About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual Fiduciary Financial Planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.
Two out of 10 people in America will provide custodial care, mostly in addition to their full-time jobs.1 With a fifth of adults preparing to or already providing care for aging loved ones, it’s important to recognize the sacrifices - both financial and physical - they make every day. Below we’re taking an in-depth look at who is considered family caregivers, how this responsibility impacts them, and how individuals can prepare for the future costs of custodial care. Make sure you take a look at the checklist below and another checklist later in this post that details what you should know about Long Term Care Insurance.
What Issues Should I Consider For My Aging Parents?
Becoming a caregiver for aging parents can be a drain physically and emotionally. It can also carry financial ramifications both for parents and for the caregiver children. Working to understand and manage the financial issues involved can make the situation a bit easier.
This is a comprehensive checklist of the types of financial issues you should consider if you're caring for aging parents. In this checklist, we cover a number of financial issues that you need to consider when faced with helping and potentially caring for aging parents, including:
- Be sure to examine your parents’ finances to determine if they can manage their own expenses. There may be sources of income available to your parents that they're unaware of.
- It’s important to ensure you have access to your parents’ important documents, such as any estate planning documents. You should have the names and contact information for any advisors their parents use, such as an attorney, financial advisor, or accountant.
- If your parents need long-term care, they will need to investigate ways to cover the cost. Medicaid planning or a reverse mortgage might be options.
- If the estate of your parents is over a certain amount, they may have an estate tax issue. It’s also important for you to ensure that your parents’ beneficiary designations on insurance policies and retirement plans are up to date and that they reflect their wishes.
- You need to ensure that your parents’ tax situation is in order, managing any capital gains or losses, as well as fully utilizing any deductible medical expenses.
- It's essential for you to have a handle on all of your parents’ assets, liabilities, and all related financial issues as a time may come when their parents are unable to manage their own affairs.
What Is Custodial Care?
Custodial care is considered non-medical care that is provided to those in need of assistance when performing activities of daily living (ADLs). Examples of ADLs include using the bathroom, getting dress, eating, moving around the house, grooming and bathing. It is most often provided at home by family caregivers, but in some cases, it may be provided in a nursing home or long-term care facility.
Who Are Family Caregivers?
Around two-thirds, or 66 percent, of family caregivers, are women - spouses, sisters, daughters, or daughters-in-law.1 Custodial care may also be provided by a professional caregiver, but professional care can get expensive. The national average cost for professional caregiving is $23 an hour.2
While being a caregiver is often an act of love, family members who provide custodial care often suffer from:
- Temporary or permanent pause on career and/or family life
- Emotions including stress, fatigue, anger, or depression
- Resentment or anger among siblings
- Financial loss
- Worry and guilt
Impact of Caregiving on Women
Family caregivers spend around 24.4 hours per week providing care, but nearly 25 percent of caregivers spend 41 hours or more per week providing care.3
Women in the workforce already face a lifetime wage gap. Women are typically paid about 82 cents to every dollar a male counterpart earns. Over the span of a year, this wage gap translates to a loss of about $10,194 in median earnings.4
With women already facing their own financial hurdles in the workplace, the effects of becoming a family caregiver can further exacerbate the issue.
As family caregivers, women have faced financially impactful decisions, including:3
- 33 percent decreased their work hours
- 29 percent passed up a job promotion, training, or assignment
- 22 percent took a leave of absence
- 20 percent switched from full-time to part-time employment
- 16 percent quit their jobs
- 13 percent retired early
Does Medicare or Medicaid Cover Custodial Care?
Custodial care has enormous practical, physical, and emotional consequences for family members who provide this care - including stress, anger, and substantial financial loss.
One of the most important components of financial planning is addressing the need for custodial care.
Why Medicare May Not Cover Custodial Care
Medicare considers custodial care by a family member to be “unskilled” care. In some cases, Medicare will cover “skilled” care that’s provided by a qualifying health professional. This could include a Registered Nurse (RN) or Licensed Practical Nurse (LPN).
These “skilled” services are typically considered to be short-term and an alternative to recovering in a hospital or nursing facility. Examples of these services include:
- Patient monitoring
- Wound care for a pressure ulcer or surgical incision
- Administration of intravenous drugs or nutrition therapy
- Catheter changes
- Education for caregivers and patients
When Medicaid May Cover Custodial Care
Your state’s Medicaid program may provide payment for custodial care. The rules will vary state by state, but Medicaid may pay after someone has spent the vast majority of their personal assets.
Preparing Financially For Custodial Care
With proper planning, caregiving can be a fulfilling and satisfying experience. Having solid financial resources can be a massive relief to caregivers because it enables them to hire a professional to provide all or part of the necessary care. Allowing the family member to coordinate the bulk of the care instead of being the primary provider of that care can make a huge difference.
It may be worthwhile to consider products specifically designed to cover custodial care costs. Some products may cover the care costs altogether, while others could be used to generate income. Your financial professional can provide details on long-term care insurance, hybrid products, and life insurance.
Long Term Care Insurance
If you're contemplating Long Term Care (LTC) Insurance for yourself or a loved one, please review our checklist below. This can be a complicated analysis, dependent upon an individual’s age, health, financial circumstances, wealth transfer goals, and general philosophy. As a result, you may struggle and be reluctant to weigh the risks and benefits and assess LTC coverage's potential value. Please feel free to contact me if you have any questions.
To help you guide you through this process, we have created This Checklist. It covers key issues to consider before purchasing LTC coverage, including:
- LTC needs and services
- Funding options
- Policy features
- Hybrid alternatives
- Tax considerations
Having a plan in place to fund custodial care can greatly benefit family caregivers by allowing them to supervise a plan of care rather than deliver it. And for those worried they may need custodial care one day, it can help make sure you have the means to get the care you need without the guilt of interfering with your loved one’s life. Solutions can create peace of mind, better health, and a better quality of life for caregivers and beneficiaries alike.
Dream Financial Planning Process ™
Whether you're managing student loan debt, starting a family, or considering buying your first home, the DREAM Financial Planning Process™ is tailored to the unique needs of busy professionals in their 30s and 40s. This process focuses more on short-term goals while you grow and evolve in your personal and professional life. If you're looking for guidance on Financial Planning, optimizing employee benefits, budgeting, student loans, and managing your 401k or investments, we can help.
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.
If you're looking for guidance on your investments, you'll want to read this month's Newsletter. In my April Newsletter, I discuss Gamestop, market speculation, long-term investment returns, and 9 investing mistakes you should avoid.
SIGN UP TO RECEIVE OUR MONTHLY NEWSLETTER BY E-MAIL
Disclaimer: Dream Financial Planning, LLC does not warrant that this information will be free from error. None of the information provided on this website is intended as investment, tax, accounting, or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Dream Financial Planning, LLC be liable for any direct, indirect, special, or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Dream Financial Planning, LLC or a Dream Financial Planning, LLC authorized representative has been advised of the possibility of such damages. Please consult with your own advisor before making any changes to your Financial Plan, Investments, or Insurance coverage.