Remaining independent, staying mobile as long as possible and keeping mentally sharp are goals we all share as we age. But the reality is, at some point most seniors will require some form of custodial care.
Estate planning and elder law professionals often are amazed at the personal sacrifices our clients and their families make to care for aging loved ones. Whether the aging relative receives in-home care or resides in a retirement community, family members are emotionally invested in the management of their loved one’s caregiving.
As the nation’s aging population increases in numbers, professional advisors will play a key role in helping clients choose appropriate caregiving solutions for their aging family members.
Having served as the “quarterback” for the caregiving and medical needs of beloved family members who’ve since passed on, I can relate personally to clients who are responsible for making decisions regarding their loved one’s caregiving. This hands-on experience also has helped me to better understand the mindset of clients who are determined to achieve lifestyle independence and avoid being a burden on their children.
The Shifting Demographics of Caregivers
Ten years ago, Baby Boomers comprised the majority of the “sandwich generation” – defined as those sandwiched between caring for elderly parents and their own children. But, according to a recent study by Pew Research, most Baby Boomers have aged out of the sandwich generation.
Today, Gen Xers are more likely than Baby Boomers to find themselves in the role as caregiver for their aging parents. Many Gen Xers find themselves torn between achieving financial independence for themselves while providing care for an aging parent. According to Pew Research, nearly half of adults in their 40s and 50s have a parent age 65 or older and are either raising a young child or financially supporting a grown child (age 18 or older). About 15 percent of middle-aged adults are providing financial support to both an aging parent and a child.
Recognizing that today’s aging population will live longer due to advances in medical treatment, the challenges of Gen X caregivers will likely increase as the duration of care for those chronically ill extends out five, or even 10 years.
Yesterday’s Caregiver is Today’s Estate-Planning Client
According to a recent national survey of estate attorneys conducted by WealthCounsel and published in the October 2015 issue of Trusts & Estates, 52 percent of estate planning clients are Baby Boomers between the ages of 51 and 69.
In terms of net worth, 66 percent of the attorneys surveyed stated their clients have a net worth of less than $2 million. Of them, the majority indicated their clients have a net worth of less than $1 million.
Given the demographic correlation between yesterday’s caregiver and today’s estate planning client, it begs the question, “Has the caregiving experience of those from the sandwich generation impacted their own estate planning and retirement priorities?”
Based on what I’m seeing in my practice, the answer is “yes.”
As those from the sandwich generation exit their caregiving roles and begin focusing on their own estate planning and retirement objectives, they bring a new perspective to the initial client meeting.
Where once clients were concerned primarily with the efficient transfer of their material possessions, family traditions and values to future generations, many of today’s clients are adding another priority to the mix – not being a burden to their loved ones—by maintaining lifestyle independence as they age.
One of my clients summed it up best when she said, “If I’m going to need an in-home caregiver to help with my ADLs (activities of daily living), I’d rather pay a caregiver than rely on my children. It’s important for me to age with dignity, and having my children take care of my daily hygiene needs is simply not an option.”
As noted in my previous article published by Trusts & Estates article titled “My Way,” today’s estate planning client prefers to age in place for as long as possible. And while it’s important for them to be connected and engaged with family members and loved ones, they don’t want to be dependent on family members for caregiving or for financial assistance in their custodial years.
The Price Tag
Considering the previous discussion that 66 percent of clients have a net worth of less than $2 million, some clients may find it fiscally challenging to achieve the desired lifestyle independence while leaving an inheritance. As we slice up the $2 million pie, it’s readily apparent that the equity in the family home, coupled with the face value of a life insurance policy, could easily comprise $1 million of a couple’s net worth.
So the question to be asked in this scenario is, “Will the remaining $1 million be sufficient to achieve the client’s goal for lifestyle independence extending out 30 years, and enable her to leave a substantial inheritance?” Practically speaking, probably not. The answer will depend on the cost, duration and level of care the seniors require as they age.
Federal government sources indicate that a senior turning 65 today has a 70 percent chance of needing some type of long-term care services in their remaining years. Given the high cost of custodial care, it’s important for the client to develop a financial strategy to prevent depleting her financial resources.
The fear of running out of one’s retirement assets is a very real concern for most. According to the AICPA PFP Trends Survey released earlier this year, more than half (57 percent) of CPA financial planners cited running out of money as the top retirement concern for their clients.
Advisors should help clients set realistic expectations based on what’s affordable in terms of aging in place options. They also will want to help clients compare the costs of moving into a continuing care retirement community versus aging in place at home, which in the long run can be more expensive. Evaluating the client’s ability to purchase long-term care insurance coverage is always a top priority.
Make clients aware that achieving total lifestyle independence may require substantial cash outlay for handicap-accessible home remodeling projects, tech-based monitoring systems, chair lifts, in-home supportive care and other paid services that promote independence. An additional and often overlooked cost is the time of a sentient adult to oversee all of these initiatives on behalf of the client. Care management – either by a loved one or a paid care manager – increases in need as the client becomes frailer and requires more services. These types of expenditures could quickly drain the client’s assets over a 30-year period and thus reduce the likelihood of the client leaving a financial inheritance to heirs.
And finally, no estate plan is set in concrete. Clients should work with their advisors to update their estate plans at least every three to five years or more often if there are major life events.
As the population continues to age and the demographics of estate planning clients and caregivers change from generation to generation, planning priorities change. Professional advisors will be expected to keep pace with clients’ shifting priorities and help them balance their legacy objectives with their lifestyle preferences as they age.