By Joe Hearn
Does your retirement plan include your parents? It probably should. Chances are good that they are counting on you to handle their affairs if they die or become incapacitated.
How confident are you that you have everything you need to handle that role effectively? Do you know their wishes regarding life-prolonging care? Have they given you power of attorney? Will they have adequate resources to pay for the cost of their care?
Many parents are reluctant to discuss these things with their children because they think they are private matters, they fear losing control, or they want to appear to have it all together. Be sensitive to that, but don’t let it keep you from starting the conversation because the stakes are high.
A study by MetLife found that there are nearly 10 million adults over age 50 caring for their aging parents. The study estimates the potential costs for caregivers (in terms of lost wages, pension and Social Security benefits) to be around $3 trillion or an average of $300,000 per caregiver. In other words, many risk putting a significant dent in their own retirement plans if they haven’t properly planned for how to help mom and dad.
The sooner you begin talking and planning, the easier it will likely be on everyone involved. Helping is much more difficult after a crisis, so start talking while your parents are still healthy and active.
Below is a checklist that will help you get started.
• Make a list of all accounts and where they are held
• Get contact information for their advisers
• Consolidate and simplify accounts where possible
• Make sure the accounts are titled correctly
• Offer to sit in on a meeting with their financial adviser to review investments, make sure the asset allocation is appropriate and make sure there are adequate resources to support your parents’ lifestyle
• Review Social Security benefits
• Make sure all beneficiary designations are up-to-date
• Streamline bill paying
• Make a list of all insurance policies (life, health, long-term care, etc.) and where they are located
• Get contact information for their insurance advisers
• Offer to sit in on a meeting with their insurance adviser to see if a long-term care insurance policy would be appropriate
• Review homeowners, auto and umbrella liability insurance to make sure they are adequate, appropriate and up-to-date.
• Review health insurance coverage and consider whether it would be appropriate to add a Medigap policy to pay for costs not covered by Medicare
• Do they have a will or estate plan?
• If so, does it reflect their current wishes (i.e. does it pass property to the correct people and have the correct people taking charge)?
• Do they have an up-to-date durable power of attorney for finance?
• Do they have an up-to-date durable power of attorney for health care?
• Does their health care power of attorney contain a health-care directive that spells out their wishes for life-prolonging care?
• Is the current housing situation suitable?
• Do any changes, updates or modifications need to be made to the house?
• Have they made contingency plans for illness, disability or death of a spouse?
• Is there money available to pay for those contingencies (e.g. savings or long-term care insurance)?
• Make a list of their doctors as well as any medications they are taking
• Help coordinate benefits between care providers and insurance companies
Becoming a parent to your parent is never easy, but you owe it to both them and yourself to get things in order. And while you’re at it, get your own affairs organized so that you don’t leave a mess for your kids. Proper planning will give peace of mind, help avoid family conflict and minimize the financial impact on everyone involved.