When An Adult Child Becomes a Caregiver:
Using a Family Agreement for Peace of Mind
Article by R. Joseph Ritter, Jr. CFP® EA
Many older adults are unsure if they can afford to pay for long-term care in the event it becomes necessary and feel their options are limited. It is likely fair to say that the majority of older adults feel they are “priced out of the market” for long-term care facilities.
In many families, adult children are taking on the responsibility of overseeing their aging parent’s care and even moving the parent into the adult child’s home. While this may be the only solution for some families because of the lack of funds, these situations give rise to a host of issues:
- Who pays for modifications to the child’s home or a larger home?
- Who pays for the parent’s care and transportation to doctors?
- Do homeowner’s and car insurance policies cover the situation?
- What happens to the parent’s home (if he or she owned a home)?
- Can the child be compensated for overseeing or providing care?
- Should the parent leave more money in his/her Will to the child?
- How should other children be handled if they are not participating or contributing to the parent’s care?
- What happens when the parent’s care becomes too much for the child?
- What happens to the parent when the child needs a vacation or respite?
These questions are very difficult to answer and sort out on the day a parent moves into a child’s home or after the move has occurred. Added to this, these questions are even more difficult to answer when there are multiple children and blended families involved.
Proper and efficient planning can be done to address these questions and more. The first and most critical part of the planning process is to discuss the issues with the parent ahead of time. No one can plan when a long-term care need may arise, however, we all know the potential exists. Ignoring the possibility will not help the situation, particularly if, as mentioned above, there are multiple children or blended families involved. Even if the family unit is on good terms today, money can do funny things to people and relationships.
Proper and efficient planning helps to preserve family unity, give the parent peace of mind, and, in families that deal with less healthy relationships, protect the child or children who act as the primary care point and prevent more serious complications in the family dynamics.
The second part of the planning process is for the parent(s) and children to reach an agreement on how these issues will be handled. One of the key purposes for reaching an agreement is to obtain the parent’s wishes. Although most people would rather not discuss major health problems and death, those same people have strong feelings about what they want to be done. The agreement gives the parent control over his or her care and direction over the family. It also clears up the potential for current and future misunderstandings.
The third part of the planning process is to implement the agreement. Reaching an agreement should be an informal, verbal process that occurs over time and especially in the presence of as many family members as possible. All of the children should be on board with the plan.
Unless there are legal or deeply rooted family issues which need to be resolved, a formal “settlement agreement” is likely not needed. Instead, the agreement can be memorialized in a letter from the parent to the children, with each child acknowledging receipt of the letter, preferably by counter-signing the letter. It is important to retain flexibility in the plan, something a formal, legal document may not offer. Also, a proper plan will impose fiduciary standards through other means which provides an opportunity for court intervention if malfeasance becomes an issue. All we are concerned about here is giving the parent a voice and bringing the family together on the major issues.
To address the financial and health care aspects, the parent should have the following documents (at a minimum) prepared and signed:
- Durable Power of Attorney – designating one or more individuals as a fiduciary to manage the parent’s finances. The Power of Attorney authorizes the individual(s) to sign checks, pay bills, make deposits, oversee investments, manage real property, and in general address all other asset and property related matters. Note that the Power of Attorney is only effective over assets titled in the parent’s individual name. It is not effective over property in a trust or in someone else’s name. A convenience joint account is not an alternative to using a Power of Attorney.
- Health Care Directive – designating one or more individuals to oversee the parent’s health care. The Directive authorizes the individual(s) to access HIPAA protected information, discuss medical care with physicians, participate in treatment plans, move the parent between facilities, hire/fire medical personnel, and in general deal with the parent’s overall health care needs.
- Living Will – designating one or more individual(s) to carry out the parent’s expressed intention with respect to end of life issues.
- Pre-Need Guardian Designation – in states which authorize this advance Designation, one or more individual(s) are appointed to act as Guardian for the parent in the event the Parent becomes incapacitated. Because guardianships can be restrictive and require court oversight, most states have laws in place to review whether there are alternatives to guardianship. Common forms of alternatives include the Durable Power of Attorney, Health Care Directive and Trust. The Designation can be helpful if the appointment of a guardian becomes a requirement in the parent’s care, such as if the family situation deteriorates, a legal issue arises, or the parent requires protection not afforded under the available alternatives.
A final point of discussion that can often be overlooked is a plan of care for the child who is the primary point person overseeing the parent’s care. The child, particularly if there is a spouse and/or his/her own children/grandchildren involved, will need breaks, spiritual and/or emotional/mental care, and support of friends and other family members, particularly as the parent ages and becomes less independent. What may begin as a seemingly doable task can quickly turn into a daily drain on the child’s energy and personal well-being. Planning ahead and establishing regular intervals of respite will be the best methods of ensuring the child does not experience burnout or harbor resentment over the situation.
With advance planning, both the parent and the children can have peace of mind in knowing how things will work in the event care becomes necessary. We can help you develop a plan and consider the areas where you may be the most vulnerable. Contact us today!