If you have an aging parent or adult child who is still financially dependent on you, they should all have at least a simple estate plan. Even if you have to pay for it, taking this step can save you in terms of probate or litigation.
Do a Financial Survey
Ask about financials. It’s a difficult decision to have, but you need to talk with your aging parent(s) about their finances in very specific terms, so you know what you’re facing. While both children and parents may be facing tough economic times these days, it can be much more difficult for an older parent since their earning days are likely behind them. So how can you help your parents financially without incurring additional taxes?
Seek input from a estate planner, their doctors, tax consultant, and financial planner before making decisions or attempting assistance.
Look at Today
Focus on the present. If you have not had a good relationship with your financially struggling parent, try to focus on the present instead of living in the past.
Consider Long-Term Solutions
Consider long-term consequences. Consider both the financial and emotional long-term consequences of assuming the financial burden of caring for an aging parent. Consider their health requirements, living arrangements and safety, driving ability, and overall mental capacity.
Share Tasks and Responsibilities
Involve everyone and establish ground rules. Caring for an aging parent is a family issue, so involve siblings, grandchildren and other family members so you don’t have to take on this burden alone. If your aging parent is acting abnormal, consider a caregivers, assisted living, or in drastic situations, a conservator. If they are a spendthrift, insist that they make the necessary sacrifices to live within a budget that works for all of you.
Review dependents’ health care coverage and consider modifications so your own financial future is not affected by unexpected costs.
Medicare/State Aid Assistance
Use asset protection planning for Medicare/Medicaid assistance. This can help a parent who may need extensive Medicare/Medicaid coverage avoid losing their assets to the state, but you need to do it now. Some states require at least five years before the need arises.
Consider life insurance
Look into purchasing life insurance for potential dependents, including parents and children.
Consider Long-term Caregivers and Coverage
If you have elderly parents or other family members who count on you for care, a part-time (or live-in) caregiver may be the best solution. Sometimes, buying long-term care coverage may help reduce what can be a substantial cost for long-term care.
You Can't Always Be The Boss
Be realistic. If your aging parent refuses to make the necessary financial sacrifices to maintain their lifestyle or keep their home, this may be something you cannot prevent.
Sometimes You Must Say "No"
Make decisions with your own future in mind. Work with a financial advisor to determine exactly what helping an aging parent will mean for your own savings and retirement plans. Determine if you want to help. Whatever your relationship has been in the past, assess how willing you are to help an aging parent. Be prepared to say “no”. Sometimes the demands of an aging parent seem unfair. Follow your own conscience in your decision-making.
Married couples can give up to $52,000 a year tax-free to Mom and Dad since the law allows individuals to gift up to $13,000 each a year to an unlimited number of people – so you and your spouse can each give $13,000 to each parent.
Pay Medical Costs
If you are offering to cover portions of health care of others, pay the medical costs directly to the provider, so you will not incur any gift tax.
Medicare - Medical
Remember, they may only qualify for Medicare benefits if you have already set assets into a Private Asset Protection Trust.
Providing a Home
You can help your parents pay for a new home or allow them to live in a home you already own, with some provisions. You need to be sure that if your parents plan to pay you back on a home purchase that not too much money is paid back to disqualify them from Medicaid. If you plan to own the home, you must be clear on what is and is not going to be considered rent and name your parents the beneficiaries of the house in your will or a trust. You can set up a trust for your parents and have the trust purchase and maintain a home for parents.
The Private Asset Trust
Consider our Private Asset Trust including the selected benefits, to have the most benefits.