When Parents Depend on You

What do you do when Mom or Dad needs assistance? First, you need to know what, if any, planning they have done. Second, you need to understand the financial impact you may experience.  

Plan Ahead
The adult child that will likely find his/herself most involved in the care of parents is the one that is geographically closest to the parent's residence. There are exceptions to this, but the first assistance needed is generally mobility related. Elder parents may find themselves unable to drive either due to physical ailments or the recognition of their inability to confidently maneuver in traffic situations.

• Health Insurance. If the parent is over age 65 and participating in Medicare, does he/she have the appropriate Medicare supplement policy? Supplement policies provide secondary coverage for services not funded by Medicare. There are multiple types of supplement policies ranging from basic to comprehensive coverage. The more benefits the higher the premium.  Medicare Part D or prescription drug coverage should also be reviewed. The adult child may find the need to assist parents in filing the claims and tracking the reimbursements, which can be very time consuming.   
• Legal Documents. There are two legal documents that are important: a living will and the appointment of a healthcare representative. The living will indicates the desires of the parent for life sustaining measures in the event he/she is terminally ill. This document will prevent the children from making such decisions during a difficult time. The appointment of a healthcare representative will indicate to the physician and hospital the person(s) who has the ability to make decisions on the part of the parent in the event that he/she cannot. In many cases this responsibility falls to the spouse and children. Just as with any legal document, it is important that the parents create and sign these documents while they have full mental capacities.
• Release of Medical Information. In some cases it may be necessary for parents to sign a letter for the physician's file which gives permission for the doctor to discuss the parents' medical situation with the adult child. Given the laws concerning privacy of health information, this measure needs to be taken for the adult child to have the ability to call the physician with questions and issues. 

• Long Term Care Insurance. If the parents have purchased a long-term care policy, it is important that the adult child knows that it exists and understands the provisions. This policy may provide for home healthcare as well as custodial or nursing home costs. The home healthcare provision will pay for a non-family caregiver and, therefore, may allow the parent to remain at home. The policy will also provide a per day amount to cover the expenses of living in a custodial care facility. The policy will provide these benefits for the number of years dictated by the policy or, if  the lifetime provision was available and selected, for the entire time that the person needs home healthcare or lives in a nursing home. As with any insurance policy, the greater the benefits, the higher the premium costs.
  Note: The premiums paid for a long-term care policy are deductible on Schedule A of the policy owner's federal income tax return. 
• Medicare Does Not Pay. It is important to understand that Medicare does not pay for on-going custodial care in a nursing home. Medicare is a health insurance vehicle and not a long-term care policy. A limited amount of nursing home care is provided as it relates to recovery from a medical condition. This does not include the need to have on-going assistance to meet the daily living needs.
• Medicaid Does Pay. Medicaid is the welfare program provided by each State government for its citizens. It is meant to provide financial support for those individuals who do not have the resources to meet their living needs. Medicaid requires that an individual "spend down" the greatest portion of their assets in order to qualify for the Medicaid benefits. If an individual is in a nursing home and has exhausted all resources to pay for their care and, therefore, qualifies, the Medicaid program will initiate financial assistance.   

• Claiming Parent as a Dependent. If you provide more than one-half of the parent's financial support, you may be able to claim your parent as a dependent on your income tax return. There are several requirements for claiming a dependent, so discuss this aspect with your tax accountant.
• Dependent Care Reimbursement Accounts. If you are eligible to claim your parent as a dependent, you can also utilize the Dependent Care Reimbursement account to pay for a limited amount of out-of-pocket expenses on a pre-tax basis. A Dependent Care Reimbursement account must be provided through your employer. Employees are eligible to contribute pre-tax dollars from their paycheck to this account and then claim reimbursement for the eligible expenses as incurred. This requires you to plan ahead since you must indicate your participation and the dollar amount prior to the beginning of the calendar year (usually in November for the next calendar year). Generally employees utilize this account to pay for the childcare for their children while they work. It can also provide for the cost of adult day care for dependent parents as long as all the requirements to participate are met.