Guiding your way through Long Term Care

Long Term Care refers to the period of time in which loved ones will require additional assistance to complete the routines of daily living.  Importantly, it isn’t just about money, or finding a facility that will be able to accommodate them in their retirement, but that is a part of it.  This post will explore some of the topics to consider when building a Long Term Care Plan for your family.

The earlier the better

I use the word ‘Guiding’ in the title of this post because it should be a collaborative process.  If you start early enough you can work with your parents to capture their own wishes, and help build towards that.  It is much less stressful than waiting until a catastrophic event happens late in retirement, and an intervention is required to remove the parents car, or a fight is required to ‘evict’ them from their home.

There are many phases of Long Term Care

Most people want to stay in their own home for as long as possible. This stems from natural feelings of emotional ties, and a feeling of independence and control.  When creating a plan that might involve an assisted living facility, it could well involve phases where the home is reinforced with some modifications in order to make it safer for the elderly parent.

Before we start reinforcing the home itself to help reduce risk, it is important to consider if the location, type of home, and neighborhood amenities create a proper environment for an aging person.  At the extremes of this you could imagine a serviced apartment building in the heart of Manhattan vs a remote country home.

We’re not just looking for proximity of help here, we’re also looking for proximity of friends, clubs, activities and things that will keep the elderly person active and engaged.  Intellectual and physical pursuits keep us young, and help encourage independence.  Along with this community and purpose, it allows family members to form relationships with neighbors and friends to tap into things and help monitor the situation.  Also, if you simply live too far away to be able to help, it should influence the timeline when even the best of personal homes is changed for assisted living.

Protecting the home

Technology Advancements enable family members to monitor the parent, and wifi enable apps would be a good way to help keep an eye on things.  Fire is a huge risk for the elderly, a National Fire Prevention Association (NFPA) report cites:

Only 13% of the U.S. population is 65 or older, but 30% of fatal home fire victims were at least 65 years of age.

Different approaches to reducing and controlling the risk of fire

Installing smoke detectors is a way to alert the homeowner that there is a fire, but if you take it a step further, the Nest Protect smoke detector would allow for an alert to be pushed to a smartphone, informing family members of the danger. This is an essential step, but is also a reactive step.

A proactive solution might be to reduce the opportunity for fire by encouraging eating of salads in the summer, or using take out services.  When the parent does actually cook, having them always set a timer as good habit might also help avoid mishap. Combining Proactive and Reactive steps helps build a stronger plan.

Being alert to a fall

Falling in the home in and of itself can be a very serious thing, but coupled with the risk of fire a simple trip could result in a much larger situation. Finding out about a fall early could make all the difference.  There are several companies on the market that provide Fall Alert devices, which allow the wearer to both trigger a call for help by pushing a button, or they also are able to detect the movement of a fall.  Alert 1 and Life Alert are two providers, though I have no personal experience with either.

In addition to this, Nest, who provides the wifi enabled smoke detector also has a camera solution that could be placed in the home.  The camera allows you to check in via the app to see if anything is amiss, and also sends push notifications based on noise – so a large bang/window breaking might trigger an alert to check in on the house.  This is a touchpoint where things may become too invasive for the parent, and one solution that I recently heard about was to place the cameras at ground level, so you only see people’s feet, or if they are lying on the ground….

Driving

Car ownership, and relinquishing the act of driving is a huge step for the elderly. It is the epitome of independence.  As such, it again helps to make an agreement early on as to when this will happen, rather than stepping in and snatching the car keys.  A softener for this would be to help build a system where the individual still gets to be mobile, via structured and on demand services.  A structured approach would be to set a day or days in each week where a shopping trip would occur with a prebooked driver or group.  The unstructured would be to equip the person with a skill, and a mindset that is different.

Uber and Cabs are great options, but might be confusing or seem unnecessary to a long term driver.  Changing the paradigm by showing how they could accomplish some trips via Cab might make the car ownership less important.  Uber, and other services are great, but confusing.  If you want to help get someone to use that it might be best to sit through a few rides with them and ‘walk them through’ every step of the journey. The ideal scenario is that the elderly person decides they no longer need a car so there is no conflict point later.

Finances

If a Long Term Care plan has been created, it is important to factor in how finances will be managed when the owner of the asset is incapacitated.  It is not uncommon for a family member to obtain power of attorney over the assets and start investing in a manner which seems fine to them, but discounts both the goals of the plan, and the wishes of the owner.

Two ways to address this would be:

• Property goes into Trust, and assets are managed by a third person, such as a financial advisor or investment manager. This person will follow the instruction of the trust document and will use an Investment Policy Statement to determine level of risk and goals of the portfolio.  You really want to get a fee only advisor who is a Fiduciary to do this.
• Property is managed by the family. This can work, but might be more at risk of deviating from the goals again. If there is not an Investment Policy Statement (IPS) in place then the heirs and family members should create one. The primary goal of the IPS should be to ensure that the original owner of the assets is protected throughout the remainder of their life, and the secondary goal should be their own beneficiary status.  Someone who is managing anothers assets via POA does also have a Fiduciary responsibility to that person, and therefore shouldn’t take the role lightly.  The key here is to invest for the other person first, and not just as you invest yourself.

The Ethical Will

One document that not all people have is an Ethical Will. This is intended to share how the person feels about things like money, values, life.  It shares their experiences and their hopes, their failures and successes.  This document isn’t legally binding, but gives great insight.  These don’t have to be a stuffy or formal document and can also be created via video.  Sometimes, people can find out things that they never knew about their parents from this, and it can help shape the way that they manage long term care for a late intervention, or a loved one with rapidly declining health.

Planning for costs

If it is decided that at a certain point in time the loved ones will leave their home and move into assisted living it is important to know if assets will support the choice.  Medicare generally will not pay for Assisted Living, Medicaid can provide payments towards skilled care (where nursing is required) but they often expect assets to be depleted before stepping in.  This is a topic of its own right and will be discussed later.

The costs of Long Term Care in Assisted living can be projected using a tool from Genworth here.  Long Term Care Insurance can cover some or all of these costs, but it tends to need to be a policy that has been held a long time prior in order to be cost effective, as premiums rise with age.

If other assets are low, and there is good equity in the home, it might be worth considering a reverse mortgage rather than a sale of the property.  A sale can create an infusion of cash, but might also trigger capital gains tax if the gain is greater than $250K/$500K (single vs married filing jointly).  A reverse mortgage would allow the property to instead ‘step up in basis’ at the death of the loved one, and be more tax efficient in certain cases.  In others, it might be an unnecessary expense.  The amount of the gain is the driving force here.

Pulling it all together

A family meeting, involving your financial advisors and attorneys if applicable is a good way to bring up these topics, and start defining how the loved one would like to be treated.  If there is a desire to stay at home for as long as possible then exploring the viability of the plan, and bulletproofing the home are key.

Once people understand the vision, Estate Documents should mirror these wishes, the right people are to be named into decision making positions for things like Health Care Directive and Power of Attorney.  Roles should be assigned as to who will actually install the smoke detectors and handle the other steps.

I believe that the Long Term Care Plan is actually more important than the Estate Plan, because you may find a person with diminished ability who still has needs and wants that are not being met.  This can create friction and stress for all members of the family. Don’t look at Long Term Care as the time when you need to go in and evict someone, look at it as the time where you help them implement their desires and wishes in the best way you can.