Though it’s a difficult conversation to have, families and caregivers should plan ahead for the financial burden of long-term and end-of-life-care, especially for older clients and those with diagnoses like dementia or ALS, Dr. Carolyn McClanahan, a physician and financial advisor, told an audience at the Morningstar Investment Conference in late September.
For clients who want to stay in their homes as they age and need more nursing help, there are logistical issues to consider, McClanahan said. Having a transportation plan and making sure the home’s setup is appropriate for aging are part of the process. Families should also make sure one grown sibling isn’t saddled with all of the work of taking care of the aging parent, or that, if it’s unavoidable, the sibling receives some form of compensation.
“The time to do this is not when they're starting to have trouble,” McClanahan said. “We need to start having these conversations with people in their 60s, at max early 70s.”
McClanahan warned it is important to know “when to say when” is enough in terms of taking care of the parent at home, and seeking a place in a long term care community.
“If somebody has severe dementia, it is just not safe and it's not good for them to be in a home, isolated,” McClanahan said. “You have many people that stay active in communities, have family and friends visit — but some people don't.” Older adults who age in place at home can be “socially isolated” and even get “the dwindles, which means that they're starting to not care about life and not taking care of themselves,” she said.
While many Americans dread life in a nursing home, “sometimes moving into a facility actually makes them blossom like a whole new person,” she said. It’s a good idea for families to discuss the concept of moving before their parent actually needs to move, and to visit nursing homes before they’re required. Moving into a care facility starts to make sense “if you have financing issues around paying for long term care in general or if you need more than 12 to 16 hours of care and you’re having a problem affording it,” she said.
Advisors should have conversations with their clients about setting markers for quality of life that are revisited often, McClanahan said. She mentioned a study her firm, Life Planning Partners, conducted a decade ago that asked people about their personal benchmarks for when life would no longer be worth living. Significant deterioration in communicating, enjoying food, grooming themselves, and interacting with others were the biggest categories, she said.
“I had a client say to me, ‘If I'm that person you put in the nursing home you just park them in the side, nobody ever talks to them and they can't talk to anybody because they’re so demented... Kill me, let me die. Move me to hospice, don’t keep me going,’” she said.
These markers are not permanent and can always change, even once the clients begin to get unwell, she said.
“As long as people have agency they should have the ability to change their mind. You see this with any chronic illness, people say, ‘Oh gosh, I would never want to live like that,’ and once they actually get to that stage they're okay,” she said.
One client with ALS had said he’d like to be placed in hospice when he could no longer enjoy wine. But when it came time, that wasn’t the choice he ultimately made, she said.
“He opted for the feeding tube and that was because he still was getting enjoyment with family and friends even though he was wheelchair bound. He'd become adept at using the computer that you control with your eyeballs. He was happy,” and able to communicate, she said — a key point for him.
One issue many advisors face is what to do with clients who are showing signs of diminished mental capacity or encroaching dementia. Advisors should have a letter of agreement with their client for when they suspect a client can no longer handle their finances, McClanahan said.
“I encourage all advisors to have letters of agreement with your clients that when you're starting to notice, because you’re going to be the first to notice, to have permission to call the surrogates and the family members even if the clients disagree,” she said. “People think you're doing fine, and they don't realize your ability to manage your finances goes down 1% or 2% every year after age 60.”
She also said less is better in terms of the number of accounts a client has open.
“First and foremost — especially when people start to hit their 50s and 60s — simplify. People have five 401 K's out there and multiple IRAs, annuities, all these complicated investments,” she said. “We try to keep it down to one brokerage account, one IRA, one Roth, one checking account and the money market, and that's it. Clean up everything, make certain that whoever is the surrogate knows where everything is.”
Christine Benz, director of personal finance at Morningstar, who moderated the conference session, asked how advisors can help their clients from becoming prey to financial frauders. McClanahan said financial planning is the cornerstone of protection.
“If you're just managing investments and you don't really know a client's cash flow, cash flow needs, then when things start to happen that don’t make sense, if you haven't really been doing their financial planning, you may not recognize it, [but] before you know it, a bunch of money may disappear,” she said.
One way to deter fraud is for advisors to shift clients’ money out of their checking and savings accounts, where scamsters would have an easier time stealing it. “If they're defrauded, it's hard for them to get access to big chunks of money to be defrauded, so at least we're protecting most of it,” McClanahan said. “We say, ‘You have full access to your money and your brokerage accounts, but it's good for us to see so we can protect you.’ And clients totally get it and they appreciate it.”
For clients who do not have children or partners, McClanahan said it is important to be active in the community and to hire trusted counsel, including a fiduciary advisor, estate planning attorney, and accountant. It’s also key to have relationships with younger people — ideally several of them — who might be able to pick up on the early signs of elder abuse and act as a check on con artists.
“Unfortunately, most older people just stay friends with older people and old people watching out for each other can be a disaster,” she said.
She recommends advisors help clients create a family agreement and ethical will, a document that lays out the reasons behind their will. McClanahan also said advisors should stay away from barebones advanced medical directives and instead use a more comprehensive
“More importantly, make certain that your clients have had the conversations with their children and other family — anybody who could step in the way of causing trouble if they become ill,” she said. “It just makes the end of life so much more peaceful and less angst ridden, than if people are fighting over what care they need to be in.”
