Long-term care and wealth planning for aging parents

By having difficult conversations and focusing on key areas of your parents’ well-being, you can help alleviate the administrative and emotional burden of caring for them.

Mike Blake/Reuters/File
An elderly man exercises with a jog along the beach as surfers head into the ocean in La Jolla, California (January 20, 2016).

By Winnie Sun

Learn more about Winnie on NerdWallet’s Ask an Advisor.

The challenge of helping aging parents is one of the most common issues I see as a financial advisor. One client’s father, who recently was diagnosed with dementia, couldn’t remember where his financial records or money were kept.  My client is now in a gut-wrenching situation, trying to find important documents while caring for his ailing father.

Most people don’t like talking about money, death or incapacity, so they avoid discussing it with their families, setting the stage for potentially more complex issues in the future. But by having difficult conversations and focusing on key areas of your parents’ well-being, you can help alleviate the administrative and emotional burden of caring for them.

It’s up to adult children to address potential issues, however uncomfortable they might be. Parents need to be reassured that you are not trying to control their lives or take advantage of them, but that starting the conversation early is in the best and long-term interests of the entire family.

Here are some of the most important financial issues, decisions and plans to discuss with your parents:

1. Create a living trust

Most people know they should have a will in place, but may not be aware that their families also may benefit from creating a living trust, a legal document that designates which beneficiaries will inherit their assets. The biggest difference between a trust and a will is that assets included in a properly executed living trust do not go to probate, the legal process of distributing property after a person dies that can be tedious and time-consuming.

While your parents are strong and lucid, work with them to set up a living trust. Through the process, they can designate who will control their assets if they are incapacitated and specify who will inherit after they die. This will help you, or whoever is designated to sort out your parents’ estate, avoid an administrative nightmare. A living trust may be more expensive to set up than a will, but it will allow your parents to do smart tax and estate planning to protect their wealth. It’s best to consult a professional estate-planning attorney for this process.

2. Plan for the possibility of long-term care

It’s never too early to start planning for long-term care, even though there’s no way of knowing if you’ll need it. The U.S. Department of Health and Human Services expects the duration and level of long-term care to change over time. But it says there’s a nearly 70% chance that a 65-year-old will need some type of long-term care at some point, and some people will need it for more than five years.

Planning ahead will help you learn about the long-term care services in your area and the potential costs. It may also help parents make important decisions. Together, you may need to make health, housing, financial and legal decisions. People with signs of Alzheimer’s disease or dementia should start planning for long-term care as early as possible.

3. Consider housing options

Will your parents be able to stay in their home? Will they need round-the-clock care at a senior facility? Will they move in with you? It’s vital to talk about housing alternatives and what may happen if your parents can no longer get around easily without help.

Evaluate different senior housing options such as independent living communities, assisted living, nursing homes, Alzheimer’s care, respite care and residential care homes. Compare costs and benefits to see what and how much is covered by long-term care insurance. Have a budget and plan in place long before your parents actually need to make a move or get in-home help.

4. Figure out transportation needs

If your parents can’t remember where they keep their money or other basics, would they be fit enough to perform other functions such as driving? Besides needing to protect our parents, we also have a greater responsibility to ensure that they aren’t a threat to anyone else. What is the plan for when your parents can no longer drive themselves?

If your parents are healthy, check to see if they can save some money while driving. Some insurance providers reward older drivers with senior car-insurance discounts for simple things such as taking a driving class or driving fewer miles in retirement.

5. Talk to your parents

For most people, conversations about money, death or incapacity won’t be easy. Studies have shown that adult children and their parents often face a disconnect over money issues. Many families have trouble communicating about who will make financial decisions on behalf of parents if they lose the ability to handle their money safely. Other families tend to disagree on the role children should play in the care of their parents.

Many aging parents tend to keep their financial details secret from their children. In my client’s case, his father refused to talk about the family’s finances, even during moments of clarity.

Despite the discomfort, talking with your parents about their health and wealth as they age is incredibly important. By showing your parents that you are looking out for their best interests, you can try to avoid conflict and even greater challenges later on. Being informed and having clear lines of communication with your parents about their finances and other key issues will make taking care of them much easier.

Winnie Sun is the founding partner of Sun Group Wealth Partners in Irvine, California.

This story originally appeared on NerdWallet.

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