Aging Clients? Understanding the Secrecy About Finances
Have you ever had a stubborn older client who told you he’d never talk about his assets with anyone but you?
He doesn’t think he’ll ever need help in his life and he wants to be in charge. When you suggest a family meeting to let someone else know what to do in case he ever became ill and unable to communicate, he shuts you down. This is all too common.
A consistent obstacle to communication we see in our work is the resistance of the older person to discuss finances with anyone, including their adult children or other heirs. The Great Depression led to secrecy about finances for many, as fortunes were lost sometimes overnight and once proud people became impoverished. Talking openly about money was just not done for those who grew up in this time of widespread devastating and sometimes life-ending financial losses. To this segment of our population, openly discussing money was considered rude, unseemly. Some of these Depression-era survivors remain reluctant to tell anyone in their families where their accounts are, what their assets are and what they want done with their assets in the event of incapacity.
Presumably when you have a long-term relationship with your client, she trusts you and trusts your judgment. That gives you leverage. You may know more about her finances than her family, her friends or anyone in her life. You are charged with the task of long range planning and you look ahead. In doing so, it is up to you to urge your client, gently, repeatedly and with ongoing persistence that she find someone she can trust to appoint to protect her if she has an accident, falls ill, or can’t speak for herself.
Sometimes persistence pays. The power of your relationship is a tool to persuade your client to come around. This is not a situation to ignore just because your client resists. The older she is, the more there is at risk. Anything can happen to her health at any time.
If your client resists, we encourage you to repeat your requesting a week or a month. Do it in a tactful way and paint a verbal picture for her of what would happen if she were no longer able to speak for herself. Tell her how frustrating it would be to have to refer her account to your legal department for a decision about getting a court involved if she could no longer communicate. Tell her how upset that would make you feel. Express your own concerns and make it your problem.
We hope that every single person in your book of business has an appointed trusted other for you to contact. You may well need that and it can be up to you to urge your client to take care of that most important piece of legal business, the Durable Power of Attorney, if she has not done this. Diminished capacity can sneak up on your client and you’ll need help.
It’s a new role you have with the oldest clients. They are living longer than they thought they would and with longevity come the risks of impairment in all ways.
Are Your Clients Failing to Plan for the Costs of Long-Term Care?
Written by: Matthew Paine
It’s been a tough few years in my family. My mother has been battling cancer for what feels like forever, and while she’s been managing her health with diet and exercise for some time, a few months ago everything changed. Her cancer had become aggressive, and chemo, which she had dreaded, was suddenly the only real option. My mother is in her late 70s, so the already brutal side effects of chemo resulted in a prolonged hospital stay that is currently at four weeks and counting. The good news is that she’s mentally strong, and she’s battling like a lion.
My dad is another story. Suffering from early-onset dementia, his ability to understand what’s happening and why my mother isn’t at home shifts from day to day. Because he’s unable to drive or care for himself (at least predictably), my siblings and I have been juggling taking care of him ourselves. It’s not an easy task, especially with jobs, children, and lives of our own to manage as well.
Like many families, none of us—my mother, my father, my siblings or myself—saw our current dilemma coming our way. Clearly we should have. My mother hasn’t been in top health for years. My dad’s condition is sure to get worse. And even if both of them were in perfect health, their age alone should have driven us to communicate better, earlier, and smarter. Despite being in the financial services industry myself, I haven’t been involved in my parents’ finances. I know they saved well for retirement, but I don’t know where they stand financially today. I don’t know what or how much insurance coverage they have. I have no idea how they plan to pay for their long-term care—or if there even is a plan.
The situation is forcing our family to get personal—and fast. Despite being careful about nearly every other aspect of our family’s financial lives, this one slipped through the cracks. We failed to plan.
Just like cancer and dementia, this failure to plan is an epidemic. And it’s only getting worse. To help your clients battle this epidemic, it’s vital that planning for long-term care become an intrinsic part of your retirement planning process. Here’s why:
Retirement planning alone isn’t sufficient.
We’ve all seen it. A client has a great retirement plan in place, and suddenly life throws an unexpected curveball. The later in life your clients get, the more likely that curveball will be the need for long-term care. According to the National Center on Caregiving, the number of people needing long-term care will hit a shocking 27 million by 2050. And according to the AARP, one in four people age 45 and over are not prepared financially if they suddenly required long-term care for an indefinite period of time. That statistic alone tells us that our efforts at planning are failing.
Long-term care costs are escalating rapidly.
According to a 2016 survey from Genworth Financial, a private nursing home room costs just over $92,000—about $7,698 a month—which is 19% more than it cost for the same care in 2011. According to the AARP Public Policy Institute, lost income and benefits over a caregiver's lifetime is estimated to range from a total of $283,716 for men to $324,044 for women, or an average of $303,880—and less than 10% of that care is expected to be covered by private insurance.
Medicaid isn’t the answer.
Many people assume that public programs are the answer to long-term care, but in the case of Medicaid, a program designed to assist the poor, it is a last resort. First, while nearly everyone over age 65 has Medicare coverage, that program doesn’t cover long-term stays. That means that many people who need that coverage are forced to spend down their assets until they qualify for Medicaid. How poor must a patient be to receive benefits? In order to be eligible for Medicaid benefits, a nursing home resident may have no more than $2,000 in "countable" assets, and the patient’s spouse—called the "community spouse"—is limited to one half of the couple's joint assets up to $119,220 (in 2016) in "countable" assets. The result: even a couple who has spent a lifetime saving for a comfortable retirement can be forced to draw down nearly all of their assets before qualifying for Medicaid.
Once on Medicaid, long-term care patients lose the one thing many seniors care about most: choice. As a recipient of public assistance, patients rarely have a say in where they receive care. Whether that means being placed far from family, in a less-than-desirable facility, or even in a facility that lacks certain types of care (such as a dementia unit or other specialized care), the patient is at the whim of the state.
The good news is that even for those who feel there’s no light at the end of the tunnel, there are options that can help seniors who are struggling to pay for their post-retirement care to not only cover those rising expenses, but to do so in a way that gives them the freedom of choice. A Veteran myself, I know that VA Benefits are highly underutilized—including long-term care benefits. You can learn more about these benefits here. As well, the National Association of Insurance Commissioners (NAIC)’s July report Private Market Options for Financing Long-Term Care Services offers a variety of options for helping finance long-term care needs. Included in that list is the use of life insurance policies to help to fund long-term care expenses—an approach that is supported by GWG Life’s LifeCare Xchange Program.
In my own situation, I know there’s a high likelihood that my dad will eventually require skilled nursing care. I hope that as my siblings and I begin to dig into the details of my parents’ estate, we’ll find that they have indeed planned for long-term care. If that’s not the case, I’m comforted to know there are options available to help ensure Dad is not only in a facility that can meet his specialized needs, but that his new home is where our family chooses for him to be. Life may throw its curveballs, but at least Dad’s care will count as a home run.
Matthew Paine is Senior Vice President at GWG Holdings. Mr. Paine started his financial services career with AXA Advisors, developing marketing strategies for the North Central Region and building his personal practice. Since 2008, he has lead sales teams in raising capital in various assets classes ranging from the Life Insurance Secondary Market, Multi-Family Real Estate, Conservation Easements, and MBS Hedge Funds/Fund of Funds. Mr. Paine has a BA in Marketing/Management from the University of St. Thomas in St. Paul, MN and holds FINRA Series 7, 24 and Series 63 licenses through Emerson Equity, LLC. Member FINRA/SIPC.
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