Part II of III Parts–General overview to be followed by specifics of home choice and then specifics of softer, more emotional issues
When age or poor health force Boomer parents to leave their home, financial planners say that the event creates a complex nettle of practical decisions and emotional responses for both parents and children.
Interviews with National Underwriter suggest that there are 3 pieces to transitioning parents to their next living accommodation: getting organized, dealing with the practical and negotiating surfacing emotions. NU addressed the organizational component in its January 2006 Advising Boomers supplement, will address some practical issues in this article and the emotional piece in next month’s Advising Boomers supplement.
Advisors say that a good place to start is to consider what assistance is available from government service agencies. And, they emphasize that they are talking about legitimate use of services available and not efforts to circumvent financial responsibility for a parent’s care.
In many states, there are local support services that can be accessed and that should be factored into any consideration over how much money a Boomer should be contributing to a parent’s care and whether that parent should remain in the area in which they currently live, says Eve Kaplan, a certified financial planner with Kaplan Financial Advisors, Berkeley Heights, N.J.
Boomers may want to consider contacting a local area agency on aging office which can help assess a parent’s condition, says Julie Bucaro, a certified financial planner with Balasa Dinverno & Foltz, Itasca, Ill.
Medicaid may be an option if there are few assets available to a parent but planners cautioned that state laws can vary.
Other options that may be considered if a parent is set on staying in the home, according to Kaplan, are reverse mortgages and qualified personal residence trusts.
A reverse mortgage can be a way to use, what is for many, their main asset, according to Kaplan. “With a reverse mortgage, the owner is not put on the street. They can stay in their home. Not everyone wants to downsize. Emotionally, there can be a toll.”
And, parents might want to consider a qualified personal residence trust, she adds.
A QPRT is an irrevocable trust funded with a personal residence. The donor gets to live in the residence until the trust ends. The residence is excluded from the estate and, consequently, estate tax.
Kaplan says that there are new assisted living housing solutions that are being offered. However, she cautions that these options may not have a long track record. So, it might be difficult to determine if they are financially stable, Kaplan adds.
One kind of facility that is becoming more common is the continuing care community, according to Cheryl Hancock, a certified financial planner with Rinehart & Associates, Charlotte, N.C. The community offers different levels of care such that if a resident’s needs change, a move to assisted living or nursing home care is possible, she explains. If one spouse needs to move into a part of the community where more care is offered, the other spouse can visit easily, Hancock says.
The issue is one that comes up weekly with clients, according to Hancock. In fact, Hancock says that she is putting together a list of such local communities as a resource to her firm’s clients.
When a client is considering one of these communities as an option, Hancock says that a planner from the firm will often visit the facility with the client. The reason, she explains, is that the pricing structures can change as the type of service changes and clients need to be aware of this fact. So, if a spouse goes into the nursing home component of the community, the client has to know how that will change pricing, she adds.