Flexible Spending Accounts, or FSAs, can be a useful tool for caregivers of ailing relatives. FSAs are structured to allow employees to place a portion of their pre-tax salary into a separate account which is designated for use in covering health care expenses. In many cases, these expenses do not have to be restricted to the employee’s own health care, but can be used towards dependent healthcare premiums and expenses.  When medical expenses arise that are not covered by standard healthcare, the employee can then be reimbursed from the flexible spending account.

The catch with an FSA is that the funds have to be used up each fiscal year, or the employee forfeits the money saved. In general, this won’t be an issue for those acting as a caregiver, so long as you plan carefully and deposit what you think you’ll need.

One of the most important uses for an FSA, if you are caring for an elderly parent, is that you can use it for day care expenses while you are at work, so long as the elderly parent relies upon you for at least 50% of their support. To qualify, this day care

  • Must be essential to allow you to continue to work
  • Cannot be used for custodial nursing care.

In addition, if you have a spouse, he or she must also

  • Work;
  • Be seeking employment;
  • Or be a full-time student.