This past October, RegentAtlantic hosted clients and friends at our Morristown office for an educational panel presentation entitled “You and Your Aging Parents.” Our panelists included Michael Thompson, an estate and elder law attorney with the law firm Cestone & Thompson; Aging Life Care Professional™ Patricia (Pat) Lombreglia from Pathways Care Solutions, and Wealth Advisor Jim Ciprich, CFP®, RegentAtlantic .
This discussion focused on helping seniors and their adult children deal with the legal, emotional and financial issues surrounding aging. Below are a few of the questions and answers. This is the first part of a two-part series.
RegentAtlantic: Let’s start with Michael Thompson, since estate planning is a critical part of most financial plans. When we work with clients, we find that a lot of adult children already have copies of their parents’ estate-planning documents. However, for people who haven’t completed their estate plans, what would you say are aging parents’ most basic planning needs? And what do you think is optimal when it comes to estate documents?
Michael Thompson: People often think of their will as the primary document in their estate plan. The will is certainly important. This document outlines where your belongings will go after you die.
However, your estate documents should also include planning for disability and health care issues. I often tell people that the power of attorney is one of the most important documents an individual or couple can have. Your power of attorney appoints someone to handle your affairs if you become disabled or for some reason are unable to take care of important tasks like paying your bills, making required distributions from an Individual Retirement Account (IRA) or selling property.
If you haven’t established a power of attorney and you become incapacitated due to illness or injury, your loved ones may have to go to court and get what’s called a guardianship agreement. This legal arrangement is costly. I also think it sort of strips people of their dignity if they have to go through that process. So having a power of attorney is probably the single most important estate planning document to have.
To handle health care issues, we usually suggest having a health care proxy and a living will. We often combine those two items into a single document. A living will expresses how you wish to be treated at the end of your life if you can’t speak for yourself. The health care proxy document is similar to a power of attorney. With this document, you appoint someone to make health care decisions for you and to speak for you to medical professionals if you can’t speak for yourself. The person who agrees to be your health care proxy should abide by the terms you include in your living will. So these combined documents are the health-related basis of any estate plan.
In some estate plans, we may also use trusts. Revocable trusts aren’t used much in New Jersey, except in certain cases. Irrevocable trusts are another option. There are many types of irrevocable trusts that can be used for tax planning or long-term care planning. A trust is sort of an add-on to a basic estate plan, but it could be a very powerful tool.
Critical Circle of Support
RegentAtlantic: Patricia, could you talk a bit about the “critical circle of support” you consider so important for aging individuals?
Patricia Lombreglia: I use the term critical circle of support as something that can be very helpful when people are getting older and may not be as capable as they once were. Elders may need help building a safety net of people and services around them to support their goals of independence. If a client’s goal is to remain at home or to live in a certain way, we try to identify which resources they need and the people we could put into their circle of support.
RegentAtlantic: What elder care-related services could we expect from a professional like you?
Lombreglia: My field of geriatric care management underwent a name-change a couple of years ago and is now called “aging life care management.” A lot of people still refer to us as geriatric care managers. In terms of our professional disciplines, we are usually either nurse clinicians, which is what I am, or social workers.
You can expect a variety of services when working with us. For instance, we may first meet you during an elder care crisis situation. In that case, we can help you troubleshoot your way out of the current situation. For other families, we may serve as consultants. We can help you and your parents identify whether you need to shift an elder’s living situation or medical care, or bring in psychosocial emotional support.
The other service we offer is ongoing care management. For some of our clients, we keep working with them after an initial consultation. We help implement all the services they need and monitor them. We also do a lot of advocacy, both in the community and also sometimes in care settings, to really make sure the elders’ voices are heard, the best outcomes are achieved and that our elderly clients remain at the center of their “care plan,” as we refer to it.
Fear of running out of money
RegentAtlantic: Now we’re going to switch to RegentAtlantic’s Jim Ciprich. As a Wealth Advisor, Jim, do you find that clients are continually surprised by the rising costs of health care and health care communities? In addition, there’s so much uncertainty regarding long-term care costs and long-term care premium increases.
One of the biggest fears adult children seem to have is that our aging parents will run out of money. How do you help evaluate whether Mom and/or Dad will have enough assets to last their full lifetime?
Jim Ciprich: Some of my answers will require some backup data. As financial advisors, we love numbers, we love data and we love working with dollars. However we’re probably not going to love these particular dollar figures so much.
There are two studies I consider to be the best resources for trying to figure out what cost of elder care or health care is going to look like over the course of retirement. Fidelity does a study every year called the Retiree Health Care Cost Estimate. According to Fidelity’s study, we know that the average couple retiring this year at age 65 this year will spend close to $275,000 during their retirement on health care expenses.
Two things are interesting about these numbers: One is that these health care costs don’t include any long term care costs. So what we’re talking about with the Fidelity figures really are costs such as prescriptions, insurance premiums and copayments. Second, these health care cost estimates have increased 6% since last year. The estimated cost of retiree health care last year was $260,000. Now it’s already $275,000. Estimates from 2015 to 2016 went up at the same pace: 6% per year.
So when we look at health care costs as Wealth Advisors, we want to make sure we’re accounting for the fact that health care costs are going up faster than the pace of inflation. Historically, inflation has run at about 2-3% annually. However, health care costs are increasing at a pace of 6% per year.
Since the Fidelity study doesn’t include long-term care costs, we also look at the annual Genworth Cost of Care Study. That survey includes only costs related to long term care costs. I’ll cite some statistics here.
New Jersey is a more expensive place for our aging parents to live than almost anywhere else in the country. Costs for long term care vary depending on the level of care the senior requires. Nationally, the monthly cost for adult daycare is about $1,500; a home health aide for a parent who wants to stay at home is $4,100 monthly; assisted living is $3,600-$3,800; a semi-private skilled nursing home room is $6,800; and a private skilled nursing facility room runs about $8,000. Those are national, monthly averages.
If your parent lives in New Jersey, you need to increase all of those rates 10% to 40%, depending on the level of care. So that’s really the sticker shock for New Jersey. It’s also why financial planners focus so much on elder care costs and why we need to plan ahead for them.
Read the second part of our conversation about “You and Your Aging Parents” in an upcoming RegentAtlantic newsletter.
Addition to Important Disclosure Information
The inclusion of Cestone & Thompson and Pathways Care Solutions should not be considered a recommendation or an endorsement of their services.
Important disclosure information
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