Looking Out for Aging Loved Ones

Strategies for adult children to reduce the financial toll.

Although average life expectancy continues to rise, those extra years are not always filled with good health.

As a result, adult children are increasingly being called upon to provide care for aging loved ones, which can take a physical, emotional, and financial toll.

By Grace S. Yung

If given the opportunity, most older people prefer to remain at home for as long as possible.

In determining whether your loved one should remain at home, consider the cost of maintaining the residence, whether it is safe and suited to their physical needs, and whether the location is convenient for caregivers.

If you determine that your loved one should not remain at home, options include skilled-nursing homes that provide medically necessary 24-hour care, and assisted-living facilities where residents are more mobile and can participate in activities.

If your loved one remains at home, they can still benefit from a variety of services including  registered nurses, certified home health aides, occupational therapists, physical therapists,  nutritionists, social workers, companionship services, and home-delivered meals. It would also be a good idea to install a personal emergency response system in the home.

Healthcare is among the largest expenses for older individuals. In 2016, the estimated cost of a retired couple’s healthcare for the remainder of their lifetimes was $275,000, according to a Fidelity study. And this figure does not include the cost of long-term care.

Although Medicare Parts A and B pick up at least some of the tab for hospitalization and doctors’ services, the program is rife with out-of-pocket charges such as deductibles, copayments, and coinsurance.

For long-term care, Medicare won’t cover basic “custodial care,” or assistance with everyday activities like bathing and dressing—the type of care that more than 90 percent of recipients need. Even if your loved one requires more extensive “skilled” care, Medicare coverage is limited.

Another government program, Medicaid, requires people to “spend down” their assets to meet their state’s poverty level before long-term care is covered. Medicaid also leaves little choice as to where an individual receives care, and they may be required to go wherever there is an open bed.

Fortunately, there are some private funding solutions available.

One option is to purchase long-term care insurance, which typically covers care received either at home or in a facility. Unlike most types of investments, benefits from long-term care policies are often tax-free.

Another option is purchasing an immediate annuity. Here, the income generated from the annuity can be used to pay for your loved one’s care.

If someone is eligible for long-term care insurance, annuity income can be used to pay premiums. This strategy can be beneficial because while income from annuities is often taxable, long-term care insurance benefits may not be.

One thing to keep in mind with immediate annuities, however, is that one would be exchanging a lump-sum investment for a fixed income stream. If liquidity is an issue, this may not be the best strategy.

If your loved one has a cash-value life-insurance policy, it can be accessed tax-free and used for care. Many life-insurance policies and annuities provide “living benefits” riders, meaning a portion of death benefits can be used to cover terminal illness, chronic illness, or long-term care needs without incurring surrender charges.

While “customizing” a policy can help make it more appropriate for your anticipated needs, the myriad of riders and benefit options can be very confusing, so it is important to work with a qualified financial advisor when setting up your plan.

Also, note that funds accessed as living benefits are deducted from the death-benefit payout. So if the benefits from a life-insurance policy are already earmarked for final expenses and/or estate taxes, you may not want to use them for long-term care needs.

As always, it is beneficial to discuss your situation with professionals who are adept at suggesting options that may be best—especially if you are part of a non-traditional family. An LGBTQ or LGBTQ-friendly adviser can offer suggestions and solutions for your specific situation.


Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.
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