If you’re caring for Mom or Dad, your own finances are in danger


The adverse impact of caring for Mom and Dad go beyond the stress of day-to-day responsibilities.

About 3 in 10 caregivers who are also working have experienced adverse reactions from their employers because of their caregiving duties.

Meanwhile, their savings have suffered. Caregivers have a median of $68,000 saved in their retirement accounts.

“Caregiving responsibilities can impact a caregiver’s finances, ranging from lost income due to time off the job to incurring out-of-pocket expenses on behalf of the care recipient,” said Catherine Collinson, president of Transamerica Institute.

“Over time, it can negatively impact the caregiver’s own future retirement,” she said.

The article identifies other ways that caregiving costs families:

Further, these individuals are also incurring out-of-pocket costs. The study found that caregivers spend a median $150 per month to cover expenses for their loved one.

The work these people do goes largely unreimbursed: 75 percent of caregivers don’t receive any payment or financial assistance for their duties.

Many families come for counsel about Mom and Dad’s finances and planning for long-term care. Often, the financial consequences of the caregiver are never contemplated. This article suggests to planning opportunities.

A recent survey shows the impact on caregivers:

The SCAN survey found that, from the perspectives of physical and emotional health, the implications of caregiving can be equally worrisome. Results show that, of senior caregivers:

  • 82% have difficulty saying “no” to the job.
  • 54% feel guilty about taking a break from their caregiving tasks to make time for themselves.
  • 29% spend 40 hours a week or more caring for someone.
  • 47% are concerned about the physical strains that comes with caregiving and 44% are concerned about the emotional strains.
  • 44% are not confident that the person they’re a caregiver for would be able to find someone else to take care of them.
The SCAN survey also explored the financial implications associated with caregiving. Some 47 percent of caregivers report having to tighten their belts financially because of their caretaking responsibilities. Among those who have experienced financial strain:
  • 34% have cut back on their own discretionary spending.
  • 20% have used personal savings to provide care.
  • 8% have accrued credit card debt to provide care.
  • 5% have asked for donations or financial support from friends or family.
  • 2% have taken out a loan to provide care.

First, the caregivers should NOT pay anything for Mom or Dad’s expenses. Its basically a gift to Medicaid. The whole goal of Medicaid planning is spending down the assets of the elder; paying things for Mom or Dad only puts assets back into the pot. Do not spend your personal savings. Do not use your credit cards to provide care. Do not take out loans.

Second, know that any gifts or transfers of assets or money from the elder, for less than fair market value, with five years of entry into the nursing home will be counted against the applicant for Medicaid. However, the law does allow the elder to pay for services. Instead of just outright forfeiting the income and retirement which the research shows occurs, why not use the Medicaid rules to offset that loss while spending down Mom or Dad’s estate. I often recommend adult children to establish a personal services contract with their elderly parents. These contracts need to be carefully drafted in order to satisfy Medicaid scrutiny. Instead of caregivers providing free services, as apparently 75% of caregivers provide, the personal services contract places a value on those services and formalizes a payment schedule. This not only helps the caregiver but it also successfully “spends down” the elder’s estate.

Third, employ community resources:

Gelb suggests senior caregivers look into the following resources that may already be available to them:

  • Local communities services such as those offered through local health associations, churches and synagogues or other organizations.
  • A geriatric care manager can conduct a professional assessment of you and your loved one to identify need. They can then connect the caregiver and recipient to local agencies to provide services and resources. “Something like getting nutritionally balanced meals delivered can lift a weight off of a caregiver’s shoulders,” Gelb said. Often Area Agencies on Aging can provide meals and other services.
  • Respite care provided in the home or in the community can give caregivers time to care for themselves whether for exercise, doctor appointments or important mental and physical health breaks.

Fourth, claim you tax breaks:

  • The dependent exemption. You might be able to claim all or part of an exemption of up to $4,050 if your adjusted gross income was less than $436,300 (for joint filers) or $384,000 (for single filers) in the 2017 tax year.
  • The child and dependent care credit. If you paid for someone to take care of your parent so you could work or actively look for work, you might qualify for a credit that generally runs 20% to 35% of up to $3,000 of adult day care and similar costs. Tax credits directly reduce the amount of tax you owe, giving you a dollar-for-dollar reduction of your tax liability. A tax credit valued at $1,000, for instance, lowers your tax bill by $1,000.
  • Your employer’s dependent care benefits. People often think dependent care flexible spending accounts, if your employer offers them, are just for child care. But elder care may be included too, Nolan says.
  • The medical expenses deduction. If you paid for Mom’s hospital stay or footed the bill for expensive medical or dental care and weren’t reimbursed by insurance or other programs, you might be able to deduct the cost.