Enter The Quiet Shift

Guiding aging parents through the transitions of longevity

by Dr. Nicole B. Simpson, CFP^®

Caring for an aging parent requires planning. The emotional and economic impact can effectively disrupt all intentions and stated desires of how one wants to grow older. It is inevitable, yet socially, we are still shocked about its actual impact on an average nuclear family.

In 2004, literally within a month’s period, two families were impacted by the realities associated with long term care. Each caregiver was the only child. Both were seeking the counsel of a financial professional because they sold their parent’s home and needed to determine the best course of actions.

That is where their similarities ended…

Meet Angel And Her Mom

Angel was very clear about her objectives. She did not want her mother to live with her… ever. Equipped with $375,000 from the sale of the house, she needed a strategic plan that would allow that goal to be achieved. She was fortunate. In 2005 the Deficit Reduction Act was passed and one of the most significant impacts of the law was that the Medicaid look back period would increase from 36 months to 60 months.

People believe they will have access to Medicaid, only to find out eligibility is based on having limited income and assets. You cannot simply spend down your assets to qualify. Any money transferred or gifted away will still be considered. Most people learn that information at the point of need and its already too late.

Angel and her mom agreed to place most of the proceeds from the sale of the house into Angel’s name, making a gift that would be applied toward her lifetime gift tax exemption. Then Angel was able to self-pay for an assisted living facility for three years and successfully apply for Medicaid after the look back period expired. If she had sought the services of a professional five years later with the same number of resources, her options would have been drastically different. This was a sound recommendation because she had been managing her mom’s affairs financially for years and she was the sole beneficiary of any remaining assets from her mother’s estate as an only child.

In 2010, the daily cost of a semi-private room in a nursing facility in the United States was $205 per day. In 2023, the cost has risen dramatically to an estimated $7000-$8000 monthly. However, many people can identify with Angel today because they are dealing with parents that may have a house and perhaps some retirement assets they have acquired over the years. For example, with a modest savings of a few hundred thousand dollars, a family cannot afford to ignore the economic impact of aging, based strictly on the cost factor alone. A nursing facility will financially drain the family rapidly.

Meet Jenny And The Carringtons

A potentially viable option is home health care. This is care that can be provided to an elderly person in the home. The responsibilities are often managed by family members. According to AARP, in the Valuing the Invaluable series, the care provided by unpaid family caregivers was valued at $600 billion in 2021.^[1] This is what Jenny, the daughter of Mr. and Mrs. Carrington, was facing. Her parents had sold their home and they were reluctantly moving into the same house with Jenny.

The Carringtons decided to meet with a professional at the suggestion of their longtime local banker. In addition to the sale of the house, Mr. Carrington had recently retired, and he accumulated quite a healthy nest egg for him and the Mrs. She never worked outside of the home. Jenny was an entrepreneur who was slowly thrusted into the role of unpaid caregiver for years beforehand. The responsibilities were so exaggerated that it became necessary for the parents to move in with Jenny because it was taking an emotional and physical toil on her. In addition, her business was beginning to falter. When an adult child must care for their parent(s), their earnings potential is impacted, work promotions may elude them, the ability to pursue their own dreams are minimized and they must manage time between their own families as well.

At the time, the Carringtons were financially comfortable, having accumulated over a million dollars in assets, not including the proceeds from the sale of the house. While addressing the financial objectives of the elderly couple, the planner began to ask pointed questions regarding the parent’s expectations of their daughter Jenny. After all, she was being financially impacted because she was incapable of consistently maintaining her business. Once the parents were made aware of the financial hardship, they agreed to gift Jenny almost 25% of their existing net worth so that she could invest wisely in alignment with her personal risk tolerance and financial objectives. They understood they were going to bear the weight of any long-term care costs because they had not purchased any insurance. Mr. Carrington died within a year and Mrs. Carrington lived an additional 15 years with Jenny as the primary caregiver. The final estate set Jenny up to manage her own long term care needs as well.

It was the decision of the two parties to sit with a professional that made it possible to ensure the elderly could age with dignity. It also changed the financial trajectory of their children and grandchildren future. When Angel and Jenny met with the planner about their parents, both were advanced in age themselves. They were able to process the changes in the law and move beyond the belief that Medicaid was a viable option for them. So, they became proactive by including their children in the planning process for themselves. As they began to create a comprehensive estate plan, they encouraged their children to seek the guidance of a financial professional as well. They did not want to be a financial burden and they wanted to set measurable expectations.

Defining Expectations

Clearly defining the expectations then opens the conversation to deal with the physical and financial health of the aging parents. When someone does not have the ability to perform two of six activities of daily living (bathing, dressing, toileting, getting in and out of the bed or a chair, eating and the ability to control bowel and bladder movements), they require support. Being honest about one’s health allows all affected parties to realistically gauge how their lives will be forever impacted. The ability to manage time and use resources set aside to maintain a comfortable standard of living shows consideration for your loved ones. It is the parent who has a great need, and they need to be cooperative in their health and financial wellness plan. Angel and Jenny understood the value having been caregivers themselves.

Why is this important? When aging occurs or ‘if’ an unexpected illness occurs, everyone will be scrambling to determine your quality of care. If it’s an illness caused by a medical emergency, is the parent conscious and capable of making informed decisions? Is there a health care directive on file that identifies the quality of care an aging parent prefers? Is there a power of attorney on file should the medical emergency cause a prolonged recovery process? Who has access to the financial resources to ensure the necessary bills are being maintained?

The best way to manage The Quiet Shift is to critically reflect upon your overall health and financial standings. Begin to answer the questions of how you desire to age and set up the plans to address that desire. Educate yourself regarding how Medicare and/or Medicaid will impact your plan and take the necessary steps to create an estate plan.

One thing is certain – you will age. The question that remains is how prepared are you to age with dignity as the most vulnerable stage of your life? The ability to determine the outcome is completely up to you.

Securities and Investment Advisory Services offered through NEXT Financial Group Inc. Member FINRA/SIPC

[1] https://www.aarp.org/caregiving/financial-legal/info-2023/unpaid-caregivers-provide-billions-in-care.html#:~:text=Care%20provided%20by%20millions%20of,contributions%20from%20the%202019%20report.