If there’s one thing that could derail a successful retirement, it’s the unplanned need for advanced medical care. This can result from injury, disease, handicap, dementia, or overall decline. Without a proper plan, a family’s resources can be decimated, or inheritances diminished.
Long-term care insurance can help mitigate care costs if needed. However, it’s common to incur earlier expenses before insurance pays out to assist with daily activities including shopping, appointments, and medications. This assistance can fall on family members who then find themselves needing to provide valuable time and financial help.
Of the country’s approximately 40 million caregivers, a study found they average nearly $7,000 a year in additional expenses to help a family member. That doesn’t include the time lost on their own family and careers.
This makes it an important part of a financial plan to address potential care needs for yourself and elder family members.
Here are some questions to get started:
- For pre-retirees and retirees:
a. Can your financial resources provide an enjoyable retirement while protecting you against the costs of future care needs?
b. Do you have long-term care insurance, and if yes, how much protection does it provide relative to potential costs?
c. As you age, what housing options are you willing to consider or rule out? Options might include staying in your current home with future accessibility improvements, living with a child, or moving to a retirement community. The costs of each can vary dramatically.
d. Who is named on all accounts, and how will someone be able to help in managing finances if needed?
- For adult children:
a. How much help can you realistically provide for your parents? This could be in the form of managing day-to-day activities, taking parents to doctor appointments, having your parents move in, providing ongoing physical care, or paying for care.
b. Do you know enough about your parents’ finances to estimate what help their resources can afford?
After reviewing these considerations, it’s time to develop more detailed plans.
Portfolio Evaluation
The structure of investments and other assets should be evaluated relative to planning and paying for medical care needs. It’s often wise to reduce investment risk exposure to cover immediate or foreseen cash needs over the next few years.
It’s also important to consider where investments are held among different types of accounts. Tax considerations often determine the best type of account to use for sourcing funds.
Critical Planning Documents
While important at all ages, proper legal documents are crucial for those with a medical condition or in the late stages of life. The three most critical documents include:
- Power of Attorney: Naming an agent to manage your legal and financial affairs.
- Living Will: Naming an agent to make medical decisions and expressing your end-of-life decisions.
- Last Will & Testament: Naming an Executor of your estate and outlining your wishes such as the distribution of your assets upon death.
These documents should be reviewed and possibly updated if they are more than 3 years old, if tax laws have changed, or if they were created in another state.
Estate tax planning should also be evaluated if total assets at death (including property, portfolios, and life insurance) exceed or could exceed Federal or state estate tax exemption amounts.
Medicaid Planning
If there is a potential for Medicaid assistance, consulting with an estate planning attorney should be done to evaluate how assets are titled between spouses and whether family gifting would be beneficial. This planning should be done far in advance. Changes made within a specified number of years before seeking Medicaid coverage may affect the ability to claim benefits. Every state dictates its own criteria to qualify for Medicaid benefits.
Locating Resources
Remember that resources might be available as you plan for and navigate care needs. Be sure to explore local and national programs for financial and emotional assistance, both for the one needing care and the one giving care. A few suggestions include:
- BenefitsCheckUp.org allows you to find programs you may be eligible for with the ability to apply online.
- Caregiver.com provides helpful information and resources relative to obtaining and coordinating care.
- Veterans Affairs can provide information about any benefit eligibility.
- Religious organizations might also provide support or assistance.
Managing care needs for a loved one entails a lot of time, support, and energy. While there is no way to avert these needs, proactive planning can help to ease the process and the effort.
SageVest Wealth Management works with clients to help prepare for care needs, either for themselves or for family members. Please contact us to learn more about structuring your finances to support yourself and your family.
