How well do your calculation tools work to figure out if your aging client’s money will last?

Here’s a real case where the calculations are a serious problem.

A wealthy 87 year old woman with three million dollars left in her formerly extensive portfolio needs full time care long term. Her financial advisor, together with the bank trustee managing her assets used calculation tools to figure out how to make her assets last for her lifetime. Somehow, they failed to anticipate the actual cost of caring for an elder with physical conditions and illnesses that require 24/7 care. This is a woman with advanced cardiac disease who had open heart surgery. Her daughter, who is a professional, left her self-employment to care for her mother full time.

The caregiving daughter wants some compensation from mom’s millions. She indeed deserves it.

Further, the life expectancy the trustee and advisor chose as a basis for determining how long her assets would have to last was 100 years of age. Given her medical issues, no doctor treating her would agree with that estimate. Far from it. Her heart is simply wearing out.

While cash is being drawn down monthly for her essential expenses for care at her daughter’s home, no one calculated the cost to her daughter, who is losing a six-figure income in providing the needed care. Being with her daughter is the mother’s preference. And her daughter is taking excellent care of her.

The brother, who is eager to get his “share” of an inheritance is hovering around the trustee, demanding to know how much is being spent to care for mom and why the caregiving sister should get compensation to make up for her losses, even partially. He resents his sister for asking for compensation for caregiving.

What could you, as an advisor do to prevent or mitigate family conflict like this when planning for an aging client’s future? Here are some tips:

  1. When using tools to calculate life expectancy, take into consideration your client’s medical condition. Get real data from your client or from involved family. And update your information and calculations as age takes its toll. A person in fragile health with numerous life threatening conditions is very unlikely to live to 100.
  1. Take into consideration that about 70% of people today will need long term care at some point. In the client’s case described above, the minimum cost of care for her is $12,000 a month. That does not include bookkeeping, a driver, nor medication management. That figure covers a full time, 24/7 non-medical home care worker only.
  1. Assume that if your client has adult children willing to provide care, a wealthy client can and should compensate the caregiving adult child. What is “fair” should be based on market rates for service provided and the cost of what the adult child has to give up, such as quitting a job.

Calculation models may be inadequate to build in these details. The smart advisor will use good sense and knowledge of your client’s needs and preferences to adjust planned drawdowns to meet those needs.

Are you taking your client’s health care needs into consideration in forecasting the need for cash as she ages? Is this creating any problems for you in planning? We want to hear from you with any issues you have. Comments welcome!

If you want to learn more about what to do when your client develops dementia, get your one hour accredited CE online course, Best Practices With Aging Clients and start increasing your expertise today!

Carolyn Rosenblatt, RN, Elder Law Attorney,





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