Safe Guarding Your Nest Egg With an Elder Care Plan

October 29th, 2021 by Jim Allen

November is long-term care awareness month, so this is a great time to bring up the topic with your parents or other loved ones. The idea that a loved one may not be able to care for themselves is a difficult thing to discuss and something that many families decide to ignore. But the reality is that roughly 70% of people over 65 will need some level of care at some point in their lives.

Because the probability is so high and the costs both financially and emotionally are so great, a well-crafted elder care plan is a critical component of every senior’s overall financial plan. While many people associate elder care with a nursing home, where the costs can be as high as $7,500 per month, this is not the only option. In actuality, many seniors will use some variety of home health care whether provided by a health care professional or by family members. In fact, about 85% of the support given to older adults is by a friend or family member. Often, this burden falls on females (daughters, sisters, or wives) who are sometimes themselves seniors.

The emotional and financial strain that is placed on family members who must make difficult decisions about caring for an elderly family member is tremendous. This burden can lead to lost wages, stress related health issues, divorce, or even financial devastation. That is why having a plan in place that everyone can agree on is so important.

An elder care plan is just not buying a long-term care policy. In fact, in the last several years, “standalone” long-term care policies have become less common and the constant price increases charged by insurance companies have made them a far less viable option. A well-designed elder care plan should include three components:

Legal Aspects

A major part of the elder care plan is to make sure that the senior has an up-to-date and articulated estate plan in place. While this includes a properly executed will and living trust, of critical importance are financial and health care power of attorney documents. The financial power of attorney will allow someone the senior trusts to manage their finances in the event the senior no longer can themselves.

The health care power of attorney (health care directive) allows the senior to make clear their wishes on issues like life support, artificial feeding and hydration, organ donation and health treatments. This takes the burden off family members who would have to make these difficult decisions with no guidance from the senior.

Finally, the senior should have a document that articulates their wishes about the type of care they want to receive (home health care etc.) and also to specify any burial and funeral arrangements. In addition to having these documents in place, it is recommended to make the plans known to family members.

Financial Aspects

Given the high costs of long-term care, and the likelihood of needing care at some point, funding needs must be a part of the financial plan. Part of the analysis needs to evaluate what impact a long-term care event would have on the senior’s finances. If the impact is severe, then all options for funding the need must be considered.

As I mentioned before, basic long-term care policies are not always a viable solution due to their limited availability, their cost, and the uncertainty surrounding future price increases. The good news is that there are other options available including: asset based long-term care policies, life insurance with long-term care riders, use of home equity through a reverse mortgage or selling the home, or creating a fund for care expenses (self-insuring).

Personal/Family Aspects

The first part of developing the personal aspects of the elder care plan is get clear on what the senior’s wishes are. Ask questions like:

  • Do they want to stay in their home?
  • Is the home safe for “aging in place” or can it be adapted to accomplish this?
  • What are their feelings on assisted living or nursing home care?
  • Are there support systems (health care, transportation etc.) that are local and can be used?
  • Are there legacy goals that need to be incorporated into the elder care plan?

Once the senior’s wishes are clear, then a realistic assessment of the senior’s physical and mental state should be done. What is the likelihood of needing care and how soon?

Finally, the family along with the senior should discuss and come to agreement on who will have responsibility for the care of the senior if care is needed outside of a nursing home.

Once all of the components of the elder care plan have been addressed, the plan should be documented and shared with all of the involved family members along with the senior’s advisors like their attorney, tax advisor and financial planner.

This is often the most difficult part of the financial plan as it forces discussion on very touchy subjects. However, it is a critical part of the plan and brings piece of mind to both the senior and his/her family. At Anchor Bay Capital, we specialize in retirement planning and can help you develop and successfully implement an elder care plan.

If you would like a consultation on elder care planning, please contact us to schedule your appointment.