Taking care of aging parents financially rarely starts with a big decision. It starts with a stack of unopened mail on your mom's counter, a late notice from the power company, or a call about a "prize" your dad has to pay a fee to collect. One day you notice you are already managing part of a parent's money, without a plan, the right paperwork or any idea what it will cost you.
You are far from alone. According to AARP's 2025 Caregiving in the US report, 63 million Americans, nearly 1 in 4 adults, provide ongoing care, and nearly half of caregivers had at least one major financial impact, such as taking on debt or stopping saving.
This guide covers the documents to sign, the programs that can pay family caregivers, the federal tax rules that may help, and a worked example with the math shown.
The short answer: Protect your own savings first, map your parent's income and bills, and get a durable financial power of attorney and a health care proxy signed while your parent can still decide. Medicare does not pay for long-term care, so look at Medicaid and VA programs, some of which pay family caregivers, and check whether your parent qualifies as your dependent for a $500 federal tax credit.
How do you start taking care of aging parents financially?
Work through five steps in order: protect your own finances, map your parent's money, sign the legal documents, claim the help that exists, and agree on a plan with your siblings. The order matters, because the paperwork is far easier while your parent can still make their own decisions.
- Protect your own finances. Decide what you can afford each month before you offer. Keep contributing to your retirement plan and keep your own emergency fund intact; care can last years.
- Map the money. List every income source (Social Security, pensions, IRAs), every bill and debt, each insurance policy, and where the documents are kept. Note warning signs such as missed payments or unusual withdrawals.
- Sign the documents. A durable power of attorney for finances, one for health care, and a will or trust (our guide to will vs trust explains the difference).
- Claim the help. Medicaid, VA benefits and federal tax breaks, covered below.
- Agree on a plan. Write down who pays for what and who handles which bills. Sibling money fights usually start with assumptions nobody wrote down.
What does caring for an aging parent cost, and who pays?
Families pay a large share of long-term care themselves, because Medicare does not cover it. Medicare.gov says plainly that "Medicare doesn't pay for long-term care," which it also calls custodial care.
What the research shows:
- Over half (56%) of Americans turning 65 will need long-term care at some point. The average American turning 65 will incur $120,900 in future care costs, and families pay 37% of that out of pocket (HHS ASPE, 2022).
- Medicaid is the largest payer of long-term care, but only for people who meet its income and other eligibility rules.
- In AARP's 2021 out-of-pocket cost study, 78% of people caring for an adult family member had regular out-of-pocket costs, averaging $7,242 a year, or 26% of the caregiver's income.
One rule to know before anyone moves money: when a parent applies for Medicaid nursing home care, federal law looks back 60 months for assets given away "for less than fair market value." A transfer inside that window can mean months without Medicaid coverage for that care, so talk to an elder law attorney before retitling a house or emptying an account.
How to legally take over your parent's finances
The legal tool is a durable power of attorney for finances, which, in the words of the National Institute on Aging, "names someone who will make financial decisions for you when you are unable to." Its partner, a durable power of attorney for health care, names a health care proxy. Our guide to financial vs medical power of attorney explains what each one covers and what neither one does. Your parent has to sign both while they can still understand them; after that, families may have to go to court for a guardianship or conservatorship instead.
Two things surprise most families:
- Social Security does not accept a power of attorney. The Social Security Administration says having power of attorney "is not the same as being a payee." If your parent cannot manage their benefits, "you must still apply to serve as his or her payee," and the same goes for SSI.
- You take on legal duties. The CFPB's guide for agents under a power of attorney lists four: act only in your parent's best interest, manage their money carefully, keep their money separate from yours, and keep good records. Pay their bills from their account, and if you cover something yourself, keep the receipt and a note of why.
Can you get paid for taking care of an elderly parent?
Sometimes. AARP's 2025 report found that 11.2 million family caregivers now receive some compensation, though most are still unpaid. The main routes:
- Medicaid self-directed care. If your parent qualifies for Medicaid home care, some states let the participant hire and direct their own personal care workers. The 2008 federal rule for these programs noted that beneficiaries "could even hire qualified family members." Who can be paid, and at what rate, varies by state.
- VA caregiver support. For a veteran with a VA disability rating of 70% or higher who needs at least 6 months of continuous, in-person personal care, the VA's Program of Comprehensive Assistance for Family Caregivers pays the primary family caregiver a monthly stipend, among other requirements and benefits. Separately, VA Aid and Attendance adds monthly payments to a VA pension for veterans and survivors who need help with bathing, feeding and dressing.
- A written family care agreement. If your parent pays you from their own money, put it in writing at a fair rate with an elder law attorney. Informal payments can look like gifts during Medicaid's 60-month look-back.
What tax help can you claim for a parent you support?
Your parent can be your "qualifying relative" for federal taxes even if they do not live with you, but two tests are strict. Under IRS Publication 501, their gross income must be under the limit ($5,200 for 2025 and $5,300 for 2026, per Rev. Proc. 2025-32), and you must provide more than half of their total support for the year. Gross income means income that isn't exempt from tax, so Social Security that is not taxable is left out.
Two support rules catch families off guard. A parent's own money only counts as their support if it is actually spent on them. And if your parent owns their home, its fair rental value counts as support your parent provides.
If your parent qualifies, look at:
- The $500 credit for other dependents, a nonrefundable credit per qualifying dependent (Taxpayer Advocate Service).
- Medical bills you pay for them, which join your own medical expenses if you itemize; the total above 7.5% of your adjusted gross income is deductible (IRS Topic 502).
- Head of household status, if you are unmarried and pay more than half the cost of keeping up your parent's main home, which can be a rest home or home for the elderly. Your parent must qualify as your dependent, and this does not work if you can claim your parent only through a multiple support agreement, as Mark does in the example below.
- The child and dependent care credit, if your parent lived with you more than half the year, cannot care for themselves, and you pay for care so you can work. Up to $3,000 of expenses count for one person (IRS Topic 602).
When siblings share the cost and nobody provides more than half alone, a multiple support agreement can let one sibling who provides more than 10% claim the parent. The worked example shows how.
A worked example: Mark, Dana and their mother, Linda
This family is illustrative; use your own figures. Linda, 79, is a widow living alone in her paid-off house. Her income is $1,500 a month of Social Security ($18,000 a year) plus $300 of bank interest. Her son Mark lives nearby and pays for an aide and her medical bills. Her daughter Dana lives two states away.
Step 1: the gross income test. Half of Linda's Social Security ($9,000) plus her interest ($300) is $9,300, far below the $25,000 point at which a single filer's Social Security starts to count. Her gross income for the test is just the $300 of interest, under the 2026 limit of $5,300.
Step 2: Linda's total support for the year.
- Fair rental value of her house (similar homes rent for $1,200 a month): $14,400
- Food: $6,000
- Utilities, home insurance and property tax: $4,800
- Medical (Medicare premiums, prescriptions, dental): $4,800
- An aide three mornings a week at $300 a week: $15,600
- Clothing, transportation and other costs: $2,400
- Total support: $48,000, so "more than half" means more than $24,000.
Step 3: who provides it. Linda provides $14,400 + $6,000 + $4,800 + $2,400 = $27,600, counting her house. Mark provides $15,600 + $4,800 = $20,400, or 42.5%. Even though Mark spends $20,400 a year, he cannot claim his mother, mostly because her paid-off house counts as support she provides herself.
Step 4: the siblings combine. Dana starts paying for groceries ($6,000), and Linda keeps that money in her own account for future care. Now Linda provides $21,600 (45%), Mark $20,400 (42.5%) and Dana $6,000 (12.5%). Together, Mark and Dana provide $26,400, or 55%, and each provides more than 10%. With a multiple support agreement, Mark claims Linda and Dana signs a statement agreeing not to.
Step 5: what it is worth. Mark can claim the $500 credit, and the $4,800 of Linda's medical bills he paid joins his own medical expenses if he itemizes, with only the total above 7.5% of his AGI deductible. A tax professional can confirm the details for your family.
Are you in Canada? Here is what changes
- Canada caregiver credit. If a parent 18 or older who has an infirmity regularly and consistently relies on you for the basic necessities of life, you may be able to claim up to $8,601 on line 30450, depending on your parent's net income (CRA).
- EI caregiving benefits. If you take time off work to care for an adult who is critically ill or injured, Employment Insurance offers up to 15 weeks of the family caregiver benefit for adults. A long-standing condition qualifies only after a new, acute life-threatening event. Compassionate care benefits pay up to 26 weeks when someone needs end-of-life care (Canada.ca).
- Two powers of attorney. In Ontario, for example, an attorney for property handles bills, the house and investments, and an attorney for personal care handles health care, housing and daily decisions (Ontario.ca). Other provinces use different names and forms.
4 mistakes families make with a parent's money
- Raiding your own retirement or emergency savings. Help from your monthly budget, not from the accounts your future depends on. If caregiving means cutting your hours, see our guide to retirement planning for women.
- Waiting for a crisis to sign a power of attorney. After a stroke or a dementia diagnosis, it may be too late for your parent to sign.
- Moving money to the kids "to protect it." Transfers inside Medicaid's 60-month look-back can delay coverage.
- Signing a nursing home admission form as guarantor. Federal rules say a nursing home "must not request or require a third party guarantee of payment" for admission or a continued stay (42 CFR 483.15). You can sign as your parent's representative, paying from their income and resources without personal liability.
Your next step
Tonight, start a one-page money map: your parent's income sources, monthly bills, accounts and where the documents are kept. Circle anything you cannot find, then ask, gently, whether a durable power of attorney has been signed. If a parent was recently widowed, our first-year checklist after the death of a spouse can help.
If you would like help turning it into a plan, KAV Solutions offers a complimentary Financial Need Analysis. A licensed insurance professional walks through your parent's income and costs, your own budget and retirement plan, and how savings and insurance fit together for both generations. The analysis is free and you never pay KAV a fee. If you choose to buy a policy, the insurer pays the professional a commission. Powers of attorney, wills and Medicaid planning belong with an elder law or estate-planning attorney in your state or province. KAV's insurance professionals are not attorneys, but we can help with the money side.
Frequently asked questions
Can you get paid to take care of an elderly parent?
Yes, in some cases. Medicaid self-directed programs in some states let a parent who qualifies hire a family member as a paid caregiver, and the VA pays a monthly stipend to primary family caregivers of eligible veterans. AARP's 2025 report found 11.2 million family caregivers receive some compensation.
Am I financially responsible for my elderly parent's debts?
For your parent's own debts, generally no: the CFPB says debts are usually paid from the estate unless you co-signed, shared a joint account or another exception applies. But some states, including Pennsylvania, have filial support laws that let a court order an adult child who can afford it to help pay for an indigent parent's care (23 Pa.C.S. 4603). A nursing home also cannot require you to personally guarantee payment as a condition of admission. State laws vary, so ask an elder law attorney about yours.
Can I claim my elderly parent as a dependent?
Possibly. Your parent's gross income must be under $5,300 for 2026 ($5,200 for 2025), not counting Social Security that isn't taxable, and you must provide more than half of their total support. They do not have to live with you. If they qualify, you may claim the $500 credit for other dependents.
Does Medicare pay for a caregiver at home?
Not for ongoing personal care. Medicare.gov says Medicare doesn't pay for long-term care, also called custodial care. Medicaid is the largest payer of long-term care for people who meet its eligibility rules.
Do I need power of attorney to manage my parent's Social Security?
A power of attorney is not enough. The Social Security Administration says the Treasury does not recognize power of attorney for Social Security or SSI payments, so if your parent cannot manage their benefits, you must apply to become their representative payee.
How do you care for elderly parents with no money?
Start with Medicaid, which covers long-term care for people who meet its income and other eligibility rules, and ask about home care and self-directed options. Check VA benefits if your parent served. Then give only what you can without harming your own retirement, and share costs with siblings in writing.
KAV Solutions is a women-led team of licensed insurance professionals based in Pennsylvania. This article is general education, not individualized financial, tax, or legal advice. Tax, Medicaid, VA and power of attorney rules vary by state and province and change over time.
