A Different Kind of Plan

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According to a recent poll, 41 percent of baby boomers who have a living parent are providing some sort of personal care, financial assistance, or both for their parents. Of those who are not currently providing care, 37 percent expect to someday.

The wild card in any financial plan is the risk associated with a potential long-term care need. This is exacerbated by the uncertainty of the length and severity of the need, if it occurs at all. Longevity plus incapacity can wipe out a family’s resources pretty quickly. For years, we have discouraged counting on an inheritance from an aging parent as part of one’s own financial plan. These days, to be prudent, we also encourage some clients to strongly consider that they may need to contribute to the support of parents.

Of course, when we raise that question, most people automatically assume that we are talking solely about finances. In reality, a parent’s long-term care need can require physical and emotional support from adult children that money simply cannot buy. The financial need is often mitigated by long-term care insurance; however, before the benefit can be paid, policies usually require that the insured be unable to perform at least two activities of daily living: bathing, dressing, eating, transferring from bed to chair, toileting, and continence. Cognitive impairment that affects the person’s health and safety will also usually qualify. As we age we often simply need help with getting to and from a doctor’s appointment, keeping medicine dosages straight, shopping, preparing meals, opening jars. These are not activities that trigger long-term care benefits, but the need remains.

In his book, How to Say it to Seniors, David Solie presents five predictable dilemmas of aging: Where will I live? How can I manage my health? How will I cope all by myself? What should I do about money? What is the right way for me to say good-bye? Each of these can be a source of difficulty for the person going through it and often presents itself as inter-generational conflict.

A more holistic approach to financial planning becomes essential when an aging parent becomes dependent upon their adult children. Considering the combined resources of the aging parents and all their children, with their own diverse needs, takes the planning process into a totally new realm. The goal for many can be simply stated: meet the needs of mom and/or dad without endangering the children’s, or even grandchildren’s, financial well-being. The first step, if everyone is on board, is to view the family as a system. Defining the boundaries of the system can often be difficult and laden with emotion.

Most adult children of aging parents are still in the prime of their own careers, and while many are willing and able to contribute financially, they totally discount the time and energy required for proper caregiving. In a few cases, caregiving begins suddenly when mom or dad has a heart attack or takes a fall that results in a broken bone. More likely, the need develops more slowly. The adult child is called on first for something very simple, but then has to slowly take on added responsibilities as the need progresses. The price of added care is often paid in the caregiver’s loss of income, advancement, as well as significant expense paid out-of-pocket.

At some point in our lives, nearly all of us will face a developmental task marked by the conflict of attempting to hold onto as much control as possible, while at the same time letting go of our legacy. Facilitating the resolution to that conflict is no easy task and is usually best done in the presence of an objective third party. It is important to recognize that our aging parents may be struggling with this as they age. Regarding seniors as persons who still have dreams and goals as well as fears and apprehensions is a big step toward jump-starting the resolution.

We encourage clients to begin these conversations while everyone in the family system is still reasonably healthy and thinking clearly. One book we typically recommend is The Other Talk: A Boomer’s Guide to Talking with Your Family About the Rest of Your Life, by Tim Prosch. Another great resource is The National Alliance for Caregiving www.caregiving.org. We have found that the best place to start the conversation is usually around living arrangements. When asked, nearly everyone wants to remain in their own home and age-in-place. However, when the inability to perform even one of the activities of daily living gets introduced, many will see that aging-in-place alone simply will not be possible. Other options are living with children or moving to an assisted living or personal care facility. Every family’s situation is different and each must decide which option is best based on the quality of life for all and the cost of each alternative.

As stated above, the time for planning is before care is actually needed. Emergent reactions to a need for care rarely produce optimal results when it comes to aging; but when the call comes, such reactions are unavoidable. It may help everyone involved to see that the earliest and slightest need for care is truly an opportunity to come together as a family unit and to integrate financial and life plans for the benefit of all. Such planning usually requires a team approach of legal, financial, insurance, and tax professionals. The strategic plan that gets developed from such a place will likely be far superior to the one that addresses each separately. If you have questions about this, please let us know.

Scott Neal is president of D. Scott Neal, Inc. a fee-only financial planning and investment firm. Contact him at scott@dsneal.com or by calling 1.800.344.9098.