What You Need to Know
- Physician and advisor Carolyn McClanahan outlined how advisors can help with LTC decisions.
- Long-term care planning should start as soon as someone is diagnosed with dementia.
- Families planning to self-fund nursing home care should expect to need at least $200,000.
As clients age, or as they need help with aging family members, there are steps advisors can take to help them prepare for long-term care.
Christine Benz, director of personal finance at Morningstar, spoke with Carolyn McClanahan, an advisor, physician and founder of Life Planning Partners, on Friday during the Morningstar annual conference. As an aging relative can be difficult to discuss, following some simple steps can alleviate issues for both the caregiver and the care recipient, one or both of whom might be clients.
Here are some of the ideas they discussed:
The time to make long-term care decisions is when the person is in their 60s or 70s — or even earlier.
Dementia typically doesn’t happen until the 60s, and then chances of onset double for each five years thereafter, McClanahan noted. She said that things to consider and discuss when developing a plan are:
- Whether the living situation is appropriate. For example, is the home multiple floors? Are the doorways wide enough to accommodate a wheelchair?
- When the person should quit driving, and an alternative plan for transportation.
- How health care decisions should be made.
- Financial decision management, i.e. when someone should take over their financial matters.
Watch for signs that hospice care is needed.
McClanahan noted four signs of diminished quality of life that can indicate it’s time to move to a hospice facility:
- The client or family member has severe difficulties with communication, or can no longer communicate.
- They cannot feed themselves.
- They cannot groom themselves.
- They no longer interact with others.
What can advisors do?
Advisors can help clients organize and complete finance-related tasks and documents such as:
Personal service contracts: These can be expansive and should include who will handle what, including payment for services. A contract can be drawn up to help designate who will be the main caregiver — even if that person is an unpaid relative or friend — as well as determine payment (i.e. 10 hours a day for seven days a week) and set aside funds from the estate to pay. McClanahan also noted this can help them qualify for Medicaid sooner.
Financial best practices: Bills must be paid on time, and foreseeable expenses should be handled as soon as possible, McClanahan recommends. For example, if the roof needs replacing, better to do it earlier. Also, cash flow will need to be determined.
Simplify investments: People often have multiple accounts and brokers. McClanahan recommends simplifying everything: one broker, one Roth, one money management account, and so on, so it is easier to keep track of money and to transfer to a surrogate when necessary.
Surrogate planning: Have a plan that when family notices changes in the client or relative, they will have permission to assign a surrogate.