I’m a Financial Planner: The Top 4 Financial Consequences of Being a Caregiver for a Parent

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Caregivers are oftentimes thrust into the role of caring for an aging parent with a limited understanding of how this responsibility will impact their individual lives. The financial consequences can be quite devastating without proper planning.

If a family is committed to acquiring wealth, maintaining a consistent standard of living their entire life and then ultimately leaving a legacy to the next generation, then parents must communicate with their children.

However, a potential caregiver should not wait for a cue from their aging parents because their individual financial plans can be at risk. Here are four financial consequences and things a caregiver should consider when they are the designated caregiver for their parents.

Your Ability To Advance in Your Career Can Be Impacted

The need to be available to an ailing parent can cause you to miss out on networking and industry-related opportunities that can help you advance in your vocation. Caregivers dedicate time to being available to help parents maintain some level of comfort. When the parents need a caregiver, it means they cannot perform two out of six activities of daily living. In other words, they need help bathing, dressing, going to the bathroom, getting in and out of the bed or a chair, eating and/or controlling their bowel and bladder movements. This requires your presence.

Financial Vulnerability Among Seniors Can Cause Potential Inheritance To Be Quickly Depleted

Unfortunately, seniors are targeted for scams as they advance in age. One must closely examine new people entering their parents’ lives and the level of influence they may wield.  Parents provide context clues through simple engagement about their day. 

Observe your parents’ activities and determine if they are maintaining a level of consistency or normalcy. Are they going out more often? Are packages being delivered to the house that are out of the norm? Have they taken a liking to someone in need? Are they going to the bank all the time or inquiring about how to transfer money electronically without explaining why?

One secondary note of caution that isn’t necessarily a scam: Caregivers can be the cause of an inheritance being depleted, especially if there are multiple siblings and only one person is in charge. Parents may add a name to a bank account, not realizing the financial impact it can cause. The parent may consider it a necessity out of convenience, not realizing that the added party has full rights and access to the resources legally.

Lack of Understanding Regarding Medicaid and Medicare Can Cause Great Financial Harm

As a caregiver, understand how Medicare and/or Medicaid will impact your parents’ quality of life and your time. People believe they will have access to Medicaid, only to find out eligibility is based on having limited income and assets. 

Medicare is available to individuals ages 65 and older or if you are on Social Security disability. However, it does not cover long-term care expenses, except under the strictest of conditions. If there is a stated hospitalization stay, Medicare will pay up to 100% of days one through 20. From day 21 to day 100, the individual must pay a daily rate and Medicare pays the difference. Day 101, Medicare pays nothing further. This reality causes families to have to spend down assets to qualify for Medicaid.

If Caring For Two Parents, Poor Planning Can Cause the Second Parent To Live In Poverty

If the caregiver isn’t familiar with how Medicaid works and one parent requires long-term care, a 2005 law changed how families must qualify for Medicaid. The Deficit Reduction Act was passed and one of the most significant impacts of the law was that the Medicaid look-back period would increase from 36 months to 60 months.

What does that mean? The first instinct for families is to try to give money away to trusted family members to qualify. However, any money transferred or gifted away will still be considered. Most people learn that information at the point of need and it’s already too late. Now, a family is paying for care out of pocket, depleting their net worth until most assets are exhausted. 

There is an adage that says time is money. The thought is that if one is wasting time, they cannot concentrate on things that would help them to achieve success in their lives. Caring for a parent is not wasted time, however, the responsibility will impact your ability to focus on your individual goals and aspirations. It is critical to consider caregiving in your overall life and financial goals.

Editor’s note: Dr. Nicole B. Simpson is a dedicated certified financial planner and the CEO and founder of Harvest Wealth Financial.

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