can always be changed.
Set aside fun money. Make sure that the parent's contribution allows for some personal money to spend on small luxuries, clothing, or gifts for grandchildren, or any other purpose. This is not an allowance, because it is your parent's money and she has discretion to save it or spend it.
Set up bill paying. Set up an efficient and reliable way to pay bills, whether that is online or by check. Some recurring bills, such as rent or mortgage payments, can be deducted from your account automatically.
Monitor the accounts carefully. Your parent may have paid all the bills before or that may have been a spouse's job. Your role should not be to take away all financial responsibility, unless the parent is unable to do any independent financial management. You should discuss any major financial adjustments or needs.
Consider power of attorney. If your parent agrees, you may want to obtain power of attorney (POA) for financial affairs. This can cover all financial matters or be limited to specific needs. Consult an attorney for advice. Even if your parent is fully able to manage money now, an unexpected medical event may occur in which a POA would be important.
Check on Social Security. Make sure Social Security payments or pension payments are deposited automatically in your parent's bank account.
Watch out for scams. Older people are often the targets of phone or Internet scammers who announce sweepstake winnings that never happened, solicit money for charities that don't exist, and offer other once-in-a-lifetime opportunities to cash in. Warn your parent about these scammers, and if one happens to slip through your warning net, alert authorities and the bank or credit card company about it.
Fill in family members on the arrangements. Involve siblings or other relatives such as nieces and nephews in a discussion about financial arrangements. Let them know what you are paying for (in general, not necessarily in dollar amounts) and what your parent is contributing (again, in general).
If they offer to contribute or to take over your responsibilities for a vacation period, make sure there are no strings attached. Also make sure they really understand what they will have to do if they take over your job, even for a week or two.
If you feel that other relatives will use this time to pressure your parent for money or changes in the arrangement, then don't accept the offer.
Consider a personal-care agreement. If you have to give up your job or cut back on hours to accommodate your parent's needs, consider consulting an attorney about setting up a personal-care agreement. This is a document that sets out the amount your parent will pay you and the hours that will count toward your salary.
But understand that it's not a substitute for your regular salary, and no benefits are attached. Some courts have looked askance at agreements that pay family members their prior or even higher salary as a way to transfer assets without incurring tax penalties. The amount should be consistent with what you would pay to a paid home care worker.
Update the will. Make sure your parent has an updated will with clear instructions about the disposition of any property or assets as well as items such as jewelry, artwork, or other pieces that may have sentimental as well as monetary value. Sometimes older people promise the same item to several different people, forgetting what they have said to another person.
Designate a healthcare proxy. Along with a will, the older person should have an updated advance directive and healthcare proxy naming someone to make healthcare decisions in case she cannot do so herself.