Elder care accounting falls within the scope of services provided by accountants and tax professionals. Today, we will blend two topics together to illustrate the usefulness of elder care accounting.

Elder care accounting is provided for elderly individuals who have declining capacity to administer their own finances. Very often, the accounting is arranged by the individual who holds a financial power of attorney (Fiduciary). In a common scenario, an elderly parent designates a child as the Fiduciary. The Fiduciary then retains an accountant to provide professional reporting to the other children, parent, and interested parties.

Without elder care accounting, the Fiduciary may not be legally required to provide any reporting to family members. The result can be accusations or suspicions of malfeasance and ruptures in family harmony.

Let’s say an aging parent begins to need physical assistance. One adult child has the ability to move the parent to the child’s home. Home health care can certainly be cost-efficient over an assisted-living or skilled care facility. However, the child needs to upgrade the home and uses the parent’s money to install a stair lift and hand rails in one bathroom.

There is automatically an argument that one child has been financially benefitted over the other children. While the parent resides with one child, the child may request the parent assist with monthly expenses. The other children may live in another state. Suspicions can also arise that the child is financially exploiting or over-charging the parent.

Two concepts can help to prevent such a scenario.

1. A family agreement with respect to the aging parent’s care before it is necessary. It is best if the parent leads this discussion and expresses his or her wishes. We tend to err on the side of privacy and individualism, but expressing intentions and desires helps to preserve harmony in advance.

2. Elder care accounting provides financial reporting to the other children or interested parties. In this way, the Fiduciary is offering transparency, and the other children know that a professional is reviewing the parent’s finances.

Elder care accounting can be implemented even if there has not be a family discussion. However, the family discussion beforehand is recommended. Because of its value in promoting family harmony, we believe the elder care accounting serves an important role among families caring for aging family members.