November 13, 2018

The more conversations I have with family, friends, neighbors and clients, the more the topic of caring for an aging parent or spouse comes up. I am continually surprised just how many families are affected by this (my own included). As I began drafting this blog, this headline came across the news: Justice Sandra Day O’Connor was diagnosed with dementia, likely early stages of Alzheimer's. I learned that she retired from the bench in 2006 in part to care for her husband who was ailing from Alzheimer’s. It is sad to see one person be dealt such a blow not once but twice in a short period of time, and it demonstrates how prevalent such a difficult disease can be, cutting across all swaths of life and reported at a seemingly increasing pace.    

Let's face it: most of us will be touched by the need to care for an ailing parent, spouse, or other family member for some period of time.  As a Financial Planner, I find that planning conversations around this topic fall well behind other financial concerns such as retirement or college planning. Of course no one wants to imagine dire circumstances; however, a long-term care event can be one of the single most detrimental and catastrophic set-backs to a financial plan, health, and well-being. How can you mitigate the toll of such an event? Address it in advance and make a plan to the best of your ability.

Too often we hear, “If I only knew what I know now, I would have done things differently.”  Based on experience, we know too well that the burden borne by a caretaker is a hardship that can have a lasting impact on their emotional, physical, and financial health. The reality of difficult decisions being made under duress, when decision making is uninformed and at its most fragile state, is far more painful than the planning process itself.  We hope to compel you to act. 

To highlight how we often see this play out in our practice and in conversations with friends, we would like to introduce you to "John and Mary". Their story is similar to many we hear from clients and friends. John and Mary have two kids about to go to college, are contributing fully to their 401(k)s and are financially on track.  Their future looks bright. 

Recently, Mary has noticed a change in the health of her mother Judy. Judy spent several years caring for her husband, George, who recently passed away.  Though Mary is close to her mother, she has been busy with her own family, work, and life.  She suddenly realizes her father’s illness took a significant toll on her mother.   

After taking some time from work to bring her mother to doctor appointments, they learn Judy is in early stages of Alzheimer's.    

Suddenly, Mary needs to figure out the best way to plan for her mother’s care at home and eventually in a facility that can keep her safe and well cared for.  She reaches out to her only sibling, her brother Jeff, and they start discussing how they will help Judy deal with day-to-day activities and manage and advocate for her physical and emotional well-being.   

In addition to the medical decisions and knowledge they must quickly acquire, Mary and Jeff learn that their mother does not have much money left after drawing on retirement resources to care for their father.  They suddenly must contend with how they will pay for care, and who will be her advocate in three realms: medical, financial and emotional.  None of this was ever discussed prior to this point, and at times Mary is at odds with her brother.  Both have their own families and Mary feels she is left to manage all aspects of her mother's care while balancing time away from her family and work. 

Since her mother’s assets are limited, there is additional strain in imagining how she can provide the best care for her mother as the disease progresses, and the degree to which the families can afford to draw on their respective assets while trying to save for college and retirement.  

They are all committed to doing the right thing, but the stress of trying to figure that out and the process by which to achieve their goals is confusing and overwhelming. 

What can they do now and what could they have done differently?

Right now, Mary and Jeff are in crisis mode.  Their best course of action is to consult with an elder care consultant, financial planner, and estate planning and elder care attorneys.  It is important for them to have frank discussions with their mother about her wishes and health care directives, if they have not been established.  They will need to take a full accounting of their mother’s assets, establish where she will live and who will provide care as the disease progresses. All of this takes time, money, and is emotionally draining. They have to make decisions that impact everyone involved and their financial future.

If Mary and Jeff had understood the risk long-term care presents to their every day lives and finances before an event took place, they might have avoided the uncertainty and stress, and mitigated the cost to all family members involved.

Below are just some of the options for managing the costs of long-term care:

  1. Self-insure through an Annuity, Trust, or Reverse Mortgage.
  2. Draw down all assets and qualify for Medicaid. 
  3. Purchase a Long-Term Care Policy or Life Insurance with a Long-Term Care Rider.
  4. Ignore or hope it never happens and possibly be left with an emotionally and financially stressful situation.

The best option to manage the cost of long-term care depends on individual circumstances such as available assets, medical history, and where you live, to name a few.  Whatever course of action you choose, planning in advance can protect your family from the emotional difficulty of making decisions for you and the financial hardship of paying for care. 

Whether you are a caretaker, or the one being cared for, long-term care planning is as much about your family as it is about you (see video below).  If this topic or this situation sounds too familiar, you are not alone. We encourage you to reach out to our team to ask about how you can best plan for a long term care event for yourself, spouse, parent, etc. We are here to help.

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