6 Financial Steps to Take When Your Aging Parents Move In

Long-term elderly care can be prohibitively expensive. Fortunately, there's a long, worldwide history of having a multigenerational household, and moving your aging parents in with you can provide multiple benefits. You know your parents will receive the care and attention they need, and you gain precious time with them.

Making this transition can be complex, though. If you've decided to bring your aging parents to live with you, consider these smart money moves to simplify and support the process. (See also: A Simple Guide to Planning For a Loved One's Long-Term Care)

1. Organize their finances

Since bringing your parents into your home affects your finances, too, you need to have some honest discussions with them about their financial resources, and yours. You need to know what they can handle financially, and what you'll need to take on. Getting their financial information in order is an important first step, so you can assess the combined financial picture together and plan accordingly.

Since financial matters are often stressful, these discussions can be the most delicate part of the transition. Discuss with your parents the importance of simplifying and organizing their finances. Work with your parents to locate and organize all important financial information. Consider purchasing a fireproof safe or renting a safety deposit box for the most important financial and legal documents.

2. Plan for their finances

Once you have all the financial information at hand, you'll need to sit down with your parents to make some decisions. It's often a good idea to set up a meeting with a financial adviser to discuss creating a will and making a plan for how to handle illiquid assets, investments, and any liquid wealth in the most beneficial way possible for your parents.

You also need to discuss options for helping your parents handle their finances in the event that they are not able to do so independently. You (or another adult child) may need to be included as a primary holder on their accounts. (See also: 6 Things You'll Encounter When Taking Over a Loved One's Finances)

Finally, examine the costs and expenses of having your parents move in with you. First consider the initial modifications and supplies needed to set your parents up with comfort and accessibility in your home. Then estimate how much your parents' ongoing monthly living expenses will be, and work together with your parents on the best plan for covering these expenses.

3. Create an independent living space

If both of your parents are moving in with you and at least one of them is still functioning moderately well, they may be able to handle a little more space and separation from you. On the other hand, if your parents need assistance with their daily needs and/or medical care, you'll want to be nearby.

For parents who want more independence, consider the "granny pod" trend. This is a small but separate structure, often placed in the backyard. It can be a tiny home, guest cottage, small prefabricated home, or a converted workshop or garage. The separate building helps you all maintain some privacy and space, but still keeps you close and connected.

If your parents will be in your main house with you, there are many cost-effective options for creating a usable living space for them.

  • Convert an unused room. An empty dining or living room can become a spacious bedroom.
  • Close in an outdoor space. That patio, deck, or porch may already have the structural elements in place.
  • Use the basement. Transform the empty downstairs of your home into a suite for your parents (just be sure that accessibility isn't an issue).
  • Change your configuration. Perhaps you'll give up your master bed and bath for your parents, but convert the basement into your own luxurious suite.

While some changes may be costly upfront, any improvements and updates you make to your home can add to its long-term value. Keep good records so you can validate the increased value of your house if you decide to sell in the future.

4. Consider accessibility needs

There are several accessibility and safety needs to consider with your aging parents. Will they need a wheelchair ramp for getting in and out of the house? If they will be using stairs, are there adequate, sturdy handrails? (These are an important safety feature for anyone, not just aging parents!) Talk with your parents' medical provider about any other special safety or accessibility concerns.

5. Investigate financing options

Once you know what your parents need, investigate options for financing it. Your parents' insurance may foot all or part of the bill for necessary home modifications for safety or medical reasons. Medicaid and Medicare generally don't cover home modifications, but may provide needed in-home equipment. The Department of Veterans Affairs also covers some home-modification needs.

Beyond insurance, there are some state programs that provide financial assistance for elder-care home modifications and there are grant and loan programs from the Department of Agriculture, as well as from the Department of Housing and Urban Development and the Federal Housing Authority. Finally, many local nonprofit groups provide financial assistance or volunteer labor to help with home modifications for seniors.

If you do have to fork out your own money, you may at least get some relief from the IRS, as some home improvements qualify for tax deductions.

6. Establish a caregiver agreement

If your aging parents will need help with daily activities or will require in-home medical care, consider establishing a formal caregiver agreement. A formal agreement can help you continue to personally afford your parents' care, especially if you need to forego other employment to provide that care.

Without this agreement, it's more difficult to qualify for tax deductions, and your parents may find their Social Security payment lowered. With an agreement, you can set out the formal cost of your care in terms of a fair-market rent and the hourly rate of a caregiver. This protects both you and your parents from a financial loss you don't need to incur.

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6 Financial Steps to Take When Your Aging Parents Move In

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