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The Caregiver’s Financial Guide

Five questions to help you prepare for what may be one of the most important roles of your life

LIVING TILL YOU'RE 80 OR 90? A century ago the odds were decidedly against it, but today we take living longer almost for granted. The extra years can be a wonderful gift, providing more time for us to spend with loved ones. But longevity also has added costs, among them a greater chance of needing expensive long-term care. In fact, a recent study from Age Wave in partnership with Merrill, “The Journey of Caregiving: Honor, Responsibility, and Financial Complexity,” found that 43 percent of respondents said that the biggest negative surprise of caregiving was how much care and care-related expenses cost. Only one-third of adults over 40 say they have money set aside to pay for their long-term care. 1

While all chronic illnesses involve financial and emotional costs, Alzheimer's disease can be especially challenging. Alzheimer's patients frequently end up in nursing homes, where a semiprivate room costs, on average, $82,000 per year. 2 Whether someone in your family ends up suffering from Alzheimer's or an equally devastating illness, you may be called upon to help out, providing both hands-on care and financial support.

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Graphic showing a photo of two women hugging and explaining that 20 million Americans became unpaid caregivers in 2017

Source: Age Wave/Merrill, "The Journey of Caregiving, Honor, Responsibility and Financial Complexitiy." 2017

Graphic showing a photo of a father and daughter and explaining that caregivers spend an average of $7,000 each year

Source: Age Wave/Merrill, "The Journey of Caregiving, Honor, Responsibility and Financial Complexitiy." 2017

Graphic showing a grandmother, mother and daughter and explaining that women lose an average of $324,000 when they leave work

Source: Age Wave/Merrill, "The Journey of Caregiving, Honor, Responsibility and Financial Complexitiy." 2017

There are no simple answers to the financial and legal questions related to caregiving, but advance planning can help. Cynthia Hutchins, director of Financial Gerontology for Bank of America Merrill Lynch, and Amanda Ross, managing director, National Insurance Sales and Distribution Executive, Bank of America Merrill Lynch, suggest gathering your family and considering the answers to the following five questions.

Q: How can I prepare for the financial challenges of caregiving?

A: It's never too early to talk with family members about what-if scenarios, Ross says. "What if your parents need to move in with you, for instance? That might require that you retrofit your home to make sure that it's safe for them. Or what if they live hundreds of miles away and you need to visit them often to make sure they are being cared for properly? You'll have to figure out how that will affect your career, what problems it might create if you have kids of your own who still need you around and whether the cost of regular travel might be a burden."

Talk with your financial advisor to determine how future caregiving responsibilities could affect your overall financial strategy. Depending on your family history, you may want to begin saving now for potential caregiving costs. "Try to avoid finding yourself in a position where you have to quit your job or reduce your hours at work," says Hutchins. "That could leave you paying for your own health insurance, and you might lose other benefits as well, including money from your retirement plans if you haven't met vesting requirements."

Q: What if my parent or spouse doesn't have long-term-care insurance?

A: "Taking an inventory of your loved one's assets may help you find sources of money to help cover caregiving costs," suggests Ross. Could they afford to move into an assisted living facility? What other assets or resources might they be able to draw upon to cover such ongoing expenses as a home health aide or a large onetime expense like a stair lift? Try to avoid tapping your own retirement funds. "If you shortchange your financial future, you could inadvertently become a financial burden to your own family," adds Ross.

Q: Is Medicaid an answer?

A: Eligibility for Medicaid, which covers the cost of most long-term care in the U.S., is determined by a maze of state and federal rules. In general, assets must be reduced to a set limit in order to qualify, with federal "spousal impoverishment" rules protecting the healthy spouse from having to spend down all of the couple's assets to pay for nursing home care. "An elder-law attorney could help you and your spouse or parents navigate these extremely complicated rules," says Hutchins.

"People who aren't familiar with Medicare and Medicaid regulations may be surprised to discover what is and isn't covered—especially what isn't.."—Amanda Ross managing director, National Insurance Sales and Distribution Executive, Bank of America Merrill Lynch

"People who aren't familiar with Medicare and Medicaid regulations may be surprised to discover what is and isn't covered—especially what isn't. So it's worth spending some time researching what these programs actually pay for," adds Ross.

Q: What if my parents live far away?

A: Merrill clients can take advantage of a program provided through Broadspire Care Management, notes Ross. "It can help with the selection of a nursing home and coordinating benefits. It also offers caregiver training, and it will even monitor a relative's care in a nursing home or other facility." Check the Eldercare Locator, managed by the U.S. Administration on Aging, for local caregiving services, suggests Hutchins.

Q: What if I need to transfer management of a relative's finances to myself or a trustee?

A: Taking responsibility for a parent's or spouse's legal, medical and financial affairs will be easier if you're able to have this conversation while your loved one still has the cognitive ability to understand the situation. Make sure to review and update relevant legal documents, Hutchins advises, including a will, an advance medical directive (describing end-of-life treatment preferences), a durable power of attorney (which designates someone to make legal and financial decisions) and a health care proxy (transferring legal authority for medical decisions).

You might also ask your advisor whether a trusteed individual retirement account makes sense in your situation. With it, the financial institution you name as trustee can continue to provide professional investment management services, which include investing IRA assets, ensuring that required minimum distributions are made and paying bills, among other services. "It's a valuable tool that can provide security in the event of incapacity," says Ross.

Another important part of becoming a caregiver is making sure you take care of yourself. “Understand that you cannot bring your best self to your caregiving journey unless you are maintaining yourself,” Hutchins says. One last tip, she adds: Don’t be afraid to ask for help. "Caregivers go through a lot of stress. Taking advantage of community services such as adult daycare or respite care can make a huge difference."

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1Source: Genworth, “Cost of Care Survey,” 2017.

2Ibid.

This material should be regarded as general information on health-care considerations and is not intended to provide specific health-care advice. If you have questions regarding your healthcare concerns, please contact a professional in that field.

Long-term-care insurance coverage contains benefits, exclusions, limitations, eligibility requirements, and specific terms and conditions under which the insurance coverage may be continued in force or discontinued. Not all insurance policies and types of coverage may be available in your state.

Bank of America Merrill Lynch is a marketing name for the Retirement & Philanthropic Services businesses of Bank of America Corporation. Banking activities may be performed by wholly owned banking subsidiaries of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Brokerage services may be performed by wholly owned brokerage subsidiaries of Bank of America Corporation, including Merrill Lynch, Pierce, Fenner & Smith Incorporated (‘MLPF&S’), which is a registered broker-dealer and Member SIPC.

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