Mar 25, 2016 | aging, elderly, finances for elders, financial capacity, handling money for aging parents, handling money for seniors, senior investor
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:
- 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.
- 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.
- 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, AgingInvestor.com
Mar 3, 2016 | aging, elderly, long term care, seniors finances
When meeting with a group of young business owners and CEOs recently, Mikol and I were were amazed that these folks were so forward thinking about their parents. We had been invited to come and discuss a variety of issues they saw in planning for their parents’ futures. All are 40 years old or younger. With their own thriving businesses, they felt responsibility to share with parents who were probably going to be depending on them or already were doing so. Their foresight is likely related to their business success as well.
The cost of long term care arose. What if you have to pay for them to get the care they need later on, even if they don’t need it yet? How much should a person set aside?
Some had purchased long term care insurance for a parent and we were happy to see that good planning. Others figured they’d have to pay out of pocket when the need arose.
While only about a third of aging folks believe they will indeed need long term care, the fact is that about two-thirds of them actually will need it. The gap between what older people think and expect and what really happens as we age is startling. And it is likely to throw the burden of paying for it on the financially successful adult children of these elders in denial. This particular group of business owners could absorb the cost. Many average people cannot. Many people, women in particular have to eventually quit their jobs or give up their own retirement time to care for parents themselves.
What about the dollars and cents? The Genworth Cost of Care Survey is done every year and provides average rates charged by service providers for homemaker services, home health aides, adult day health, assisted living and nursing home care across the country. And you can also search by state to see the average where your parents live. Even the lowest level of care, someone to come in and help with cooking, shopping, laundry and errands averages $19 per hour, the national median hourly rate. The national median monthly rate for assisted living is $3500. And in my state, in urban areas and well populated centers, it is twice that.
If you have to consider paying for long term help for your aging loved ones, it’s worth your time to do the math and figure out how much it may take. According to a colleague who knows long term care insurance benefits, the average time a person with this kind of insurance is collecting paymentsis three years or less. If it’s three years at $43,200 a year for assisted living, not factoring in the 2% annual increase in cost, that’s $129,600. And that’s under the unlikely scenario that a person who lives into her 90s, say, is going to stay level in what she needs over that three years. More likely than not, her needs will increase and the facility will charge more every month for more services. Here at AgingParents.com, we have had clients who are shelling out over $10,000 a month for a parent to be in assisted living. When parent is infirm and needs a lot of things from the staff, every new thing increases the monthly cost.
Near the end of our fruitful discussion, one of the participants asked “What do the other 99% in our society do when an aging parent needs long term care?” The answer: they either provide the care themselves at a very high personal cost, or their parent spends what assets he has until they’re gone. Then he ends up on Medicaid in a shared little rom in a nursing home. Longevity is great when they’re healthy. When they’re not, we need to be conscious of the cost of taking care of our loved ones.
If it so happens that you are the successful adult child of an aging parent with limited funds, here are four takeaway suggestions:
- Look ahead. If your parents aren’t wealthy and you are, guess who will be expected to help financially?
- If your parents or you can afford it, seriously consider long term care insurance. If you wait too long to apply, the cost rises sharply and some diagnoses and conditions make an elder uninsurable. Dementia is one of those diagnoses.
- Educate yourself. If you expect to pay out of pocket in the event that your loved one needs help at home or elsewhere, do the math and figure out how much cash you will probably need to set aside. The longer our aging parents live, the more likely they will need help.
- Communicate with your aging parents about these issues. Insist on the discussion. You need to know what assets they have and where to find them. They may not have planned on living so long and potentially outliving their money but you need to anticipate that possibility.
Smart planning now can save you shock and distress later. Working with your aging parents to help them stretch their assets by conservative investing and spending will benefit both you and them in the long run. And expect the long run. People in the 85+ age group are the fastest growing segment of our population.
Get more specifics on these issues and the possibility of getting public benefits for eligible aging parents in my new book, The Family Guide to Aging Parents. Get your copy today by clicking here!
Carolyn Rosenblatt, RN, Attorney, Author
Dr. Mikol Davis, Geriatric Psychologist
AgingParents.com and AgingInvestor.com
P.S. If you read up on what to say before you approach your aging parents about finances, the conversation will go better. Tips are in the book!
Jun 18, 2015 | aging, elderly, finances for elders, financial elder abuse, senior investor
The gripping thing about this case is not just the horrific means used to steal money. It’s the shocking failure of every person involved to ever notice that over a 6 year period, a caretaker isolated, abused and stole millions from a 74 year old, helpless stroke victim.
Li Ching Lu was convicted of financial abuse via fraud and forgery in Long Beach, this month. She got 4 years in state prison, which seems appallingly short for what she did. Over a period between 2002 and 2010, she emptied her victim’s bank accounts by writing checks and depositing them in 63 different accounts at 4 different banks.
Why didn’t anyone notice that she began to isolate her victim from her friends, family, financial advisors? Did any of them care enough to check on their friend or client? Did the cessation of contact from a person who had amassed a small fortune from investments ever alarm the investment advisors on her team enough to find out why? (more…)
