Here on the AgingOptions Blog, we write frequently about the joys and challenges of caring for an aging loved one. That’s because millions of us are already caught up in the work of caregiving, either as one who gives care or one who receives it. The odds are high that, if the trials of caregiving haven’t yet affected your immediate family, they will.
Given that fact, not to mention the inexorable realities of demographics, planning ahead for caregiving should be something more of us do. With that in mind we offer this recent article from Kiplinger in which reporter Alvina Lo suggests that there are ways for families to lighten the burden of caregiving through careful preparation. Advance planning might not entirely soften the emotional blow of caring for aging parents, but it can certainly reduce some of the stress and make the tasks of caregiving easier to bear.
Sandwich Generation Faces Unique Struggles
As Lo’s Kiplinger article observes, our society now has an increasing number of professionals who are part of the “sandwich generation,” caring for both young children and aging parents at the same time. This inter-generational reality has brought new stresses to light.
Lo compares “senior caregiving” with child-rearing. “While many planning concepts may be similar” she writes, “the dynamic and emotions involved when caring for aging parents are dramatically different.” Her article “[addresses] some of the common considerations as one enters into this stage in life.”
Having Proper Legal Documents and Plans in Place
First of all, says Lo, having all the proper legal documentation is essential to make sure that everything goes as smoothly as possible. These documents generally include your parents’ will, powers of attorney, health care proxies, and burial arrangements.
Lo explains that there are two types of power of attorney: springing power of attorney, and durable power of attorney. “In a springing power of attorney,” Lo explains, “the document becomes effective at a future time, usually upon a certain event such as incapacity of a parent. That’s when it ‘springs’ into effect. In a durable power of attorney, the document is ‘durable,’ meaning it becomes effective immediately upon signature regardless of future events.” It’s vital to talk with your parent or parents, and a legal adviser, to see which type is best for their unique circumstances.
Parents may struggle with the decision of who should serve as POA. “If there are siblings involved, it would be important to have an open and honest dialogue as to who should serve in this role as the attorney-in-fact,” Lo adds. She admits that she is wary of clients who think it best to name all of their children in the role of power of attorney, with shared responsibilities. It can lead to too many possible logistical issues, especially when needing multiple signatures and group consent before an action can be taken on behalf of a parent.
“If it is indeed a parent’s wish to name multiple people in this role,” she writes, “then it would be important to clearly document how decisions are made — by any one of the attorneys-in-fact, by majority or by unanimous consent.” But a better course would be to choose the best person, regardless of birth order.
Health Care Proxy and Living Will Could Be the Same
When kids care for parents, the ability to make medical decisions is often critical, and that entails creating a health care proxy. The health care proxy “appoints an agent to make medical decisions on behalf of a parent in case of incapacity,” Lo explains. “A living will or an advanced directive provides a parent’s wishes on medical treatment when it comes to end-of-life decisions. In some instances, a living will and health care proxy can be the same document.”
It’s common for people to confuse the two documents, since they both deal with medical decisions. But Lo explains it this way: “Think of the living will or advanced directive as the written memorialization of a parent’s wish and the health care proxy as the person who is going to carry out those wishes.”
Finally, there’s the parent’s will. “A will provides for the disposition of probate assets upon death,” Lo writes. “Of special consideration is understanding a parent’s wish as it relates to burial preferences. This may or may not be documented in the will. If there is any pre-determined or perhaps even paid-for burial arrangements, it would be advisable to have all those documents on hand.”
Obtaining Needed Information in Advance
Lo warns that, aside from the emotional burden, often the most difficult aspect of caring for aging parents is not having all the right information, and not having it in the right place.
“Knowing a parent’s full financial picture, including assets, liabilities and cash flow needs ahead of time is an important foundation you will need should you have to step in, which unfortunately for many people, happens unexpectedly when a parent suddenly falls ill or becomes incapable of handling his or her finances,” she writes.
She adds, “Transparency to this level can admittedly be a challenge, and so at a minimum, I would advise that you know where and who to go to for this information if and when the times comes. Make a list of a parent’s financial adviser, accountant, attorney and other trusted adviser, so you know who to call if needed. Know where all the important legal and financial documents are so you know where to look if needed.”
Accounting for the Costs of Caring for Parents
Similar to planning for childcare costs and eventual retirement planning, Lo says that it’s vital for you to understand the costs associated with your parent’s care, along with the various funding options available to them. “What resources do your parents have that are available for their care?” she writes. “Are there liquid or easily accessible investment assets, retirement accounts and/or a long-term care insurance policy in place?”
Moreover, since not all assets are created equal when it comes to timing and eligibility for government benefits, it’s important for you to know the landscape of where your parents stand. “For example,” Lo explains, “qualified retirement accounts are unique because they get a degree of creditor protection, and they may impact Medicaid eligibility benefits. So it may be advisable to look to non-qualified accounts as the primary and first funding source to the extent that required minimum distributions (RMDs) are not sufficient to cover the costs of care or are not yet being taken.”
She adds, “On the other hand, if a parent’s investment account has significant appreciated assets that if liquidated would incur significant capital gains taxes, then it may be wiser to use other funding sources with less of a tax bite. This is all situational and requires a detailed analysis of the various accounts and funding sources.”
Underlying all that data for many families as the “elephant in the room” is the honest question you need to ask yourself: to what degree are you willing and able to be a funding source for your parents’ care? “How much of the parental care will you be shouldering, and how would that fit into your own budget and plan? Have you had the conversation with your spouse or significant other on what that amount may be? If you have siblings, how will each contribute?” Lo poses. All of these questions are best asked before anything happens to avoid disaster and undue stress later.
Medicaid and Elder Law Planning
As many of our readers know, Medicaid is the federally funded health insurance program administered by each state for low-income people. Many Americans are above the threshold to qualify for benefits under Medicaid, but it’s important to do some planning if you think you may want to avail yourself of those benefits in the future. (This also applies to VA benefits.)
“At a very high level, to be eligible for Medicaid benefits, one must meet both a resource and income test,” Lo writes. “The threshold varies state by state. Depending on where your parent lives, certain assets may be exempt from the calculation, such as qualified retirement accounts in payout status, primary residence up to a certain amount, irrevocable funeral/burial arrangements and certain qualified trusts.”
She adds, “The planning strategy is for a parent to divest personal assets so that they fall below the threshold amount. This way, when the time comes for medical needs, a parent could apply for and receive Medicaid coverage and benefits. Timing is incredibly important because there is generally a ‘look-back period’ of 60 months (or less, depending on the state). Therefore, advanced planning to divest of property and income below the threshold level needs to be done well in advance of medical needs.”
In the end, Lo admits that it’s best to consult a qualified elder law attorney local to your parents’ residence to make sure you take advantage of every opportunity available to you. For example, many clients of Rajiv Nagaich of Life Point Law have taken advantage of what’s called a Safe Harbor Trust as a tool to set aside assets for future long-term care, free from Medicare’s “look-back” concerns. We urge you to contact a qualified attorney for advice particular to your family’s situation.
Preparing for the Emotional Side of Planning and Caring
Finally, Lo recognizes that much of the difficulty of caring for aging parents is emotional, especially the transition of roles as you take on the mantle of “caregiver.”
“It takes an incredible emotional toll not only because it can be financially significant, but also because it can be time-consuming in terms of the energy needed to pay bills, gather information, help with medical care and appointments and handle various day-to-day matters,” Lo writes. “Even the best-laid plans will require time and energy to implement. Preparing oneself for this mentally and setting expectations up front with other interested parties, whether it be siblings, spouse, significant others or other caregivers, would be helpful.”
Understandably, your parents will experience emotional difficulties with this change, too. Aging and admitting to new limitations can be very daunting.
“The best situation is when you have a willing party on both sides where the planning can be a collaborative process in which parents are openly sharing their wishes and information, and the children are prepared to step in and able to honor those wishes,” Lo concludes. “It’s a long journey, just as life, and the more planning you do, the more prepared you’ll be.”
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(originally reported at www.kiplinger.com)