5 ways advisors can help plan for challenges in caregiving

5 tips to plan for unexpected challenges of caregiving

August 16, 2023 6:27 PM

Danielle Miura never expected to become a caregiver. But when her grandmother took a fall two years ago on a tile floor, her own life changed dramatically.

Miura, a certified financial planner and a small business owner, took on increasing responsibilities for her grandmother and other aging relatives. It seemed like routine family duties at first, but those grew, until Miura realized she had joined the ranks of an estimated 53 million Americans who are caregivers.

"I was doing more caregiving than I was actually working or taking care of myself," Miura said in an interview. "I was starting to burn out."

Financial advisors' clients, who tend to be older and in their mid-60s, are all likely to be impacted by caregiving: either as current or future recipients, or as caregivers themselves. Twenty-one percent of Americans are caregivers, AARP said in a 2020 report — and those numbers are expected to grow. Knowledgeable financial advisors can help clients navigate caregiving challenges, emotional as well as financial.

Miura, who is the founder of Ripon, California-based registered investment advisor Spark Financials, has since become a family caregiver specialist who focuses her practice on helping families with the complicated questions around caregiving planning.

"When I started researching family caregiving, how it impacts people financially … what disappointed me was that a lot of the research is very basic," she said. "And that's when I thought to myself, why aren't more financial advisors paying attention to this topic?"

An advisor who invests in some education here can not only help a family plan for their loved one's later life in a dignified and compassionate way, but also preserve clients' wealth for future generations — and increase their own chances of keeping the heirs as clients.

Financial Planning spoke with experts from across the industry on how to plan for unique challenges of caregiving with their clients. Below are five tips they shared.

Get creative with funding long-term care

Caregiving can be overwhelming to the financial health of many families. The average stay at a nursing home is over $10,800 a month and the average monthly cost for an assisted living facility is around $5,800 a month, according to nonprofit data cited by CNN from the National Investment Center for Senior Housing and Care.

A client who expects to be relatively frugal and have a long lifespan should aim to save at least $1 million in their nest egg to cover basic living expenses and long-term care, which can vary in cost but might take up $600,000 in total, according to Tricia Mulcare, a CFP who is a principal at Atlanta-based RIA Homrich Berg. But unexpected changes like sudden health crises can derail plans and add costs.

The important thing when it comes to such an expensive financial goal is for advisors to get creative, Miura said. "It's very likely that a client may buy into a long-term care insurance policy or (is) looking to buy one that doesn't necessarily cover the full cost of long-term care. So you're going to have to find some way to supplement that."

Most clients assume they'll just rely on that insurance or government aid, or retirement savings, Miura said. But they could try other cost-saving avenues like seeing if they qualify for Medicaid, asking a family member to help pay for care — perhaps in exchange for gifting a home to them — or using dividend income to fund the care.

Plan for caregiver needs in advance

Often the overlooked piece of the puzzle when it comes to caregiving is the actual caregiver, so-called sandwich generation professionals whose earnings are reduced if they take time out of the workforce to render care. Ensuring their own financial future — be it retirement, college savings for children or their own ability to afford medical care — is not wrecked by caregiving's burdens is key.

Advisors should have a mental-health budget for clients who are caregivers, Miura said, with a "go-to list for financial therapists or regular therapists." The budget can be tailored to their mental health needs. "Ask them questions about, what do they do for self-care?" Maybe one client prefers to go to a gym, for example, and can plan around paying for a membership.

"If they are a 24-hour caregiver, who can supplement those times where they're in the gym? Who can be part of their support network, so they can not only take care of themselves, but take care of the people that they love?"

Waiting until someone is thrust into becoming a caregiver can make it harder, Miura said — they might feel too overwhelmed when it actually happens to actually put aside time and resources for themselves, and they go into "fight or flight mode" spending money from whatever accounts they have at hand to care for a loved one.

"I've met a lot of people who have finished caregiving after 10 years. That's the average timeframe that they usually suffer with dementia, it's about eight to 10 years," Miura said. "And then they are rebuilding their life again. They have no savings left. Some become homeless."

An advisor can provide life-changing support to keep a client in the middle class, or even keep their families on the road to building generational wealth, by helping them when their head is not clear on their personal financial future.

Invest in behavioral finance training and emotional support interventions

For Mulcare, it's important that advisors lean into the behavioral finance side of their work when it comes to working with clients who are going through caregiving and living out their last years, while trying to budget so they can leave some assets behind for their children or grandchildren.

"I've had a number of clients say, 'I'm ready to die. Why can't I just die?' That's heartbreaking to hear," she said. Mulcare said she's found it helpful to comfort distressed older clients in these moments by reminding them they still matter. "Listen to your clients. And validate what they're feeling, even if you personally have never been in that situation."

She also found it helpful to connect them with their grandchildren via regular FaceTime calls, and encourage them to spend on small gifts for future generations of the family, like back-to-school shoes. "Bring back some happiness for them, when many of them are just so sad."

Reassess caregiving during life transition moments

Sometimes a client going through a big life change might forget to reassess their financial outlook for long-term care.

That's where an advisor can add value — for example, during or leading up to a divorce, according to Catherine Valega, a CFP who is the founder of Green Bee Advisory in Winchester, Massachusetts and an investment advisor representative of LPL RIA.

"There are couples discounts offered" on long-term care insurance, Valega said in an email. "They should be considered prior to the divorce finalization. Then both spouses can take their policy."

Use specialists

Katie Carlson, the head of wealth strategy at Bank of America Private Bank, said long-term care and medical systems can be so complex to navigate that advisors would be well-served to find specialists for each facet of that system, to ensure clients have full use of potential options.

That's everything from estate planning attorneys to insurance agencies to a health care concierge and property and casualty insurance partners.

"Health care is so nuanced and complicated. I think it's really important that financial advisors have a list of individuals that they can recommend to their clients," she said.