Serving as a caregiver means understanding the financial implications for you.
This year, approximately 34.2 million Americans will provide unpaid care to an adult 50 years old or older, according to a June 2015 report by AARP and the National Alliance for Caregiving.
Caregiving isn’t just emotional — it’s financial. If you are taking care of an aging parent, spouse, or close relative, you’ll likely make a number of wealth-related decisions.
A person who is caregiving “has to consider the financial implications for two people,” notes Allison Elliott, Regional Wealth Planning Manager at Wells Fargo Private Bank. As a caregiver, you need to understand how the person receiving your care is positioned financially and how your resources will be affected near and long term.
Evaluate your resources
Caregiving and working in your career at the same time can cause emotional stress and strain — and financial stress and strain — notes Anne Tinyo, National Director of Wells Fargo Life Management Services.
Even if you’re part time or only lending a hand occasionally, a sudden setback or health crisis for your loved one could mean taking time off work you didn’t expect. And if caregiving is a daily or weekly commitment, caregivers may need to restructure how they work overall — going from full to part time or from employee to contractor status.
Before transitioning, check how your pay and benefits will be affected. You might have to provide your own vehicle if you currently drive a company car, for instance.
And if you stop working for a certain period, think of long-term effects, advises Elliott. You may miss the chance to contribute to or receive a company match from a 401(k) plan, health savings account (HSA), or other retirement accounts.
Understand the caregiving recipient’s position
Once you’ve begun caregiving, “have conversations with whoever will be receiving the care,” suggests Elliott. During these discussions, you’ll want to learn what types of income sources are available to your loved one. Ask about real assets, life and health insurance, equity investments, any retirement benefits, and Social Security benefits.
You’ll also want to determine your role as a financial decision-maker or administrator. Will you handle bill paying? Are you contributing your own funds to cover care expenses? Having your name on accounts can make things easier on a day-to-day basis, but be sure to be transparent with other relatives who may question the arrangement. “If you’re going to take over paying bills for the person, make sure you have access to everything,” adds Elliott.
You’ll also want to know what is in place regarding legal documents. Ask if a current will exists; and check on a durable power of attorney, which allows the care recipient to appoint someone to handle legal, financial, and health-related responsibilities. Ideally these documents will be in place before they are needed.
Make financially responsible daily decisions
You may not be able to provide care around the clock, especially if the person you’re caregiving for needs help getting to and from appointments or assistance with everyday tasks, such as grocery shopping, housekeeping, and yardwork. If you decide to hire help, such as personal home care, consider the expense and how it will be paid. The median cost for home health care is $125 a day, according to Genworth. Expect to pay a higher rate for skilled services, such as wound care and infusion therapies performed by a home health nurse.
If the care recipient needs additional medications or equipment, check if Medicare or other insurance covers these items.
“Each person’s health situation is different,” explains Tinyo. If the recipient of your care wants to remain at home, safety modifications might need to be made to the living area and kitchen, which can get costly depending on the fixes needed and can also potentially impact a home’s resale value. In some cases, turning to a retirement community or assisted living facility may help provide the type of care your loved one needs.