Increasingly as we work with people of retirement age, we’re hearing a new concern: What happens when my mother runs out of money? Those in their middle ages used to be called the sandwich generation, because they were in the middle, caring for both their children and their parents. But this is something more — we’re speaking of people in their 60s and 70s caring for parents in their 80s and 90s.
By the time we hit our latter 60s, most of us hope that the retirement nest egg is firmly in place, children are settled, and grandchildren are a joy. But since we’re all living so much longer, caring for one’s very elderly parents is now a large financial planning topic.
Medical Issues Are a Primary Cause for Concern
Too often we see a client who is concerned about his parents outliving their assets. A parent with a long and debilitating illness is a common story, which can lead to an impoverished spouse. This is a heartbreaking circumstance. Who wouldn’t give everything to care for a beloved spouse of many years?
Ideally, there is long-term care insurance (LTC) in place to pay expenses when needed. Medicare does not pick up the tab. It only pays for recuperative care after a qualifying hospital stay of 3 or more days. It does not pay for palliative care (maintenance care), which is precisely the care that LTC policies pay for.
If Your Parents Own Their Home, Here Are Two Solid Suggestions
1. Look into a reverse mortgage.
A common misconception is that homeownership is relinquished with a reverse mortgage. Not true. The owner retains title to the property, just as with a traditional mortgage.
Many people have what look to be sufficient assets on their balance sheets, but the assets are not liquid — not spendable. A reverse mortgage gives spending access to a home’s equity. There are no credit qualifications. You borrow out a portion of the home’s equity, and no repayment is due until the mortgage holder permanently leaves the home — either by death or by moving to a nursing home. This is an important point: when the loan comes due at death and the home sale proceeds are not sufficient to satisfy the outstanding mortgage, the balance is not payable by the heirs.
For example, say your mother took out a reverse mortgage for the full value of her $600,000 home in 2006. In 2015 she passed away while still living in the home. As the beneficiary, you sell the home for $400,000. The remaining $200,000 loan? You are not on the hook for it, nor is this difference taxable to you.
2. Buy your parents’ home from them and rent it back to them.
The major plus here is that there is no disruption to them. As a landlord, you’ll handle all the maintenance, which you’re probably doing already. At their death, you can renovate the home and sell it or take in a new tenant. Meanwhile, you may be able to take some passive loss against your active income if your Adjusted Gross Income (AGI) does not exceed $150,000. Your parents receive the price of the home in cash at closing, so they have a lump sum to invest and draw upon, thereby maintaining both their independence and their dignity. They can then pay you some minimal rent.
What if They Don’t Own a Home?
If your parents don’t own their home and they run out of money, the options are few. You and your siblings may need to chip in to help out. Depending on your parent’s health, this may or may not include paying for managed care at home. Another option is for family members to combine residences. If you provide over half of a parent’s support, you may be able to claim them as a dependent and qualify for certain tax benefits.
Veteran’s Aid and Attendance Benefit
If either of your parents is a veteran, look into this benefit. It is available to certain wartime veterans and their surviving spouses who need assistance with activities of daily living.
2026 maximum monthly Aid & Attendance benefit rates:
- Single veteran (no dependents): approximately $2,424/month
- Veteran with a spouse or dependent: approximately $2,874/month
- Surviving spouse: approximately $1,558/month
These benefits are entirely tax-free and do not need to be repaid. There are income and asset eligibility requirements, including a net worth limit of approximately $163,699 for 2026. The application process involves detailed forms and supporting documentation, and processing typically takes 3–6 months. If you believe a parent may qualify, it is worth beginning the process sooner rather than later.
Plan for Longevity
The primary point of this post is to offer helpful suggestions to those who find themselves caring for very elderly parents. The secondary point is to urge readers to anticipate longevity. We’re all living longer — please plan for it financially.
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