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Guide: Helping Caregivers with Financial Planning

Family financial planning is an important process for every family, but it’s also different for every family. Financial plans for families have to consider factors like whether you’re married, self-employed, or are currently working, have a disability, among many others. You also have to consider whether you’re a caretaker.

Who is a caregiver? 

Caregivers are those who regularly look after a child or a person who is sick or otherwise incapable of self-care. Adults incapable of self-care often include dependent adult children, parents, a spouse, or a family member with a disability.

If you’re a caregiver, getting from start to finish in your financial plan can be daunting. To help get started on creating a financial plan, we’ve created this 4-part family financial planning guide for caregivers. 

In this Article: 

  • Setting Goals
  • Budgeting for Your Family
  • Accessing Care Services
  • Estate Planning

1. Setting Goals

What is the first step in financial planning? Setting financial goals. Setting both small and large goals will ensure that your family’s financial plan meets your family’s unique needs.

Before getting into the weeds of your current finances, take time to think about your goals. The financial planning process can feel overwhelming, which might make goals feel far away or unlikely. Don’t worry! You’re not alone in that.

To help you brainstorm, answer the following questions that apply to you: 

  • What are your personal and professional goals?
  • If you have a partner, what are your collective goals?
  • Name 5 things you value that impact your lifestyle. This might be time for your hobby, travel, time with your children, your work, etc...
  • Where would you like to live? 
  • What would you like to accomplish by 40, by 55, by retirement? 

Specific questions for caregivers:

  • What kinds of activities or experiences would you like for your dependents?
  • What education would you like for your dependents?
  • Which other developmental opportunities for your dependents are important to you?
  • What would you like for your parents?
  • What would you like for your adult dependents?  

2. Budgeting for Your Family

Budgeting is a matter of planning to save and also planning to spend. As a caregiver, budgeting will include additional costs, but also unique savings.

Approaches to Budgeting

There are different approaches to budgeting. Some common approaches include the 50/30/20 system, the envelope system, and the pay-yourself-first system:

    • 50/30/20 system. This budgeting method breaks your income down by category: 50% necessities, 30% wants, and 20% savings. Necessities will include food, home expenses, or debt payments like student loan payments.
  • Envelope system. Some might consider this method archaic, as it’s usually done using cash. To use this method, put the amount of money you want to spend on certain necessities or activities into designated envelopes. 
  • Pay-yourself-first system. This method prioritizes putting money in savings. Simply decide how much of your income you’d like to put in a savings account every month, and the money you want to save to savings first. 

Budgeting for Caregivers

If you’re a caregiver, you’ll need to incorporate your dependents into whatever approach you use because they’ll have their own unique budget needs. For example, programming and activities for daily living may have additional costs. Consider the following expenses: 

  • Daycare
  • Home care
  • Personal care services
  • Programming, such as day programs for adults with disabilities
  • Medical Expenses
  • School
  • After school programs and activities

Tax Considerations for Caregivers

If you have dependents, the federal tax code provides various forms of tax benefits to consider as you’re creating your budget. Although they’re initially difficult to incorporate into your family financial planning, knowing which tax benefits you can claim will save you money. 

NOTE: The American Rescue Plan and related Covid-19 legislation have increased tax credits through 2021. The below information does not reflect those temporary changes.

Child and Dependent Care Tax Credit 

With this tax credit, you can claim up to 35% of your child and dependent care expenses. To qualify, expenses must be for the care of qualifying children or dependents and work-related.

Child Tax Credit

Parents can claim up to $2000 for each child who has not turned 17 by December 31st of the applicable tax year. Under the American Rescue Plan, the age limit was extended to 17 years old through the 2021 tax year. Your total credit amount depends on your income.

Credit for “Other Dependents”

If your child is 17 years or older, they can qualify for the tax credit for other dependents, or adult dependents. An adult-dependent may be a parent, sibling, cousin, or even someone who is unrelated to you. They must meet the IRS’s requirements.

Head of Household Filing Status

Obtaining head of household filing status provides tax benefits including a higher standard deduction. To qualify, you must:

  1. be either unmarried or have lived separately from your spouse for at least the last 6 months of the year,
  2. pay for more than half of the household expenses, and
  3. a qualifying dependent lives in your home for more than half of the year.

3. Accessing Care Services

Family care services are an essential part of family financial planning; finding care services for those you care for. The extent to which you use care services will depend on whether you are employed, the status of the person you’re caring for, and your budget.

Types of Care Services 

There are many types of care services for children and adult dependents. Some are work-related, meaning they’re provided to a dependent so that you can go to work. Others are to provide respite to you as the caregiver. 

Types of care services include day programs for adults with disabilities, work programs, elder care day programs, home care, daycare, preschool, nannies, or babysitters. They can be provided by non-profits, companies, or even friends paid as caregivers.

How to Find Care Services

Paying For Care Services

An important consideration in the family financial planning process is the cost of care services. In addition to tax benefits, other sources of financial support for caregivers include employers, social security, and other government programs.

Employers: Employee Care Benefits

Many employers offer care benefits to employees who are either working parents or caregivers to adult dependents. Benefits vary depending on the employer and the state where you work. For example, some states require certain care benefits. Which benefits you elect will depend on who the care recipient is, and what your care goals are.

Common care benefits include:

  • Dependent Care Flexible Spending Accounts (DCFSA, or Dependent Care FSA) 
  • On-site childcare
  • Dependent care and childcare vouchers
  • Discounts for in-network care providers
  • Subsidies

Social Security Income and Social Security Disability Income

Social Security Income (SSI): SSI is a federal program that provides income to adults and children with disabilities. The program is income-based and is meant to assist people with disabilities who have limited income and resources.

Social Security Disability Income (SSDI): SSDI is a federal program for individuals who are “insured.” To be insured, the person applying must have worked long enough to qualify.

Other Government Programs

There are many government programs that provide financial assistance such as State Disability Insurance (SDI), PACE programs, or childcare subsidies. For state-specific funding resources, contact your state’s department of human services.

4. Estate Planning

Estate planning is an essential piece of the family financial planning process. The following three legal documents are common elements of an estate plan to consider: 

  • Wills. A will is a legal document that instructs a person of your choice (called the executor) to distribute your property according to your wishes upon your death.
  • Trusts. Trusts are created to assign a person (called the trustee) to hold your property for the benefit of another person (the beneficiary). The trust has instructions for how, when, and for what reasons to give property to the beneficiary.
  • Powers of Attorney (POA). POAs give another person to make decisions on your behalf regarding your finances or health. They’re used if for some reason you become incapable of making such decisions.

How to create an Estate Plan

To create an estate plan, contact an estate planning attorney. 
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