This is a guest post written by the Editors of CreditDonkey.
It’s a tough economy out there, and even tougher for elderly folks. According to the Pew Research Center, around 20 percent of adult children ages 40 to 60 years old in the United States help with their aging parents’ living costs, including everyday expenses and geriatric care bills. If your parents have fallen on hard times, whether due to illness or dwindling income, you have several different options.
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First, sit down and chat with your parents about your desire to help them stay afloat. Make sure they understand that you’re not looking to take away their independence and emphasize that any financial assistance you provide will be solely based on their wishes and preferences.
During your chat, determine how prepared they are for the road ahead – ask if they have long-term health insurance, for instance, and how they plan to pay for their long-term medical care needs. Once you know exactly where the holes are in their financial planning, you can start to figure out how best to offer them assistance.
Below are five suggestions to get you started:
1. Provide them with financing.
Consider offering relief to your parents in the form of direct gifts. To avoid potential tax consequences, you can give up to $13,000 per year if you’re single, and about $52,000 if you’re married. Or you could simply pitch in for medical bills and insurance directly by sending money to your parents’ providers. But check the red tape before you start gifting. Consult an elder-law attorney first to make sure you don’t accidentally disqualify your parents from getting certain benefits they may use in the future, such as Medicaid nursing home care, which dishes out benefits only if the recipient has a limited amount of total assets. To avoid this problem, consider simply loaning your parents money instead. This is also a good solution if your parents have a lot of credit card debt, or other major fiscal problems. A loan from you helps your parents dodge high interest rates but still leaves them responsible for their own debt repayments.
2. Hire an outside planner to manage care and finances.
If your parents are struggling with their health as well as their finances, consider hiring an outside consultant known as a geriatric care manager. These managers provide counseling services, and can give you recommendations on whether or not your parents could benefit from in-home care or nursing home stays. In addition, they can also help you find beneficial local services for elderly folks that can save your parents money. If your elderly parents are simply having problems with remembering to pay the bills or maintain investments, however, consider hiring a money manager instead. Money managers assist seniors with monthly bill payments, budget balancing, and negotiating with creditors, among other financial tasks.
3. Look for government savings.
Research federal or state benefits on your parents’ behalf. There are many government programs designed specifically to benefit the elderly on limited income. For example, if one parent is a military veteran, he or she could be eligible for home loans, disability benefits, and more. If you don’t already know, you should also research whether your parents qualify for Medicare or Medicaid. Begin looking around for benefits at BenefitsCheckUp.org, a free website service provided by the National Council of Aging. In addition to federal resources, you might also be able to locate local community aid. Eldercare Locator can put you in touch with the local senior services agency in your geographic area. Depending on your location and income level, your parents may be able to take advantage of everything from inexpensive assisted living centers to hot meal delivery programs.
4. Set your parents up with a private reverse mortgage.
Despite their financial difficulties, your parents still have one major asset – their house. You can secure a loan from yourself to your parents anchored by an interest in their house. These financial products, known as reverse mortgages, were created as a means to help elderly people with limited income use the cash they put into their home to pay off debts, cover living expenses, or pay for health care. After your parents pass away, you can then sell their home to pay back the loan. Tread carefully if you go down this route as, just like many credit cards are known to have high interest rates, so do reverse mortgages. You’ll have to do some math to make sure this makes sense for your family.
5. Invite your parents to stay in an “in-law” apartment on your property.
If your parents do not have much equity in their current living space, setting up a private apartment for your parents attached to your home or yard may also be a good option for supporting them, assuming they’re willing to move. Since you’re literally a few doors down, you can also offer your parents assistance and care when they need it. At the same time, an in-law apartment will help your parents retain their independence and privacy – by law, the dwelling must be separate from your living space, complete with its own entrance. And since your parents don’t have to pay bills or mortgages separately, it’s a great way to save money as well.
But whichever options you choose, with a lot of careful planning and attention paid to your parents’ wishes and preferences, you and your parents can enjoy smooth sailing into their octogenarian years together and beyond.
Photo Credit: newsusacontent