People who aren’t prepared for the cost of caring for aging parents may find themselves the victim of negative inheritance, which refers to the costs adult children must bear to care for loved ones that can outweigh any bequests they receive. This term is becoming more familiar to people as a growing number of Baby Boomers are left caring for their parents with their own dwindling resources.
About 30% of people between 45 and 64 with unmarried kids at home also care for an aging loved one. Nearly 20% of workers aged 45 and older also offer financial help to a parent. Caring for a loved one is not just an emotional challenge; it can also bring with it high financial costs. Family caregivers spend an average of 5 to 40 hours per week caring for a loved one. Caregivers often finance at least some of the cost out-of-pocket and many need to cut back hours at work or dip into their own retirement savings.
Negative inheritance is a real problem as it can force children to go through their own retirement savings or leave a surviving spouse with no means of paying for their own care. In many cases, adult children have to double the amount they withdrawal from their retirement portfolio to support themselves as well as an aging parent. The child’s financial plan is then rendered useless and they may be forced back to work. Sometimes negative inheritance comes when an aging spouse manages money poorly and wipes out savings.
For people who are at risk of supporting their aging parents on their own, it’s important to have a discussion with parents about their financial status and plans they may have for care. If there is no plan in place or savings won’t be enough to pay for late-in-life care, one option is purchasing long-term care insurance, a form of insurance that can cover up to half of the cost of nursing home or in-home health care. When this isn’t an option, it’s more important than ever to help parents manage their remaining assets.
The best way to avoid this burden and ensure everyone in the family gets the care they need is to have a proactive discussion. Many people choose to work with an elder law lawyer attorney who can talk with aging parents to review their assets and help set up a plan for care. Contact Felinton Elder Law in Florida at (561) 290-2179 or in Maryland at (301) 610-0055 for advice on long-term care and financial planning.