We know Americans are living longer than ever before. That's the good news.
But that good news comes at a cost. With age comes a slew of limitations, ailments and needs. More often than not, aging people turn to their family members for help. It may seem like the easiest solution for the family as a whole, at least until the caretaker realizes he or she will be helping an aging person with an increasing number of infirmities that won't ever be reversed and that the care will go on indefinitely, taking a toll on everybody.
Recent studies indicate this trend is on the rise, especially with the ballooning number of seniors among baby boomers. One found that Americans who take time off work to care for their aging parents are losing some $3 trillion in wages, pensions and Social Security benefits. Between 1994 and 2008, the percentage of women providing custodial care for a loved one tripled to 28%, while for men it quintupled to 17%.
"The situation is getting worse and worse," says Brian Gordon, president of MAGA Ltd., a Riverwoods, Ill.-based firm that advises financial advisors on long-term-care options. "More people need care, and they need it for longer periods of time than in the past."
What can be done to help people cope with such an outcome, or better yet prepare for or even avoid it? And how can those facing this financial and emotional drain get through it without going broke?
"Caring for aging parents is having a definite impact on the younger or 'sandwich' generation-both financially and emotionally," observes Elizabeth Roberts, senior vice president and director of trust administration at Bryn Mawr Trust, a financial services firm headquartered in Bryn Mawr, Pa. "Many are [taking care] of their own children while assuming a parental role with their mothers and fathers. It is not unusual for one spouse to cut back or even leave his or her outside employment position just to supervise a parent's care."
Often, the burden falls on the child who lives closest to the parent and whose own income may be the most fragile, says Roberts. "These caregiver children often spend down their personal resources, leaving them exposed to financial hardship for their own retirement and elder care."
This scenario is so likely, in fact, that many experts recommend it be taken into account with every client's long-range financial plan. Roberts says that a comprehensive financial planning process requires a holistic view that includes such burdens.
That kind of forethought is rare, says Jean Dorrell, a certified elder planner with Senior Financial Security in Ocala, Fla. "Most advisors don't have a clue and play ostrich when it comes to this subject," she says.
Documents In Order
Dorrell herself had to take time off last year to care for her octogenarian parents. Besides needing empathy, she needed to arm herself with useful resources. "I have relationships with attorneys who can draw up the documents you need when caring for a parent, especially if the parent is showing signs of dementia," says Dorrell. "After the parent is diagnosed, it's too late to get these documents."
Those documents include separate powers of attorney for health-care and financial matters, authorization granting access to medical records under the Health Insurance Portability and Accountability Act, a will, a living will and so on. "These documents should be reviewed regularly to assure that they conform to changing administrative and tax laws," says Roberts.
In addition, if a child named to a specific responsibility has moved away, say, or is suddenly facing his or her own financial or health-related setback, it may be necessary to designate a fallback.
"A good option for flexibility in handling the finances of the parent is to couple the financial power of attorney with a revocable trust," Roberts says. "The child could be the named agent under the power of attorney, which includes authority to fund an existing revocable trust for the benefit of the parent. The trustee of the revocable trust could be a corporate fiduciary ... which could provide professional asset management and bill-paying services, often much more efficiently than through working solely under the power of attorney document."
Caring For The Caretakers
Aging clients should also organize their personal documents, including account statements and property deeds, so their loved ones can find them easily. They should even designate a preferred home-health agency and nursing home, so that when the time comes the transition can be swift and relatively easy. A geriatric care manager can be a critical component to this sort of elder-care planning.
But for the dutiful child (or spouse) who is suddenly facing these new demands, there are other, hard-to-define issues. "Most advisors focus on tax and financial issues," says Herbert Daroff, an attorney and certified financial planner licensee at Baystate Financial Planning in Boston. "Some will also help address the legal issues. All too few properly address the people issues as well."