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    Bob Mauterstock

    Caring for your elderly parents, are you doing it?

    It’s a fairly universal assumption that at some point we’re going to have to think about how to look after our parents when they get to an age when they’re less independent than they want to be. When that time comes, we have to consider the options against the time we have available to give them and the cost implications of an increase in service or utilities.

    Here are some of the ways we can make sure we’re all doing the best we can for our family and other elderly people we know.

    Time

    Giving your time to your elderly family is priceless when trying to make sure they get the best life possible. In the not-so-distant past, and in many other cultures, it’s expected that elderly men and women would live with their children or younger relatives when they are no longer capable of living independently. This is fantastic for keeping a family together, but it’s simply impossible for some young families to dedicate that much time if they are both working and have lots of commitments- consider that, when this was popular in the past, it was generally accepted that women would stay at home while men worked- alternatives must be used, even if they don’t necessarily want to use them.

    Money

    If the financial responsibility may fall on the younger members of the family and if that’s the case then private carers and expensive retirement homes may not be feasible. If this is an issue for you then check what kind of organizations are offering the retirement homes to give you a clue on what price and quality of services they will provide. Some charitable trusts offer residential ‘communities’ that focus on building an active and friendly environment for the elderly, and have the charitable status to back them up. These offer fairly reasonable prices and ensure that time and attention will be given where it’s needed, which is great if the problem is a lack of ability to spend time with the older family.

    What sorts of things are available in retirement communities?

    As these retirement villages are focused on activities and building communities, there is generally a lot to do in them. More conventional things like book clubs are obvious, but there are also more contemporary activities such as tai chi, and if people aren’t quite up to speed with IT skills like email and Microsoft Office programs, there are plenty of classes to help there too.

    Make sure they’re happy about where they’re going

    Everyone is aware of the negative connotations surrounding some of the more dingy retirement homes, so your elderly family will obviously be included in that. Retirement villages, especially when run by charities dispel those worries, by having an already bustling community that people can see and reference to, meaning that if you really can’t afford the time or money to have your family at home with you, they are by far the best options available.

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    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    The Coming Caregiver Crisis

    One third of the families in the United States provide long term care for a disabled or elderly family member. Two thirds of these caregivers are women. And half of them are working.

    These family caregiver are critical for the elderly to remain in their homes  when disability strikes. More than two- thirds (68 percent) of Americans believe that they will be able to rely on their loved ones to meet their long-term care needs when they require help, but this belief may collide with the reality of dramatically shrinking availability of family caregivers.

    According to an AARP study in 2010, the caregiver support ratio was more than 7 potential caregivers for every person in the high-risk years of 80-plus.

    By 2030, the ratio is projected to decline sharply to 4 to 1; and it is expected to further fall to less than 3 to 1 in 2050, when all boomers will be in the high-risk years of late life.

    If fewer family members are available to provide everyday assistance to the growing numbers of frail older people, more people are likely to need institutional care—at great personal cost—as well as costs to health care programs. Greater reliance on fewer family caregivers to provide home- and community-based services could also add to costs borne by family members and close friends—in the form of increasing emotional and physical strain, competing demands of work and caregiving, and financial hardships.

    The decades of the 2010s and 2020s will be a period of transition, as boomers age out of the peak caregiving years and the oldest boomers age into the 80-plus high-risk years.

    The departure of the boomers from the peak caregiving years will mean that the population aged 45–64 is projected to increase by only 1 percent between 2010 and 2030. During the same period, the 80-plus population is projected to increase by a whopping 79 percent.

    It is critical that families begin the conversation now to create a long-term care plan for elderly family members. Do not wait for it to become an immediate crisis. The family must have a serious meeting to answer the following three questions.

    1. If mom or dad becomes incapacitated, where will they live?
    2. Who will take care of mom or dad if they need custodial care?
    3. How will they pay for this care?

    The answers to these questions will form the basis for a long-term care plan. If family members disagree regarding the answers to these questions, compromises must be made. The entire family must come to a consensus that everyone can live with or risk the disintegration of the family.

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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    Join the War Against Alzheimer’s

    Nearly half of all seniors who need some form of long-term care, from help at home to institutional care, have dementia. That’s from the World Alzheimer Report which came out recently.

    The report further states that cognitive impairment is the strongest predictor of who will move into a care facility in the next two years. That is 7.5 times greater than people stricken with cancer, heart disease or other chronic ailments.

    More than 35 million people worldwide, including 5 million in the U.S., are estimated to have Alzheimer’s. Unless some miracle cure is found, these numbers are expected to double by the year 2050.

    Unfortunately, the U.S. is investing only $400 million a year in Alzheimer’s research. But the disease’s financial toll is estimated to be $200 billion per year. Compare that to the budget of the National Cancer Institute, part of the Department of Health and Human Services. For the last 6 years it has had a budget of $4.9 billion per year.

    It’s time for caregivers, advocates and families stricken by Alzhemier’s to come to together to demand a push to end this brain disease. The world’s governments and researchers came together to turn the AIDS virus from a death sentence to a chronic disease and the same force of will can turn Alzheimer’s around.

    If you want to get a clear picture of what Alzhemier’s is like from the patient’s perspective I suggest you read Lisa Genova’s book, Still Alice (or watch the movie of the same name starring Julianne Moore) or read Dr. David Hilfiker’s blog, Watching the Lights Go Out.  Hilfiker is a retired physician who was diagnosed with Alzheimer’s in September, 2012. (Note: Hilfiker writes in Feb. 2016 that he was misdiagnosed.) Lisa Genova’s book is fictional but was based on her experiences working with support groups for people who contracted the disease.

    During my 33 years as a financial advisor, I met with many couples and strongly recommended that they put together a long-term care plan while they were healthy. I was emphatic when I suggested that they consider buying long term care insurance to protect themselves. Most people don’t realize that medicare will not cover the custodial care that an Alzheimer’s patient will require. It is only available for up to 100 days if a person is expected to recover from an illness or injury.

    Long-term care insurance covers cognitive impairment from Alzheimer’s or other forms of dementia. Time and time again people told me that long-term care insurance was too expensive. But all they had to do was to talk to a few of my clients who discovered that the cost of care was much more expensive! Here in New England, care in a residence that focused on those with mental impairment averages more than $8000 per month and in some cases is over $10,000 a  month.

    Eliminate the possibility of bankrupting your parents by investing in long-term care insurance to cover any dementia care.

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    PERMISSION TO REPRINT:
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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    How do your parents transfer their real estate to avoid a family crisis?

    If you have a chance to review your parents’ assets, in many cases you will find that their home is their most valuable investment.

    Our parents often have no idea how to divide up their real estate. In many cases they  will let their their children decide amongst themselves after they are gone. This is a recipe for disaster. Most likely, not every child will have the same interest in keeping the property. One might want to sell it; one might want to keep it but has no interest in helping to pay its ongoing costs. And of course all the grandchildren want to keep the property since it often has been such a place of joy for them.

    How are you to advise your parents to plan for the disposition of their property in a way that you and your siblings have a say in it? You, your siblings, and your parents must discuss with professional advisers all the options available to them in transferring the value of their real estate.

    Let’s look at various options and see how they might work.

    Gifting Real Estate Before Death

    What if your parents want to give their home to one of their children now rather than wait until they have passed away? One of my clients came to me and said that his mother wanted to transfer her real estate to him.  She wanted to do this to get it out of her estate and protect it from the government if she should need nursing home care. She still intended to live in the house for the rest of her life.

    I told him why I thought this was a bad idea. First of all, if she gave him the home, she would transfer the cost basis to him.. She and his father had bought the home for $37,000 in 1955. It was recently appraised for $550,000. All the gain in the house would be taxable when her son sold the house in the future. If she had passed the house to him after her death, all the gain would have been forgiven for tax purposes. This forgiveness of gain is called “step up in basis” and would apply to any capital property like stocks and real estate.

    In addition, the house was now a potential target for the son’s creditors. That might not concern him but it should concern his mother. If he should ever have credit problems, the creditors could attach their loans to the house and potentially drive her out and sell the house right out from under her. Also, if her son had marital problems and got divorced, his ex-wife could claim the house as one of the assets in the divorce settlement. All in all, the direct gift of a parent’s home to you is not a good idea.

    Gift a Future Interest in the House to a Child

    A better approach would have been for my client’s mother to retain a life interest in her home and gift the remainder or future interest in the house to her son.  This is called a life estate. Two entities, the “life tenant” and the “remainderman,” hold title to the property. The life tenant has the right to use the property for life and the remainderman obtains the ownership of the property at the death of the life tenant. The life tenant pays the cost of the property while she is alive. She avoids her child’s creditors and potential ex-spouse. Another benefit is that the property does not have to go through the probate process at her death, simplifying the transfer and reducing the cost.

    The life tenant retains any of the tax benefits of owning the house, and most importantly, the life estate is not a completed gift until the mother dies. That means the son can take advantage of the step up in basis and avoid potentially big capital gains taxes when he eventually sells the house.

    Set up a Qualified Personal Residence Trust

    Another way for parents to transfer their home to their children is through a Qualified Personal Residence Trust (QPRT). It is is an irrevocable (unchangeable) trust set up by your parents. When they put their home into the trust, it becomes a permanent (irrevocable) gift to the beneficiaries of the trust, who are usually one or more of the children. But this is not an immediate gift. When the trust is set up, it is set up with a time limit. The longer the time limit, the smaller the gift to the trust.

    For example, if your father as donor was to transfer a $1 million residence to a QPRT, retaining the right to use the residence for a seven-year term, the value of the present gift to the remainder beneficiaries (the children) might be only fifty percent, or $500,000.  If your father survives the seven-year term, the residence will not be included in his estate for tax purposes, nor will any of the appreciation in value of the residence occurring after the initial transfer.  If, after seven years, the residence has appreciated in value to $1.4 million, the parents will have succeeded in transferring this amount to their children at the same tax cost as a transfer of only $500,000.

    If your parents wish to remain in the house after the trust term has ended, they will have to pay rent to the beneficiaries of the trust (the children) to avoid any IRS question of an incomplete gift.

    Agree to An Option Program

    I had a client who had four children. None of them indicated in the family meeting that they were certain they wanted to buy their parents’ home, but they wanted to ability to do so in the future. They didn’t want the sale of the house to be  automatic when their parents passed away. They agreed with their parents to set up an option program.

    When their parents were gone, they agreed that a firm they were all familiar with would make an appraisal. That appraised value would be the price any of them had the option to exercise to buy the house. The option period would only be open for one year after their parents’ death. If none of the children had exercised the option by then, the house would be sold and the proceeds shared equally..

    In this case if more than one of the children wished to buy the house it could be handled in two different ways. The sale could go to the highest bidder or the children could create a partnership agreement spelling out each of their responsibilities and buy the home as partners. It would be much simpler, however, if only one of them purchased the house.

    Create a Family Limited Partnership

    If your parents own rental property or some type of property that generates significant income, the situation can become more complex. Some of the children may wish to keep the investment property and some might just want to sell it to get the cash. One of the ways to make an illiquid real estate investment more liquid so the children have various options is to create a family limited partnership.

    One of my clients owned a very profitable motel. By just overseeing the staff of the motel and working two or three days a week, he received a very handsome income. He decided he wanted to give his children the opportunity to keep the property and continue to receive a nice income. So he created a Family Limited Partnership. He placed the motel in the partnership. He and his wife became general partners of the partnership and his three sons became limited partners. Each of the partners owns a certain number of shares in the partnership.

    In the beginning, my client and his wife owned all the shares, since they had owned the property. But over time they gifted shares in the partnership to their children. Thus, over the years, they transferred the ownership of the property to their children. Each child will own a certain number of shares in the partnership and can buy out his partners in the future. If one of the sons wants to maintain the property and receive the income, he can buy out his brothers. Or all three brothers could hire someone to run the property and receive the income based on the number of shares they own. The benefit of this solution is that the children have a choice.

    The Bottom Line

    Planning for the transfer of your parents’ real estate is one of the most important things a family can do. If parents and children talk to each other, and know each other’s needs and concerns, the valuable real estate can benefit the entire family. But if family members don’t plan together, this same valuable real estate can become the weapon that drives the family apart. That’s why it’s so important to invest the time and effort in working with a professional to create a real estate plan that works for your family.

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    PERMISSION TO REPRINT:
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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    When do elderly people lose their youth?

    Guest post is written by Alana Vial

    Many of us direct our intentions to ensure that we enjoy a convenient stress-free healthy elderly life.

    But when do elderly people really lose their youth and begin to fall prey to the psychological and emotional burdens of the elderly stages of life?

    Factors That Make Elderly People Lose Their Youth

    There are 3 great factors that influence the loss of one’s youth:

    1. Stress – No matter how old one becomes or how young one still is, the amount of stress greatly affects his or her ability to deal with aging. The human body experiences increased aging due to the hormones that need to be released in a stressful environment. When such processes are repeatedly experienced, the human body can no longer undergo reversible conditions thus fall prey to aging.
    2. Support and coping – No matter how great the stress that elderly people experience, as long as they have the right coping mechanisms and support sources, they will stay healthy.
    3. Information – When it comes to maintaining one’s youth, the amount of information that has been acquired to deal with all possible problems of aging matters a lot. This involves gathering as much information as possible in not only dealing with the common diseases and problems of elderly life but also maintaining quality of life despite old age.

    When do you say goodbye to your youth?

    After everything that has been said, you can easily tell when an elderly loses his or her youth. It is the point the he or she gives up and loses hope. Seeing the world through the eyes of youthfulness is seeing it with strength, hope, and glee. No matter how harsh, depressing, or hopeless a situation, with all 3 factors mentioned above adequately provided to your elderly, they will never lose their youth and fall prey to the a disastrous aging process.

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    PERMISSION TO REPRINT:
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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.