When it comes to making financial plans for elder care, the unfortunate truth is that the vast majority of families are extremely unprepared. Whether it’s because many families are too preoccupied with the emotional changes that come with preparing for elder care to then make sufficient financial plans, or because many families’ need for senior care comes as a surprise. Regardless of the situation, financing senior care is not something to be taken lightly, and requires much thought and preparation.
As a senior care resource, finding helpful answers for this topic is important to us, so we set out to uncover the biggest financial mistakes families make when planning for elder care. To help understand these common pitfalls and learn from them, we asked 16 senior care experts the following question:
“What are the biggest financial mistakes seniors and/or their loved ones make in paying for elder care (and how to avoid them)?”
We’ve collected and compiled their expert advice into this comprehensive guide to financial planning for elder care. We hope it will inform you of the most common financial mistakes in order to avoid them, and ultimately help you make better choices for your loved one.
Meet Our Panel of Senior Finance Experts:
Jody Gastfriend is the VP of Senior Care Services at Care.com and is a licensed clinical social worker with more than 25 years of experience in the field of eldercare. Jody’s broad range of leadership positions include Director of the Department of Social Services and Case Management at Lawrence Memorial Hospital, Clinical Supervisor within the Social Service Department of Massachusetts General Hospital, Chief Operating Officer of a Medicare-certified visiting nurse association, and Director of Adult Care Services at a national backup care company where she established an eldercare division serving more than 130,000 employees.
Jody shares the personal journey of her clients, having helped manage the care of her own parent with dementia for more than a decade. Additionally, Jody is a frequent lecturer on senior health topics, and is a featured senior care expert on NBC and Fox News, a regular contributor to The Huffington Post’s Huff/Post50 section, and has published numerous articles on caregiving and aging, including a 5-part series in USA Today.
In my company’s experiences with families trying to plan financially for elder care…
We find that many seniors and their families do not plan ahead for the cost of care. Money can be an incredibly taboo topic in many families. Unfortunately not being open about financial matters can lead to unwelcome surprises when it is time to pay for care. We recommend families consult with elder law attorneys who can assist with estate planning and give guidance around financial matters, particularly if Medicaid may be an option for the senior at some point.
The average person does not realize Medicare does not pay for long term care. This is typically paid for privately, but long term care insurance and Veterans Benefits can also be utilized in many circumstances. Understanding the payer sources and cost of care proactively are important in avoiding financial missteps once care is needed. Education is incredibly important.
Many seniors do not want to spend their private pay funds on care because they would like to be able to leave this money to their families. Unfortunately, if a senior is not receiving appropriate support this can lead to health crises that can possibly result in greater expenses down the road. Speaking with experts like the Care.com Senior Care Advisors for guidance on how to approach conversations with parents around unmet care needs has led to many positive outcomes among the families with whom we work.
Ryan McEnnif is the Owner and operator of Minute Women Inc , a 44 year old home care/elder care company located in Lexington, MA. Minute Women Inc. has been in business since 1969 and has provided thousands of hours of care to seniors in the Boston area.
When it comes to financial mistakes leading up to elder care…
Some of the biggest mistakes I have seen come from a rushed and unexpected discharge from a hospital or nursing home care and because of this: unprepared families.
When a family has no plan in place for an emergency or adult care then that is when financial mistakes can be made. When these circumstances occur many families are under pressure and do not ask the right questions when making these decisions. Because of this, they can end up signing a contract, agreeing to outrageous charges, or both.
For example I have seen customers thankful that they have ended a two-year contract with a home care company they were contractually obligated to spending a certain amount of time with or a certain amount of money with, which ever came faster.
Having a plan of action is the most important part of getting older and understanding what needs to happen. Whether it is having a conversation with an only child or having legal documents written up this allows families to save a lot of money in the long run. Having a plan makes things easier and can save hundreds of thousands of dollars.
Finally, another important point is families not knowing about Veterans Aid and Attendance. The Veterans Aid and Attendance program is a federally run pension that provides reimbursement of home care, nursing home care, and assisted living cost to the Veteran and/or their spouse. 95% of people I talk to have no idea what Veterans Aid and Attendance is and how they can benefit from the program. It is a program that is not advertised by the government because so many seniors can benefit from it.
Christopher Rodde is the President & CEO of SeniorHomes.com. Chris brings to SeniorHomes.com more than 15 years experience leading teams within technology start-ups and new business units and more than 8 years experience in online marketing. Together with Jay Goldstein, Chris founded SeniorHomes.com with the mission to simplify the search for families looking for senior care or housing. Chris holds a Bachelor of Arts in Business Economics from the University of California, Santa Barbara and earned an MBA at The Wharton School, University of Pennsylvania.
I think the biggest mistake most people make is that they assume…
That Medicare or their private health insurance will cover the costs of long-term care. Medicare does not pay for assisted living facilities, long-term in-home care and often does not cover longer-term nursing home care. Most individual health care plans do not cover long-term elder care either, unless you specifically buy a long-term care insurance policy. Our Care Advisors get calls every day from people across the country who did not anticipate how expensive elder care can be and are now searching for low-income or subsidized senior housing, which is in very limited supply and often reserved for those with little to no assets or personal savings.
Phillip Christenson is the Financial Advisor and owner of an independent Financial Planning and Investment Management Company, Phillip James Financial, in Plymouth, MN. He is a CFA Charterholder and provides comprehensive financial advice to individuals and families.
The biggest mistake that seniors and their loved ones can make is…
Not planning ahead.
I had an older couple come to me after the wife had been diagnosed with Alzheimer’s. They had some long-term-care insurance but only about half of what was going to be needed for proper nursing home care. The prospect of going on Medicaid was a real possibility. The problem was that the husband would still need their assets to live on. We had to plan quickly because of the 5-year look back period for Medicaid. The proper way to handle this situation would have been to run an analysis to determine the cash-flow needs for this type of scenario before it actually occurred. Then we could purchase the proper amount of insurance and set up the appropriate trusts depending on their needs.
Long-term-care is a real risk that can be devastating to your goals and lifestyle. Also, if using a financial planner use a Fee-Only planner as this type of analysis should be included in the cost and the planner won’t have any conflict of interest in selling you an expensive insurance policy that you may or may not need.
Douglas Goldstein, CFP(r)
Douglas Goldstein is the Founder, Owner, Director of Profile Investment Services, Ltd. He holds the designations of Certified Financial Planner™, Registered Investment Advisor, and Trust and Estate Practitioner. He is a member of both the Financial Planning Association and of the Society of Trust and Estate Practitioners.
Doug is frequently invited to give lectures as well as teach college courses on investing. He is often invited to comment on financial affairs on radio and TV and in local and international newspapers.
Probably one of the biggest mistakes the seniors make when trying to raise money for elder care…
Is to go for reverse mortgages. Though I see the theory of trying to equity out of a residence, the risks of reverse mortgages are so substantial and the stakes are so high, that for most people, choosing this path could lead to financial devastation. The risks run from large closing costs, the dangers of needing more money in the future, having family members kicked out of the house when they die, the loss of some governmental aid, and more.
Murray Gordon is a nationally-recognized Long Term Care Insurance expert and is the CEO and founder of MAGA Ltd. Over the years, Murray has helped pioneer numerous LTCI enhancements, such as waiver of premium and group premium discounts. In addition to marketing LTCI, he is dedicated to educating the public on long term care issues. He has been quoted in the Wall Street Journal, The National Underwriter, and The Chicago Tribune. Nationally-known financial expert Terry Savage considers him “my advisor on long term care policies.”
Among his many civic activities, Murray is a past delegate to the White House Conference on Aging and has participated in the Governor’s Conference on Health and Aging in Chicago and presented to the Chicago Bar Association and International Foundation of Employee Benefits.
My advice for seniors and their loved ones planning for elder care is that…
To every time there is a season. As we pass from one of life’s seasons to the next, it’s important to do so mindfully.
We all want to look after our loved ones. People have worked hard over the years to accumulate assets, it’s a family’s right—and responsibility—to determine what will eventually become of them.
Long Term Care Insurance is Not Like Fine Wine – The opportunity of obtaining prime coverage does not improve with age. The younger you are, the lower your premiums. The healthier you are, the greater your eligibility. It can ensure your family will be taken care of.
Mr. Réne Evan Girard
Mr. Réne Evan Girard has a Degree in Health Promotion & Mathematics and has been a Licensed Health Insurance Agent since 2004, with a licensed to practice in 6 states. He currently works with Hesed Insurance Solutions, an independent insurance agency that assists individuals for various insurance needs. He personally took care of father-in-law in home until his passing at age 95 is now taking care of his mother-in-law at age 83.
In my experiences, the biggest financial mistakes families make regarding elder care include:
#1 – Not paying for elder care – taking the burden completely upon themselves when they could have / should have paid for professional in home assistance. The spirit may be willing, but the flesh is weak, time is money, and most people need a skilled and knowledgeable caregiver to help with the daily activities of living as well as healthcare decisions.
#2 – Paying for inadequate care – There can be a tremendous difference in both the quality and the cost of caregivers and assisted living facilities. And many times you get what you pay for. Medicare and Medicaid facilities are often the worst.
Seniors and their loved ones should make sure they have a long term care insurance policy that easily cover the cost for the best in home care, as well as assisted living facilities and nursing homes.
David Kassir began his wealth management career in 1995. At an early age he naturally gravitated towards finance. He is the owner and CEO of Manna Capital Management, which has been operating since 1962. Mr. Kassir is involved in other ventures such as investment property management and a 501c3 nonprofit organization aimed at easing the lives of homeless individuals in the Washington, D.C. metro area, The Kassir Foundation.
When it comes to making the right choices as a senior or family looking into elder care…
A lot of the biggest mistakes are planning failures. The biggest being not planning at all.
Sometimes people plan too optimistically by not taking honest assessments of retirement savings. Or too pessimistically by not expecting to live as long as they actually will. This directly affects paying for elder care. Elder care can be really expensive. According to
fidelity investments, the average 65 year old couple will spend $240,000 in health care expenses (not including long term care.) Many people don’t take honest assessments of their savings and what they can expect to spend. This can end up forcing some expenses on loved ones.
Patrick Brault, CPA
Patrick Brault is the Principal and Regional Director of Hewins Financial Advisors, LLP. Pat has served high-net-worth individuals, 401(k) plans and foundations since the early 80s. In his view, every client needs help to “see” how to create and monitor clear, transparent long-term investment strategies. Pat offers Visual Interactive Planning™ (VIP™), a technology-based service that helps clients “see” different investment scenarios, by changing risk tolerance and return expectations.
I have seen many seniors and families struggle to make financial decisions regarding elder care. Some of the most common mistakes I’ve seen are…
1. Lack of communication between the parent(s) and family members
For a lot of families the conversations centered on level of care are never discussed between the parents and family until it’s too late and they’re in crisis mode. Generational differences, along with cognitive issues like dementia, often times create conflicts between parents, family members, and health care providers. Parents may have strong feelings on how they want things handled yet family members struggle with what they feel are good solutions for them. We’re also living in times where the availability of family members is more limited given two wage-earners dynamic. In addition, families are not living close to one another as was the case in the past..
2. Not understanding living options in retirement and how to pay for them
Seniors generally have three primary options for how they’ll receive care in retirement; at home, assisted living, or a nursing home. All three have various quality of life benefits, different outcomes and payments. Medicare is the primary funding source for healthcare in retirement. Services for hospitals, doctors and other health care offerings come under Medicare Part A or Part B. The issues arise when seniors and their families haven’t planned for the level of care, and budgeted for the potential costs.
For example; a senior facing multiple physical issues along with a cognitive health decline or dementia, is struggling with the decision to either stay in his or her own home, move to assisted living or to a nursing home. While staying in her own home is preferred, Medicare only covers medically necessary services, not the full 24/7 supervision needed. The senior is paying a family member at the present, which places a lot of burden on that individual, while depleting financial assets and also bringing about the possibility of raising friction among siblings.
According to AARP, assisted living remains primarily private pay, and as of 2000, 67% of assisted living seniors paid with their own funds, with 8% supported by family members and 2% from long-term care insurance. Due to higher cost and lack of public subsidies, assisted living is often not an option for those who would prefer it. Also, unlike nursing homes, there are no federal quality standards for assisted living.
3. Not having a plan
At the end of the day the respect and dignity deserved by our aging parents must be the first priority. Getting the conversation started and working out a plan of action will take patience and the support of the children or other key advisors to the senior. It’s very common for a senior to not openly discuss their personal health care and financial situation. However, this is where time well spent will help all parties work together in harmony and in the best interests of the senior. For those seniors who have not been able to work out a plan they may not live out their later years in the best way and their quality of life will diminish.
The senior, along with their appointed agents (by way of powers of attorney, durable financial power of attorney or health care power of attorney[t1] ) should gather a team of family members, friends, and others (from work, organizations, church or associations) to collaborate on planning for health care. As there are a lot of challenges both emotionally and financially with health care delivery, no one person should be burdened with this responsibility alone. Once there is open communication, a plan developed, and emotions but aside, a proper balance of health care options and cost maybe balanced to best serve the senior.
4. Lack of protection from fraud and identity theft
Recent studies indicate that the most vulnerable groups for identity theft are ages 30 or younger, along with those ages 55 and older. While the majority of health care professionals and providers working in the Medicare related field are honest, there can be exceptions. The most common fraud occurs when services are billing and never provided. As with any financial transaction either the senior or someone with a financial power of duty for the senior should be reviewing statements for health care services. Typically this means contacting the health care service provider, or, if the senior is under original Medicare, reviewing Medicare claims at MyMedicare.gov, or, dial 1-800- MEDICARE (1-800-663-4227) to report any potential errors.
In addition to Medicare fraud, the other financial risk to seniors is the protection of their identity. Seniors, along with their appointed financial and health care givers, need to be aware of the threat to privacy for seniors, signs they are a victim of identity theft and having a personal security plan in place. If the senior is not mentally or physically able to act diligently, their appointed financial agent (power of attorney for financial matters) should take steps to secure and review their financial information and report any questionable activities.
Jeff Salter is the Founder and CEO of Caring Senior Service. Jeff Salter founded Caring Senior Service in 1991 after having worked at a home health company in Odessa, Texas. While working for the medical-only health company, he noticed the tremendous amount of seniors in the community who needed help with non-medical, basic things such as light housekeeping, meal preparation, errands and bathing. By 1994, he moved to McAllen Texas and expanded his business to Corpus Christi and San Antonio. Today, Caring Senior Service is nationally franchised, and has the belief that every senior should be able to remain happy, healthy and at home.
The biggest mistake seniors and their loved ones make is…
Not getting proper advice on what services are actually needed. Too often, senior care providers are ‘order takers’ and happily provide seniors with the services that are requested and don’t take a full assessment of what is needed. They should take into account their current need, length of time they may need services and create a plan that solves the issues today and plans for tomorrow. Often times, senior care companies provide unnecessary services at great expense, leaving the decision up to the senior and the families to determine how much they need. While it is a consumer choice, senior care companies should provide a complete consultation so the senior does not run out of funds and end up without the ability to pay for needed assistance.
Gina Kaurich, RN
Gina Kaurich, RN is Executive Director of Client Care Services at FirstLight HomeCare. Gina started her healthcare career as a Candy Striper in Junior High and now has over 35 years of experience as a Registered Nurse. She is credentialed as a Professional Geriatric Care Manager, Nationally Certified Dementia Care Practitioner and certified as a Master Coach and Trainer. Her nursing career has extended through Clinical Administrator for a Hospital System, Director of Nursing in a Continuing Care Community, VP of Clinical Operations in Home Care and she volunteered as a Certified Paramedic for her local life squad.
In my experiences with many families, the biggest financial mistake seniors and their loved ones make in paying for elder care…
Is not discovering all of the potential resource options available to them. For instance if the senior or their spouse was a military vet the individual can receive money for their non-medical care through the Veterans Aid and Attendance Benefit or via a Long Term Benefit Plan or an annuity where the seniors death benefit of an in-force life insurance policy into a financial vehicle for care. The best way to become informed is through a community resource such as FirstLight HomeCare, a care manager, elder law attorney or elder financial adviser.
Another financial mistake is to believe the only option is to become Medicaid qualified through a spend down and liquidation of property in order to receive care and services. There are many state and community programs which can assist the senior in staying at home and receiving meals, transportation, health and wellness checks, homemaking and personal care services. As was stated previously, finding a community resource such as those listed above will allow the person to remain in the comfort of their own home and independent.
Brian A. Raphan, Esq.
Brian A. Raphan is founder and lead counsel of the Law Offices of Brian A. Raphan, P.C., an elder law firm in New York City. He has been serving the legal needs of elders for over 25 years. His cases have been written about in The New York Times, The New York Law Journal, The Villager, Elder Law Answers, and has appeared on CBS News television and NY Radio. He is also a regular editorial contributor to The Senior News on legal issues and frequently gives pro bono lectures throughout New York City at senior and assisted living facilities on legal matters facing the elderly.
Brian has vast experience with all Elder Care legal issues, handling estates of all sizes with expertise in the preparation of: Simple or Complex Wills, Trusts, Living Trusts, Medicaid Planning, Asset Protection Trusts and Guardianships.
When it comes to making financial decisions for elder care, the biggest single mistake is…
Not planning ahead. Under that umbrella are many other mistakes. Such as:
1. Thinking it’s too late to plan. It’s almost never too late to take planning steps, even after a senior has moved to a nursing home.
2. Giving away assets too early. First, it’s your money (or your house, or both). Make sure you take care of yourself first. Don’t put your security at risk by putting it in the hands of your children. Precipitous transfers can cause difficult tax and Medicaid problems as well.
3. Ignoring important safe harbors created by Congress. Certain transfers are allowable without jeopardizing Medicaid eligibility. These include: transfers to disabled children, caretaker children, certain siblings and into trust for anyone who is disabled and under age 65 ; a transfer to a “pay-back” trust if under age 65 ; and a transfer to a pooled disability trust at any age.
4. Failing to take advantage of protections for the spouse of a nursing home resident. These protections include the purchase of an immediate annuity, petitioning for an increased community spouse resource allowance, and in some instances petitioning for an increased income allowance or refusing to cooperate with the nursing home spouse’s Medicaid application.
5. Applying for Medicaid too early. This can result in a longer ineligibility period in some instances.
6. Applying for Medicaid too late. This can mean the loss of many months of eligibility.
7. Not getting expert help. This is a complicated field that most people deal with only once in their lives. Tens of thousands of dollars are at stake.. It’s penny wise and pound foolish not to consult with people who make their living guiding clients through the process.
8. Not knowing what to plan for. Many people don’t realize that even if they don’t end up in a nursing home, even home care at home or an assisted living facility can wipe them out. And put them out—if they run out of funds. When shopping a facility, it’s wise to select one that will accept Medicaid after assets are depleted. If this is the case you can plan wisely and leave funds protected for your family, spouse or loved ones.
Steve Barlam is the CEO and co-founder of LivHome and has over 30 years of experience working directly with families as a MSW, LCSW and CMC. Steve Barlam co-founded LivHOME in 1999 with Mike Nicholson, Chief Executive Officer. Since 1984, Steve has worked exclusively in the field of geriatric care management. His experience draws from work in both the nonprofit family services arena as well as from his own private for-profit care management firm. Steve is a recognized leader in the field of geriatric care management and is professionally active as a speaker and writer at both the local and national levels.
The biggest financial mistake seniors and their loved ones can make in paying for elder care is…
Waiting too long before seeking advice from a financial or estate planning professional.
The longer you wait, the more costly the options become. When adopted too late in the game, they also tend to be less appropriate to the need at hand. For example, if a senior loses the capacity to engage in the decision-making process, his or her family may need to go through a more costly procedure such as conservatorship or guardianship, bringing in the court system. The senior may no longer have the wherewithal to apply for public benefits, or to express preferences that are in his or her best interest. In these cases, money will be spent on sub-optmial choices – which is a big financial mistake.
For this reason, I recommend anticipating potential eldercare needs and beginning conversations about them long before they are needed.
Joseph DeMattos is president of the Health Facilities Association of Maryland, which represents most of Maryland’s 233 skilled nursing and rehabilitation centers. He is an adjunct instructor teaching leadership at the Erikson School of Aging at University of Maryland, Baltimore County.
One of the biggest financial mistakes seniors and their families make actually is…
Not having the conversation about financials in the first place. It would seem logical that today’s elders and their adult children would discuss financial plans for long-term care, however only a small percentage initiates this discussion. Many wait until there’s an acute care crisis or much later in the process when the senior has already lost independence to discuss finances. Adult children should approach their elder parents while they are healthy to discuss care plans and financial strategy.
Another mistake is seniors and their children not knowing where financial and legal documents reside or if they even exist. Seniors and their adult children should discuss power of attorney, wills, trusts and advance directives and review these documents often.
Lynda L. Hinkle, Esq.
Lynda L. Hinkle is the head attorney of The Law Offices of Lynda L. Hinkle, a professional law firm serving clients in various cases. Lynda Hinkle is a bar certified attorney in the State of New Jersey, holds a J. D. from Rutgers School of Law Camden and she practices in the areas of Family, Domestic Violence, Child Custody, Estate Planning, Estate Administration, Small Business, Municipal Defense, Real Estate and Elder Law. Even before becoming an attorney, Hinkle was working hard to better the lives of families and individuals. Her experience in community service is incredibly extensive in both length and breadth. She has worked as a teacher, an adjunct professor and an entrepreneur.
The biggest mistake that families make in financial decision making for their elderly members is…
Failing to consult an attorney as to the possible ramifications of financial decisions on Medicaid and Medicare, as well as their overall financial health. There are many pitfalls families can drop into easily without legal advice, and with a five year look back on Medicaid applications those financial pitfalls can be hit way earlier than the need for care.
Robert Stark is the President of Melville Capital, LLC. The firm’s significant experience makes Melville uniquely qualified to handle all aspects of advisory and brokerage relating to Life Settlements.
Rob has been involved with finance, lending and life insurance for over 20 years. He is a licensed Life Agent and Life Settlement Broker in numerous states and holds Series 7 and 63 licenses in order to transact in Variable policies.
My best advice regarding financial planning for senior care is most relevant when life insurance coverage exists because…
It is essential to know ones options and have a strategy on how to turn this insurance into a benefit while still living.
Life insurance is an asset like stocks or bonds that can be sold. As insureds age the risks they took life insurance coverage to insure (family needs, estate planning, etc.) have likely diminished or disappeared entirely. The sale of a life insurance policy, as well as the money saved from avoiding future premium payments on that policy, can provide significant proceeds for all types of elder care needs.
A Life Settlement is the sale of a life insurance policy for a lump-sum cash amount exceeding the policy’s cash surrender value. If an insured is 75 years of age or older, and has experienced a change in health since their life insurance policy was issued, a Life Settlement transaction must be examined.
Seniors and their Advisors, have been repeatedly told that seniors must “spend-down” their assets in order to eventually qualify for Medicaid. For years, this advice has led seniors to surrender or lapse valuable life insurance policies. 55% of seniors surveyed by ICR Life Insurance lapsed policies because the policies were viewed as liabilities and not assets. Worse yet, according to a recent study by the Insurance Studies Institute, 49% of financial advisors either know very little or nothing about Life Settlements and therefore do not recommended this solution to a client.
Life Settlements are suitable in any situation where a policy insuring a senior is either no longer needed or no longer affordable. The financial benefits from a Life Settlement can provide for senior care needs and avoid reliance on family members for these expenses.
Bryan Stapp is President of Medical Care Alert, a leading nationwide provider of medical alert emergency response systems for seniors.
The biggest mistake we see families make is….
Not being prepared or proactive with their elderly loved one, and having to be forced into a decision at a moments notice because of an unforeseen event (fall in the home, illness, etc).
Most of our clients for our medical alert systems get them because they recognize the preventative nature of the service (like an insurance policy), and the freedom and peace of mind it gives them and their families.
However, we often have folks get a system AFTER a fall has occurred and their parent has been left alone for hours on the floor. Typically we see those systems returned in 30-45 days as they are now unable to live independently at home and have been forced into a different living situation.