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Financial Issues To Consider When An Elderly Parent Moves In With You

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For years, maybe even decades now, you’ve been financially independent. Now your elderly parent is requesting to live with you, which can topple that financial independence if you’re not careful. What kinds of money issues do you need to think about before you accept their proposition?

Here are some financial considerations to make ahead of having an elderly parent move in with you:

  • Remodeling fees
  • Estate planning
  • Taxes
  • Potential additional income
  • Additional expenses

As you can see, you have some important decisions to make about whether it’s in the best interests of both you and your entire family to have your parent live with you.

In this guide, we’ll answer all your most burning questions about what to do versus what not to do when older people move in with you, so you can handle this next stage of your life with the care it deserves. 

How Do You Financially Prepare For An Elderly Parent?

How do you even begin financially preparing for an elderly parent to move in with you?

You need to be ready for the considerations that we touched on in the intro, so let’s go over them in more detail now.

Remodeling Fees

Is your own home elderly-friendly? If you answered no to that question or if you’re not sure, then you likely have some work to do before an elderly person moves in. 

You’ll need to do things, such as:

  • Add banisters and rails to all stairs
  • Get rid of or tape down area rugs so they’re not a tripping hazard
  • Illuminate stairwells and hallways
  • Install grab bars in the bathroom
  • Move your guest bedroom downstairs if it’s upstairs. 
  • Maybe you’ll even need to add wheelchair ramps or a stair lift if your senior has significant health problems or experiences a decline in physical health after they move in.

According to Fixr, you can easily spend between $3,000 and $15,000 on these and other senior-specific home remodels. Do you have the financial resources to afford these updates or will you be using your parents’ money?

Estate Planning

Your elderly parents should already have a will in place. You, too, might be getting to the age where you’re thinking of creating a will. Now you’ll have double the estate planning to account for.

Ideally, if you aren’t sure what your elderly parent’s estate plans are, it’s a good idea to have that conversation with them now. Today. Right away. 

The younger and more clear-minded your senior parent is, the easier it will be for them to make these kinds of important financial decisions. 

Just don’t be surprised if your senior parent later wavers or wonders if they’ve set aside enough money.

That doesn’t mean you should change their estate plan, especially if your elderly parent may be in the beginning stages of dementia or Alzheimer’s disease.

Taxes

Until your senior parent is 65 years old, they have to file their taxes. Even after they turn 65, if their non-social security income exceeds $14,250, then they still have to file.

If your elderly parents are married and over 65, then they only have to file if their non-social security income surpasses $27,800. 

Tax time is stressful enough for us all. If you undertake the care of a parent, you may have to consider that – on top of making sure your own taxes are filed by the April 15th deadline – you’ll have to be sure your elderly parent’s taxes have to be filed as well.   

On the other hand, if your senior parent is of sound mind enough to take care of their own taxes, moving in with you might require you to find a new tax preparer. 

Potential Additional Income

Some older adults absolutely cannot wait until they’re of retirement age so they can start the next phase of their lives.

Others might get bored with retired life and wish to continue working for as long as they’re able.

If your senior parent is still bringing in some form of income, be that part-time or full-time income, you need to decide how that’s going to factor into things.

Are you going to charge your elderly parent rent or ask that they contribute financially to certain household expenses, such as the grocery bill or electric bill?

Or will their income remain their own to do with as they please?

Although this is not an easy conversation to have, for everyone’s peace of mind, it’s a necessary one. Get this hammered out BEFORE they move in!!

Additional Expenses 

Then there are all the additional expenses you have to be ready for as your senior parent moves in with you. 

Read our helpful guide, How To Cope With Taking Care Of The Elderly In Your Home.

They’re going to have doctor’s bills, bills for medication, transportation fees, and all sorts of other expenses.

Is there a possibility of in-home care being necessary to help take care of their daily needs?

There may even be extra demands on utilities such as heating and cooling or additional laundry that weren’t accounted for before.

Of course, it’s also important to consider how to get the senior from one place to another; car expenses might go up if a reliable vehicle is needed for doctor visits or other errands.

Don’t forget about insurance either – it’s always wise to look into whether having a second resident in the home will affect coverage rates and what kind of care is covered, just in case something unexpected should happen.

Speaking of insurance – your elderly parent’s health insurance may cover some or all these expenses, but more than likely, insurance will kick in only for some, if any.

And, although it may be unusual that they don’t have Medicare coverage, in some cases, your senior parent might not have health insurance, which means they’re paying for everything out-of-pocket. 

Now that your aging parent is moving in with you, is that going to be the continued arrangement? Or is their financial situation such that you’ll be expected to begin taking over these financial duties?

These are again questions that need answering before you agree to them moving in with you. 

TIP: I found this guidebook on Amazon, called Thoreau’s Downsizing Planner For Seniors, which might help you and your senior parent with planning and organizing their move.

It’s a large print book filled with to-do lists, timelines, lists of utilities and things to be shut off or transferred, etc.

Should I Be On My Elderly Parent’s Bank Account?

Now that your senior parent is moving in with you, you might wonder if it will be more convenient to share a bank account with them. 

After all, your elderly parent is reaching the stage where making financial decisions will likely become harder and harder for them.

You wouldn’t use this privilege to drain them dry financially but to help pay for expenses and ensure your parent’s financial standings are in good order.

There are both pluses and minuses to sharing a bank account with your elderly parent, so let’s talk about them now.

The Benefits Of Sharing A Bank Account With An Elderly Parent

  • If your senior parent ever needs emergency medical care, you won’t have to scramble to figure out where you’re going to get the money to take care of it. You can pay for this medical care immediately. 
  • You can ensure that aides and caregivers get paid on time so they can continue to provide care to your senior parent.
  • You can oversee your senior parent’s finances. If something seems amiss, you’ll catch it a lot sooner than they would have if they were the only ones on the account. 
  • No bills will be late, which will help your senior parent maintain their credit. 
  • When your elderly parent eventually dies, you’ll have their funds immediately available to pay any hospital bills and even contribute to funeral costs. 

The Downsides Of Sharing A Bank Account With An Elderly Parent 

  • If you don’t carefully manage the money in the account–or, more accurately, if your senior parent doesn’t–then you could face damaging financial propositions such as bankruptcy or debt.
  • Merging your bank account with theirs could make them ineligible for Medicaid or other financial assistance plans since your parent will have substantially more money now. 
  • You and your parent could end up embroiled in a financial dispute over who has the right to which money or even the account as a whole.

Does An Elderly Parent Count As A Dependent?

Let’s go back to taxes for a minute, as they’re one of the only guaranteed things in life. 

Even if your senior parent is of the age where they don’t have to pay taxes anymore, you will continue to for a long time to come.

If an older person is living with you full-time, can you claim them as a dependent on your tax form?

Yes, you can, but you have to be the only one doing so. 

You also cannot be a dependent on someone else’s tax forms to claim a dependent of your own. 

There are financial thresholds to determine the eligibility of your senior parent to be a dependent.

For example, TurboTax reports that if they’ve made more than $4,400 in income over the last tax year (2022), then you can’t claim them.

Although that doesn’t sound like much money, this amount does not include social security payments, but rather, passive investments, capital gains, and dividends. 

Your elderly parent doesn’t have to live with you for you to be able to claim them as a dependent, but you must have proof that you provided at least 51 percent of the financial support they received during the last tax year. 

Can You Write Off Caregiver Expenses?

You have another question about tax time as it relates to your elderly parent living with you.

If you chip in or take over in paying for caregiver expenses, can you write off those expenses when tax time comes around?

According to the IRS, the answer is yes, but your parent has to be your dependent when you paid for the expenses and you have to itemize deductions. 

The IRS adds that you can claim “a deduction for the portion of their expenses that you paid during the taxable year, not compensated for by insurance or otherwise” and that “your medical expense deduction is limited to the amount of medical expenses that exceeds 7.5% of your adjusted gross income.

Further, the IRS mentions that “You can include medical expenses you paid for an individual that would have been your dependent except if:

  • He or she received gross income of $4,300 or more in 2021,
  • He or she filed a joint return for the year, or 
  • You, or your spouse if filing jointly, are properly claimed as dependent on someone else’s return.” 

You have to fill out Schedule A Form 1040, Itemized Deductions to get the process started, which is available here courtesy of the IRS website. 

What Do You Do When An Elderly Parent Runs Out Of Money?

Let’s say your mom and dad had some money in their account at one point, but now your parents’ finances have been all but depleted.

They don’t work, so they can’t bring in any more income.

Now what?

Well, your senior parent’s expenses, including their medical care, still need to be paid, so you have some hard decisions to make. 

You can continue to have your senior parent live with you and pay for their expenses yourself.

This is a noble cause but can be incredibly costly, so you should research how much you’ll spend on their care and then decide if this additional financial burden is doable for you.

You can also look into your elderly parent’s life insurance and other financial aid options to make paying for their at-home care more affordable.

You could even consider asking family members for financial help with the care of your parents.

If it just isn’t financially feasible for your senior parent to live at home with you, then you might consider an assisted living facility or a nursing home. 

However, the care costs for these alternative living arrangements can often run into the thousands, if not tens of thousands of dollars per year, so they’re not necessarily cheaper. 

Conclusion 

Moving an elderly parent in with adult children requires a lot of calculating whether they can afford it, as well as having some difficult conversations with their older parents. 

Keep in mind that you do have the options to claim your senior parent as a dependent, merge your bank account with theirs, and write off some or all caregiver expenses come tax time. 

Although you’ll naturally want to help your elderly parent by moving them in with you when they can no longer live independently, the best way to help is by being 100 percent certain that it’s a smart, sound financial decision for all.  

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