Such "realistic scenarios" can come with a hefty price tag-anywhere from $50,000 to $110,000 or more per year, depending on where the clients live and the degree of expertise they require. That should give pause to clients, even if they have a net worth in the millions.
"Many high-net-worth individuals feel they have enough money to self-insure," says MAGA's Gordon. "But that's taking on a lot of risk. You can deplete your estate, your entire inheritance." Health insurance and government programs such as Medicare and Medicaid won't cover ongoing custodial care, he adds.
LTC Insurance
To hedge the financial risk, many experts recommend long-term-care insurance. Many types of coverage exist, but all will help pay for extended medical or personal-care needs. It's advisable to take out a policy before age 65-in fact, the younger the better, some say-to improve eligibility and possibly lock in low rates.
That said, LTC policies are not right for everyone. "The financial advisor doesn't need to sell it to the client," says Gordon, "but at least recommend looking into it."
A Family Affair
The best plans take into account all parties-and generations. "We start educating our clients as soon as it's evident this scenario is to be a part of their future," says Robert Mollenhauer Jr., a partner at the Metis Group, a financial planning and accounting firm in New York. "The parents are also involved in the education process, to help limit the financial duress that's on the horizon for both caregivers and parents. Family meetings are planned [to discuss trying] to share the responsibilities of caregiving. In families with more than one available caregiver, duties may be shared and plans designed so to avoid burnout."
It often comes down to prioritizing competing needs. "We're frequently asked by young parents, 'Which should we fund first, our retirement or our children's education?'" says Baystate's Daroff. "We explain that their parents' custodial care should also be considered. Financial planning today must cover at least three generations."
Though high-net-worth clients are obviously in better shape than others to bear the economic burdens, some advisors say they are often the least well prepared. "They tend to address these fiscal challenges by changing their own consumption and lifestyle goals-an ad hoc approach," says Stephen Horan, head of private wealth at the Charlottesville, Va.-based CFA Institute. "They do not buy long-term-care insurance and don't specifically build up precautionary savings to address their own long-term-care needs."
What Next?
Given the growing uncertainty over caretaking, a rise in multigenerational households seems likely. "Multigenerational households provide the obvious benefit of expense sharing but also permit a crude form of risk sharing," says Horan, adding, "Different generations may even be able to provide one another non-pecuniary benefits as well."
But moving an aging parent across city or state lines-without carefully considering the potential legal and financial consequences-can be a costly mistake. "Such a move is often made so that parent and child are closer to each other," says Roberts, of Bryn Mawr Trust. "However, laws vary from state to state with respect to powers of attorney, qualification for benefits and other items."
The more light that's shone on these issues, though, the more likely financial advisors will rise to the challenges. "I see this situation leading us to a giant leap forward," says Michael Mullins, a financial advisor at JHS Capital Advisors in Bloomington, Minn. He says advisors may become "truly prepared to give, and be accountable for, [all sorts of] fiduciary advice. Just pushing securities sales to this generation of potential and actual caregivers is actually unethical in some cases. In all cases, it is not good business, and does not demonstrate the caring nature our industry desperately wants to convey."