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Ensuring Your Parents' Financial Independence
By Michelle Andrews
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HELP WANTED
For assistance with routine tasks, a daily money manager can make sure the bills get paid on time and handle other regular financial chores such as balancing a checkbook. This typically costs between $25 and $60 an hour. Find these professionals at the American Association of Daily Money Managers.
For more comprehensive help—diversifying investments, for example, or figuring out how to tap a decent nest egg to pay for long-term care—consider a financial planner. This doesn't have to cost a fortune. There are planners with expertise in this area—and rates to match. For example, Sheryl Garrett of the Garrett Planning Network in Shawnee, Kansas, heads up a network of 108 financial planners around the country, some of whom specialize in elder issues. They work strictly on an hourly basis, rarely require retainer fees or minimums, and charge between $100 and $200 an hour. Go to www.gfponline.com to find out more.
Whether or not you choose to take on the job of overseeing a parent's finances—but especially if you do—there are three important documents you need to have in place, particularly before a crisis occurs:
- Durable power of attorney. This allows someone chosen by your parents to make financial decisions for them if they are incapacitated.
- Durable power of attorney for health care (also known as a health-care proxy). This empowers you—or whoever is designated—to make health-care decisions for your parents if they become too ill to do so.
- Living will. This spells out your parents' wishes about what kind of medical care they want should their condition become terminal. As is true of the health-care proxy, a living will is not strictly a financial document. But decisions related to health care invariably have financial implications, as in how much that care costs.
As you are preparing these papers with a lawyer or financial adviser, you and your parents also need to talk about a will. The subject of estate planning is a complicated and delicate one. Ignoring it can lead to a myriad of problems: unnecessary probate complications; unnecessary taxation; and, worst of all, the failure to have your parents' true wishes fulfilled.
The key is to persuade your parents to work with an estate-planning professional to ensure that their wills are in line with their current desires. Encourage them to discuss the details of the completed will with all relevant family members. And be aware that the presence of a new spouse or significant other can have huge estate-planning implications.
BUYER BEWARE
Con artists have long targeted the elderly. There are two main reasons for this: Those over 65 have generally put some savings away for their retirement, and they are often lonely, which makes them especially vulnerable to anyone who comes across as sympathetic. To help prevent your parents from falling prey to scams, look out for:
- Mail or phone solicitations coming to your home, especially from aggressive securities peddlers. Whether they're bogus or not, if you're getting them, there's a decent chance your parents are too. Find out.
- An isolating event. The death of a spouse or a good friend, or a move to a new living situation, can leave a parent feeling lonely, which can, in turn, make him or her an easy target.
- A change in the weather. One venerable con is perpetrated by so-called travelers, seasonal scam artists who offer to do home repairs on the cheap and then do little or nothing after collecting their money. They tend to come out when the temperatures rise.
One more thing about telephone solicitations: You should suggest to your parents that they screen all of their calls by using an answering machine or that they simply not take any calls from people they don't know. "Just hang up," should be their mantra.
NOT WEALTHY (BUT HEALTHY AND WISE)
One of the most unpleasant realities about Medicare (for more on this program, see Understanding Medicare, Medigap and Medicaid) is that it doesn't pay for prescription drugs purchased outside a hospital. At the moment, the best way to bring down the high cost of the drugs (the average Medicare beneficiary spent $1,051 of his or her own money on prescriptions last year) is through one of the newer discount drug programs. Sponsored by pharmaceutical companies, retail drug stores, nonprofits (including AARP) and other groups, these programs allow participants to pay a small enrollment fee, then receive discounts of anywhere from 10 to 90 percent at participating pharmacies. To compare 14 private discount programs and five state-affiliated programs, take a look at the report prepared by the Kaiser Family Foundation (go to www.kff.org and type "drug discount" in the search field).
While some kind of prescription drug coverage is a virtual necessity for anyone in our parents' generation, long-term-care insurance is not. In fact, for most people their age, if they don't have it already, it probably doesn't make sense to get it. For one thing, it's expensive: While a 65-year-old could easily pay $2,300 or more a year for coverage, someone 75 years old could pay premiums more than double that, or up to $4,800. At 80, your parents could be paying $7,000 a year or more—if they could get coverage at all.
If you determine that your parents' circumstances are such that they could benefit from this coverage, you should look for a plan that offers compound inflation protection, which increases the daily benefit amount each year, usually by about 5 percent. Some other questions you need to ask when assessing these policies:
- What must the policyholder do to collect benefits?
- Does the policy cover home care or hospice care? If so, under what terms?
- Does it cover pre-existing conditions?
- What are the deductibles?
IN THE END
All these questions can be uncomfortable to confront. But as long as we keep our parents' best interests—maintaining an independent and enjoyable life for as long as possible—at heart, they are questions worth confronting. And don't forget, helping our parents get the most of their money works to our benefit as well. After all, if they aren't able to take care of themselves financially, the burden is likely to fall on us.
Check out these three books for helpful information and guidelines:
- How to Care for Your Parents: A Practical Guide to Eldercare, by Nora Jean Levin;
- How to Talk to Your Senior Parents About Really Important Things, by Theresa Foy DiGeronimo, M.Ed.; and
- Caring for Yourself While Caring for Your Aging Parents, by Claire Berman.
Now, pull up our financial work sheet to get a handle on your parents' income and expenses.
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