The Eldercare Conundrum

With masses of Baby Boomers headed toward retirement, they and their adult children will soon face myriad legal and financial questions. As with most things, however, a little proactive preparation can go a long way.

The conundrum is simple; with masses of Boomers swelling into retirement, they and their adult children will be faced with unexpected costs for their increasing care needs. And because few are prepared for managing the welter of financial, legal, and emotional issues that go along with this unexplored terrain, the hassle, both direct and indirect, will also be greater than imagined. And as we know about all matters financial, what you do not know makes you pay more than necessary.

So should we all take out long-term care insurance? In a word, no for most us. Why? Because the premiums have risen steeply and the qualifying requirements are more stringent, as there are few insurance companies left in this money-losing sector. It turns out that low-income people can’t afford the high premiums and the wealthy do not need the coverage. For the bunch of us in the middle, there is a sweet spot, but this arcane area will require an expert to analyze whether or not this coverage makes sense for you.

The dream of remaining at home in one’s dotage is often unrealizable. Families often will take on the small-at-first burden, but the costs and stress can often spiral out of control, to the point where studies show that Alzheimer’s caregivers, for example, do not live as long as they might, in addition to having a diminished quality of life for themselves. Taking responsibility for a loved one’s 24/7 care, especially untrained, can really take you down.

So retirement communities that provide step-wise care, from independent to assisted living to skilled nursing can make sense for many. Senior care professionals know what is needed and they have expertise and objectivity in handling the increasing needs of the elderly that we children, however dutiful, do not have. The cost unfortunately, can range from $4,000 to as high as $15,000 per month, per person, and this cost is rising. How many of us plan, or can afford this expense?

But some financial relief is available, for you and your family. Depending upon how you structure your caregiving, hopefully with the advice of a CPA and lawyer knowledgeable in eldercare, you might qualify for a tax deduction of your senior as a dependent.

If you are caregiving at home, you can also get a deduction for any home improvements that 1) are prescribed by a doc, and 2) the cost of which exceeds any increase in the home’s value. For instance, a swimming pool, an elevator, or ramp(s) may add, say $10,000 to the value of the house but cost $50,000 to install. You get to deduct the $40,000 difference. As always, check with your CPA.

And there might be little-known financial help available from the VA if your parent served over 90 days on active duty, with just 1 of those occurring during a time of “war.” This “aid and attendance” benefit can pay up to $2,000 a month if the veteran qualifies. Go to VA.gov or to a local VA facility for information.

Medicare will not pay for long-term care, only 90 days in a rehab facility after a patient has been in a hospital for 3 days. But Medicaid might. In California, for instance, if the individual qualifies (by having minimal income and assets), MediCal will pick up the total cost of long-term care, albeit usually in a bare bones facility.

If you have already had to assume the task of caring for a loved one, financially, legally, and/or physically, you have a feeling for the depth of the issues involved. If your time to step up has not yet come, do yourself a big favor, venture out of your comfort zone, and do some basic familiarization online, in one of the many books on the subject, or spend some time with a knowledgeable consultant in this area. Any of it will save you a lot of money and a lot of emotional stress. Because few of us will not face the problem of the Eldercare Conundrum.