Updated July 2017 — For most of your childhood, you relied on Mom and Dad to take care of you — providing you with clothing and shelter, a college education, emotional support, and a host of other items.
But what happens if, as you get older, you're in better financial shape than your parents? As they age, they'll be living on a fixed income and their own savings and may be facing increased medical or long-term care costs.
If an aging parent suddenly faces a health crisis, the opportunity to defray medical costs with long-term care insurance has probably passed. And often, nonmedical home care can cost up to $25 an hour, which adds up quickly.
What can you do to help alleviate the situation?
Consider impacts to your wealth plan
"Suddenly, you find yourself taking care of your parents' personal and financial needs when you're already taking care of your own family," says Michael J. Reynolds, Senior Vice President – Wealth Advisor for Wells Fargo Private Bank in Paramus, New Jersey.
This change can be overwhelming. One key initial step is asking for help. Enlist professional assistance in objectively assessing your parents' needs and getting solid cost estimates for what their care may entail. The details will give you a clearer sense of resources — financial and otherwise — that may be needed for their care.
Adjusting your own long-term wealth plan may be a needed action item, especially if you have the means and are asked to assume responsibility for some of your parents' medical and other expenses.
"Shouldering part or all of the financial burden yourself requires taking a fresh look at how your assets are positioned," according to Reynolds. "Your liquidity is one of the most important things to consider. Given their age, time horizon, and tolerance for risk, adult children may be managing their assets in a longer term growth strategy. If that is the case for you, your assets may not be as liquid as other more conservative options."
Are most of your assets tied up in illiquid investments? If you expect to need access to cash to help pay for your parents' expenses on an ongoing basis, talk to your investment professional about ways to reallocate your asset mix to accommodate the need for ready cash.
"Wealth transfer strategies can help address the issues of depleting assets, but before plans are set, create open lines of communications among everyone involved. Have those important, candid discussions, not just with your parents but with your siblings as well," Reynolds recommends. "Once the family is in agreement, they can work together with their advisors to create a plan to help manage the parents' care and needs going forward."
"Shouldering part or all of [your parents'] financial burden yourself requires taking a fresh look at how your assets are positioned." — Michael J. Reynolds, Senior Vice President – Wealth Advisor, Wells Fargo Private Bank
Consider other types of planning
A crisis often forces children and aging parents to make important decisions in haste. Planning for potential outcomes is a better approach; however, it requires families to broach possibly uncomfortable topics, including money, inheritance, health, and changes in lifestyle.
While many might start with a financial analysis, legal planning may often be a better place to begin the discussion, says Anne Tinyo, National Director of Wells Fargo Life Management Services. Adults of all ages should consider preparing or updating advance health care directives and naming powers of attorney if they have not done so.
"Without these documents, children or other relatives may be left to make decisions for parents without clear direction when health crises occur, adding to an already stressful and emotional time," Tinyo says. "Spouses, partners, and family members need to know the wishes of loved ones, should they have a health crisis and become either temporarily or permanently incapacitated."
Making those legal arrangements may give adult children the opportunity to discuss with their parents the limits of their financial resources in the event of emergencies or declining health. Living arrangements, however, often override money matters in family conversations.
"The discussion of finances often follows grappling with the issue of independence in living arrangements," Reynolds says. "It's one of the hardest things for someone to acknowledge — that they can no longer live independent of support and assistance."
Find help if you need it
"When one or both parents need help all of a sudden and a child takes on a new role, there is often sticker shock," Tinyo says. "When folks start to understand the costs of hourly and daily care, it can be a surprise, because those costs can add up very quickly."
One place to start is exploring any support available from public and private programs that could help with the expenses.
"Programs can differ markedly, state by state," Reynolds cautions. "Since many parents live in different states than their adult children, you should look into possible assistance locally before making any moves and updating estate documents."
Once you've decided you need to take action to help your parents, you may want to schedule time with your advisors at Wells Fargo Private Bank for help in assessing the current situation and potential wealth strategies to help you take the next step.