When age and poor health force parents of baby boomers to leave their home, financial planners say the event creates a complex nettle of practical decisions and emotional responses for both parents and children.
Interviews with National Underwriter suggest there are three pieces to transitioning parents to their next living accommodation: getting organized, dealing with the practical and negotiating surfacing emotions. The organizational component was addressed in last month’s Advising Boomers section (see NU, Jan. 23/30). Some practical issues will be addressed in this article and the emotional piece next month.
Advisors say a good place to start is to consider what assistance is available from government service agencies. They emphasize that they are talking about legitimate use of available services 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 should be factored into any consideration about how much money a boomer should be contributing to a parent’s care and whether that parent should remain in the area where he or she currently lives, 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 caution 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, owners are not put on the street. They can stay in their home. Not everyone wants to downsize. Emotionally, there can be a toll.”
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.
Another option, Kaplan says, is the 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.
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 so if a resident’s needs change, a move to assisted living or nursing home care is possible within the community, 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, says Hancock, who adds 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 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.
If a decision is made for the parent to move into a facility or a child’s home, then a related decision on whether or not to sell the home depends on factors such as whether the parent lives in the same city as other family members or is moving far away, says Elaine Scoggins, a certified financial planner with Scoggins Financial.
And even if the parent is staying local, a planner can help parents make the decision of whether or not it is better to sell their home or to continue to rent the property and have family members act as landlords, she adds.
If a parent cannot live alone, the level of medical care necessary to sustain that parent will determine whether the parent lives with a child or in a facility, several of those interviewed by National Underwriter say.
Eric Bruck, a certified financial planner with Allied Consulting Group, Los Angeles, says that for those who can afford it, at-home nursing care can be an option. One client, he says, had a parent’s dining room furniture removed, and added a hospital bed and team of round-the-clock nurses. In some cases, a parent might not need that level of care but rather a companion or just someone to help with meal preparation.
Bruck says it is necessary to look at all income sources including the possibility of a reverse mortgage, which he says “is usually an expensive proposition,” but could offer a way to keep parents in their home if that is an important consideration.
George Middleton, a chartered financial analyst with Limoges Investment Management, Vancouver, Wash., says keeping a parent at home with 24-hour care is very expensive, underscoring the need to explore purchasing long term care insurance.
The earlier such LTCI is purchased, the better, according to Jim Watkins of Watkins Financial, Leawood, Kan. The cost for those over 70 is “astronomical,” he adds.
If a boomer or siblings are thinking about caring for the parent, Watkins says there are three things to consider:
1. whether you can do the job;
2. whether you have the financial requirements to do the job; and,
3. whether your temperament is consistent with doing the job.
Additionally, says Kristi Sweeney, a certified financial planner with Sweeney & Associates, Greenwood Village, Colo., if a parent needs care, boomers may need to decide whether the best care is at home. She recommends that boomers consider these factors:
–Will the parent be lonely?
–Are they eating properly?
–Will a parent benefit from social interaction?
–How much care will be needed?
–If 24-hour care is needed, how is the caregiver going to function?