Risks of Aging Parents

Evaluating risk…

When my firm engages with a new client, much of what we do is determine what risks exist in their lives which would upset their financial security. Some risks are easy to determine such as the risk of death or disability and often for those risks, insurance can play a key role. However, there are many other types of risks, especially if you are a business owner. 

Obviously, there are risks inherent in running any enterprise which are many and varied. However, in addition to that list, you may have risks associated with interest rates rising, home prices falling, children needing financial assistance, returning home to roost into their 20’s and 30’s, addiction issues, the tax code changing as well as other family related issues.

We attempt to unearth the various risks and prioritize their urgency. We then implement strategies to attempt to mitigate or minimize the severity of the potential event. While insurance can play a role, it is not the sole solution and may not even be the first priority. 

Aging Parents…

One risk we often face with our clients given the demographics of the baby boomer generation aging is the financial status and security of their parents. The divorce rate in our country can mean that any couple might have multiple sets of parents and stepparents along with siblings and step-siblings. 

Recently, we started working with an individual couple and part of our data-gathering discovery is to delve into the physical and financial status of parents. In this case, we discovered one spouse’s parents were 88 and 93 and had their 65-year-old special needs son still living with them. In fact, their son had never lived on his own.

Mom is the sole caregiver for dad who has dementia and they live in a lovely, large home in an expensive suburb. My client assumed her younger brother was entrusted with both legal access and the game plan should anything happen to their parents. 

We quickly determined this was not the case and mom is operating on some level of denial, refusing to entertain help in the home or moving to an assisted living facility. Younger son does not have power of attorney, a full list of their assets or knowledge of their brother’s diagnosis and game plan. He also assumed there would be some government assistance should his parents need care which is not the case for anyone with assets. While the parents had created a special needs trust in their will, their assets have dwindled to the point that there is a real risk of not having anything left to fund that trust. 

One of the worst potential scenarios is for mom to have a stroke and need round the clock care. This would mean that she would likely move to a facility and then Dad would have to move to a memory care unit. Both of these solutions would be expensive, and their savings could vaporize quickly. Added to the parent’s scenario, their brother’s living situation and future security would have to be addressed. All of this would present a crisis for their children and not one that can be solved quickly or easily.

This presented a real dilemma for the family, especially my clients. They would have to delay their own move south in order to be available should her parents need them. For others, your parents’ situation could erupt at the same time you are in the process of getting children off to college. Or perhaps, now that the kids are out of the house, you plan to focus on the growth of your business and prepare it for a sale. 

Another complication in these situations can be the financial situation of siblings as well as their desire and ability to assist with parents. Since our clients typically are high-net-worth, a risk for them is the assumption by siblings that they should be the ones to financially cover parents’ care. This can lead to sibling disagreements and friction. If your parents are not physically close, this also adds complications in terms of resources available, sourcing resources, travel time and costs for you, issues around State taxes, estate tax specifics, etc. 

Reversing the roles…

Addressing your parent’s financial security, estate planning and plans for any long-term illness is a delicate dance.  Few people want to address their own mortality and facing debilitating illness is even scarier. Denial is a factor in many cases. 

Another factor is you are essentially reversing the traditional role where the child becomes the parent and caregiver while the parent is being cared for or managed by their children. This is very often psychologically difficult. Another issue which sometimes arises is the reticence of the child to be too nosy or lead their parents to think they are looking for a handout or an inheritance. 

The psychology of the issues combined with what can be complex solutions means that an objective, outside advisor can be the most effective way to orchestrate both assessing the overall situation as well as providing and helping to implement solutions. A family meeting could be led by your parent’s trust and estate attorney. This attorney hopefully has at least some of the right documents in order and is neutral relative to the siblings and typically is a trusted advisor for the parents. This works only if the attorney has a good “bedside manner” and is open to a discussion of what can be confidential information. 

Another solution is a financial planner who has experience with elder care issues and can work either with your parents or with you and your family to orchestrate potential solutions. The earlier action is taken, the more flexibility you have in working on implementing solutions and the less emotional the discussions tend to be. Addressing your parents’ future care is a critical step in planning for your own secure future. 

About Chapin Hill Advisors, Inc.

Kathy Boyle founded Chapin Hill Advisors in 2000 after spending her early career working in large and small investment firms on Wall Street. Chapin Hill Advisors works with privately-held businesses, often family-owned, to help them execute financial, estate and succession planning. We work with the business owner to be sure their business will provide their family with the financial security needed , identify areas of risk and help create strategies to mitigate risk.

Businesses often need assistance creating strategies to allow the business to succeed the owner as well as address structure, systems and procedures. As a business grows, the owner needs to have a plan in place to allow succession, whether an outright sale or a transition to family, partners or employees.

We work with businesses of all sizes to assist them in creating strategies to increase revenue and profitability and tie the future growth to the owner’s or families’ personal financial goals. With larger businesses, we offer a resource directory of trusted professionals. Small businesses or solo-entrepreneurs can benefit from Chapin Hill’s combination business and personal planning strategies.

As a fellow entrepreneur, Kathy speaks from experience. She has tested many strategies in the trenches and seen her clients make mistakes as well as successes. Kathy helps entrepreneurs implement strategies for future success and helps to coach them to execute action steps.

She has advised business clients of all types and sizes on structuring sales of their businesses as well. Without a long term plan and a team who can replace the founder’s talents, a business is less likely to be purchased. Kathy’s background on Wall Street and in financial planning allows Chapin Hill to implement strong financial controls and combine both estate planning as well as business planning for future success.

For more information or a complimentary meeting, feel free to contact Kathy Boyle at: kboyle@chapinhill.com or 212-583-1992.