People today live longer than ever before. One outcome of this development is that people face the reality of having to take care for their parents. People in their 40s and 50s are beginning to accept that, among other things, their parents aged 70 and over will need help dealing with their finances.
If you have elderly parents, it’s important to have a conversation with them about their financial situation as early as possible. Talk about their current financial condition, and their plans for the future. Once you have the conversation, there are important steps to take.
Go over your parents’ financial situation
When you review your parents’ financial condition, you do so in order to understand how best to care for them and support them as they age. The first thing that you need is a clear understanding of where they stand financially. Start with a quick balance sheet of their assets and liabilities.
You should also total up their income, including their pension, their Social Security benefits, and the care that they receive under their long-term care policies. Then, you need to determine what their living expenses each month are, like insurance and healthcare costs.
It would be a good idea to hire a financial advisor to find out what your parents’ cash flow is likely to be over their lifetimes. This can help you determine if they have enough assets or income to meet their expenses. With these forecasts in hand, you may be able to make reasonable decisions for where your parents should live, and how much they should be able to spend each month. If you need to shoulder some of the expense, you’ll know about it at this stage, and you will be able to prepare for it.
Make a plan for your own financial future
If the financial forecasting reveals that you’ll need to contribute financially to your parents’ needs, your first step should be to talk to your siblings and ask them about sharing some of the burden. Once you determine how much you will need to bring to the table, you’ll have to revise your own financial plans. You may need to increase your income. You may even need to shrink your own living expenses, saving plans or home buying plans. The sooner you make the changes necessary, the better.
Talk about obtaining power of attorney
Your ability to take care of your parents requires that you are able to make the necessary financial contributions. It’s possible that they may be incapacitated at some point. Should that happen, you wouldn’t have access to their funds to take care of them. It would be best to have them grant you control over their finances through a power of attorney, in the event of their being incapacitated.
Financial situations can change over time. For this reason, it’s important to have a financial advisor look over your parents’ situation every couple of years. Taking care of your parents can be emotionally draining; it shouldn’t be financially draining as well. Planning for every reasonable possibility can help you focus on the task at hand, which is making sure that your parents are healthy and happy.
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