It sounds like a simple scenario: Mom and Dad need caregiving, so it's time to convene your brothers and sisters to work out a way for all of you to contribute their fair share. In reality, though, splitting caregiving costs is anything but simple. In fact, trying to figure out how to do it can lead to family fights, fingerpointing and frustration.
“What a family member considers 'fair' is very much dictated from that family member's perspective, and family members can make very persuasive arguments that are totally contradictory from a financial perspective,” says Gregory French, a Cincinnati lawyer and president-elect of the National Academy of Elder Law Attorneys. “There's a lot of family baggage that comes out, like: 'Mom paid for your MBA, and she didn't do that for me.’”
Expect to deal with issues ranging from distribution of labor (“I took Mom and Dad in to live with me”) to parental favoritism (“Dad always loved you more”) as rationales for why one sibling should contribute more or less than another.
“I think whatever the childhood dynamic was, people are going to act out those childhood roles,” says Jane Gross, author of A Bittersweet Season: Caring for Our Aging Parents and Ourselves, a personal account of providing end-of-life care to her mother. “But one of my biggest after-the-fact revelations was: Don't spend so much time keeping score. Understand that the odds of caregiving being split are slim to none.”
Perhaps the most important rule in splitting caregiving costs is this: Put family harmony at the top of your priority list. “Nothing means more to the parent than family harmony,” French says. “So adult children should keep that in mind when discussing financial arrangements. The parents want to know the family is going to remain intact after they're gone.”
Despite potential obstacles, you can try to reach consensus to shore up Mom and Dad's finances without ruining your sibling relationships by following these tips:
Start by seeking professional advice.
An attorney or financial planner who specializes in elder issues can help you put family baggage aside to achieve consensus. Equally as important, one of these professionals will know how to structure financial documents properly for such things as helping your parents qualify for Medicaid in the future. You can start looking for an elder care attorney at the website of the National Academy of Elder Law Attorneys
. The website of the National Association of Personal Financial Advisors
, lets you search for local financial planners by specialty.
Use Mom and Dad's money first. “As a general rule, I recommend if it's the parents’ expense and they have the funds, they should pay first, before tapping into children's funds,” French says. Doing so will be especially important if the parent wants to receive Medicaid payments for caregiving costs in the future. To qualify for Medicaid, an individual can’t have more than $2,000 in assets (excluding a home, car and a few other big-ticket items). So many people spend nearly all their money over a five-year period to make themselves poor enough to qualify for Medicaid (this is called a “spend-down”). But if the adult children have been funneling money to Mom or Dad during the “spend-down” period, this could send up red flags when their parent applies for Medicaid.
If sibling incomes vary widely, go the percentage route. Have your brothers and sisters contribute a percentage of their incomes based on their financial situations, so ones who are less well off won’t be expected to shoulder more than they can manage. Start by adding together everyone's adjusted gross income from their latest tax returns (assuming everyone will disclose the figure). Let's say that total is $100,000 and the total tab for monthly caregiving will be $1,000. Divide each sibling's income by the total of the incomes to determine the individual caregiving percentage. So if Sibling A's income was $25,000, divide that by $100,000 to get 25 percent. This means Sibling A's monthly share of Mom and Dad's care would be 25 percent. Since the total monthly caregiving figure is $1,000, Sibling A would contribute $250, or 25 percent of $1,000.
Factor in the amount of time each sibling dedicates to caregiving. If one child lives close to the parents and provides most of the actual caregiving, consider assigning a monetary value to that time investment then reduce his or her financial share accordingly. You might use an hourly rate comparable to that charged by an in-home caregiving agency (the national average is around $20 per hour).
Get everything in writing. For a straightforward agreement, with each sibling contributing a monthly amount, all you’ll need is a simple business partnership agreement, which is available for about $15 at www.nolo.com. But if you plan to pay one of your sisters or brothers to provide caregiving, hire a lawyer to coordinate sticky tax issues, like payroll tax withholding and the “nanny tax” (employment taxes due if you pay a “household employee” more than $1,700 a year). The cost of caregiving is fraught with enough hassles and the last thing you need is a visit by the IRS.
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