How to Avoid the Financial Pitfalls of Being a Caregiver
Caregiving, whether for an aging family member or another loved one, can involve providing many forms of help—physical, emotional, and financial. Caregiving sometimes even involves providing direct financial support. But caregiving can impact you financially in other ways too, like through lost work time or a bunch of small purchases that add up to big budget dent.
"It takes a special type of heart and selflessness to be a caregiver for a loved one," says Neel Shah, a certified financial planner and estate planning attorney with Shah Total Planning in Monroe, New Jersey. "But sometimes the best intentions can backfire."
More than one in five folks in the United States are unpaid family caregivers to an adult with health or functional needs, according to a recent report from the National Caregiving Alliance (NAC) and AARP. Although you can be a caregiver to an adult of any age, the number of caregivers is expected to grow as America ages. US Census Bureau data shows that about 20% of people in the nation will be 65 or older by the end of the decade. More women (61%) are caregivers than men (39%). More than 60% of caregivers work in addition to their caregiving responsibilities. And about 45% of caregivers have experienced a financial impact from their caregiving situation. But the following tips, including how to get paid to be a caregiver, can help you keep caregiving from derailing your personal finances.
How to become a caregiver
"Planning for an aging parent's future financial needs begins with ascertaining what size of nest egg the parent has saved, where those savings are held, how much income is still being earned, and how much the aging parent still owes to creditors," says Rick Lauber, author of two guidebooks on caregiving.
If the person you're caring for still has assets, they can add you as a signatory on a bank account for paying bills and other expenses, such as for medication copays. Additionally, they can add you as a power of attorney, Lauber explains, so that you can make financial decisions for them once they are no longer able to do so.
Shah agrees that a conversation, if possible, is necessary. "One of the pitfalls I see with caregivers is the commingling of assets," he says. "It's common for the caregiver to pay for groceries or pay out of pocket for certain expenses for a loved one with the expectation that it will all balance out in the end."
Assumptions, Shah explains, can lead to issues or misunderstandings later, whether with the person you're caring for or with other family members after the person is no longer living. Ultimately, if you're paying out of your own pocket, don't expect to be reimbursed out of an estate or otherwise unless that has been explicitly stated and documented.
Enlist the help of others to avoid caregiver burnout
"If another family member is in a better financial situation than you," says Steffi Gaines, president of A Better Way in Home Care, "yet you are the only one footing the bill and carrying the physical, emotional, and financial burden of family caregiving, you need to make your voice heard and try to get other family members to pitch in."
Caregiving can absolutely be a joint effort, and financial support is just one branch of the tree. According to Pew Research Center, "sweat equity" is a common type of caregiver support. That includes running errands, performing household chores or repairs, and more. And emotional support is also a big need. Maybe that's helping someone navigate a medical crisis or offering solace during a period of grief. With a group of family and friends contributing where and how they're able, you can potentially cobble together a support network that meets your loved one's needs.
Also check to see if the person you're caring for qualifies for certain home health services under Medicare or for home- and community-based services under their state-based Medicaid program. Even when a government program does cover services, it may not meet all a person's caregiving needs. But Medicare or Medicaid could ease some financial strain.
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How to get paid to be a caregiver
You may even be able to get paid for your caregiving duties, depending on various factors. Some state-directed Medicaid programs allow beneficiaries to hire their own in-home caregivers, including family members, through self-directed care programs. Not all states allow for this, and those that do sometimes exclude a spouse, legal guardian, or people who live under the same roof. To find out if you can get paid to be a caregiver, reach out to your state's Medicaid program.
If the person you're caring for is a veteran, check whether they're eligible for Housebound Benefits, Veteran Directed Care, Aid & Attendance Benefits, or the Program of Comprehensive Assistance for Family Caregivers (PCAFC). These four different Veterans Affairs programs offer a variety of stipends, supplemental aid, or the option for the veteran to hire their choice of a caregiver, including a family member. Aid & Attendance may also be available to surviving spouses of some veterans.
"My advice to family caregivers is not to shy away from using all the resources at your disposal," Gaines says.