OCEAN CITY — For parents and their children, aging presents a host of financial issues — on everything from managing finances to preparing for medical costs. The longer these issues are ignored, the greater the chances your parents’ or grandparents’ most important family wishes will not be honored.
Given the emotionally charged nature of the topic, adult children understandably shy away from the dialogue. “They feel they’re invading their parents’ space, and they’re unsure of what language to use,” says David Solie, author of How to Say It to Seniors: Closing the Communication Gap With Our Elders.
But the right and well-timed conversation between children and parents helps everyone think through their options. “It’s a tough conversation, but it’s an important conversation,” notes Donald J. Levine, First Vice President, Wealth Structuring Group at Merrill Lynch. “Because ultimately, if a long-term health care challenge is not planned for, that burden is likely to fall on the next generation. That’s typically not what parents want.”
To that end, here are some questions you should consider asking your parents:
Are your documents up to date? Having documentation that will guide health and financial decisions is crucial. According to a 2012 survey by online legal service Rocket Lawyer, 41% of baby boomers don’t have wills. But this checklist item is a must. A medical power of attorney names who will oversee health care and make medical decisions in the event of an incapacitating crisis, and a financial power of attorney appoints an agent — who can be the same person overseeing health care or another trusted person — to manage finances during that period.
Are you prepared for long-term-care costs? Whether a parent needs in-home care or a nursing home, Medicare likely will not cover these costs, so it’s critical to have a plan for financing them. In most cases, those who don’t expect to have the money to pay expenses out of pocket may want to consider purchasing a long-term-care (LTC) insurance policy. (Medicaid will fund coverage only after a parent has become “impoverished,” and it offers only limited choices with respect to facilities and care.)
Consumers have a greater variety of LTC insurance options than they did in years past. Like auto insurance or term life, the basic LTC product is straightforward: In exchange for annual premiums, you’ll get a payout if you need care. “But if you don’t, that money is gone,” Levine observes.
If you have a medical setback and need a rehabilitation facility for an extended period, how will you pay for it? Medicare typically covers a large portion of the tab for physical rehab, but it’s important to determine how other out-of-pocket expenses will be covered.
How can I help? It’s important to respect the wishes of your parents if they prefer to work on the solutions alone. If, on the other hand, your parents find the potential challenges overwhelming and are amenable to help, you and your siblings should review with them some of the important choices that need to be made. If the conversation is too emotionally fraught, consider scheduling a meeting with your financial advisor.
“The important thing is to communicate that you respect what your parents are going through and send out a clear signal that you get it,” Solie says.
(The writer is a senior financial advisor and can be reached at 410-213-8520.)