According to Forbes, it is more expensive to care for an aging parent than it is to raise a child for their first 17 years of life. However, few adult children possess the financial resources to successfully contend with this reality. For this reason, it’s important that financial professionals be well acquainted with the financial demands of familial caregiving and to prepare their clients accordingly.
Adults are spending more money on caring for aging parents than they are for raising their own kids
Howard Gleckman, author of Caring for Our Parents: Inspiring Stories of Families Seeking New Solutions to America’s Most Urgent Health Crisis, points out that “while the government routinely provides a broad range of assistance and free services for children, it offers only limited benefits for those needing long-term support and services—and most only for those who are impoverished and very ill.”
A caregiver can receive a tax deduction only if long-term care exceeds ten percent of their income. In addition to being more expensive than the costs of childrearing, adult caregiving takes place in a shorter amount of time, averaging four years. However, each situation is different and some adults may need more assistance than others for more extended amounts of time.
Discrepancy in expectations
In 2016, Fidelity released their third Family & Finance Report. For the report, Fidelity surveyed both parents and adult children. Fidelity found that two in five families disagree on the child’s responsibilities for the aging parent.
The Family & Finance Report states that ninety percent of parents surveyed are against their children providing them with financial support. However, only thirty percent of children felt the same way, and one fourth were already making preparations to do so.
Seventy-five percent of parents surveyed anticipated one or more child assuming a long-term caregiving role: Forty percent of the children surveyed disagreed. While seventy percent of parents expected help from their children with managing finances, thirty-six percent of children were not on the same page as their parents.
Caregiving is prevalent
According to The National Alliance for Caregiving (NAC) and the AARP Public Policy Institute’s Caregiving in the U.S. 2015, 43.5 million adults provided unpaid care in the year prior to being surveyed. Sixty percent of caregivers are female. The NAC and AARP also found that on average, caregivers spend twenty hours per week caring for an aging parent. Seventy-eight percent of adults in need of care solely depend on family and friends.
By examining the data surrounding children caring for an aging parent, we can see that more research and resources need to be dedicated to this subject. We recommend that you encourage your clients to communicate with their family and friends about their needs and expectations. The most effective caregiving always depends on reaching a mutual understanding.
If aging parents who are in need of care are holders of a life insurance policy, a life settlement is one option that can serve to alleviate some of the financial burden placed on caregivers. A life settlement refers to the sale of an existing life insurance policy to a licensed, institutional buyer in exchange for a lump sum that is more than the cash surrender value and less than the policy face-value or death benefit.
At Ashar Group, we’ve brokered thousands of life settlement transactions and play an active role in helping financial advisors secure their client’s future. As a nationally licensed, independent resource for financial professionals and fiduciaries, we help advisors unlock the value of existing life insurance assets for their clients who no longer need or want their life insurance policy. Feel free to contact us today.