June 6, 2013

Sandwiched, Part 2

Deuth,-Dave-colorBy David W. Deuth, CFSP
President, Weerts Funeral Home

Those who may have read last month’s article are already familiar with the term “Sandwich Generation” – those who are sandwiched between caring for a parent (or other relative) AND caring for (or financially supporting) their children.

Last month, we also identified “boomerang children” – that is, kids who’ve grown and gone, only to return to the nest because of any number of circumstances, as well as the potentially simultaneous financial strain of college expenses – and even post-college living expenses – for adult children.

Despite potentially good retirement planning, many retired Americans are daily facing the reality that it is entirely possible to outlive their money. Social Security, once a fairly meaningful slice of the financial retirement pie, is now sub-supplemental in many cases. Increased costs of all consumer goods and living expenses can quickly chisel away at the fortress of retirement funds that took a working lifetime to build.

As a result, a good number of the kids of these retirees are now finding themselves financially responsible for their own household, as well as some added financial responsibility for parents whose assets are quickly being expended….even
altogether exhausted in some cases.

And perhaps it’s one reason that we’re beginning to note an uptick in a very unfortunate scenario that looks something like this:

A son or daughter contacts us to notify us that their parent is under hospice care. The inevitable is now just around the corner. The parent’s assets have been sufficient for living expenses since retirement; however, most recently, the funds have been depleted to cover nursing care expenses. They know they need to start thinking about funeral options because, well, the inevitable is just around the corner. They know they need to call the funeral home.

One of the things we’ve learned from this scenario is that many people actually think they are “pre-planning,” simply because death hasn’t yet occurred. Sadly, the unfortunate reality is that the meaningful financial benefits of “planning ahead” passed them by – unknowingly – quite some time ago.

So, this son or daughter makes an appointment to come in and meet with us, still in advance of the inevitable, yet wanting to do as much in advance as practically possible. This, unfortunately, is where the “a ha” moments often begin. The conversation often begins something like this:

“How much will this cost? Mom really wants “this and this and this” for her funeral, but her money is virtually gone. The funeral costs will be up to my brother and me, so we really need to keep things as affordable as we can.”

Another surprise to us is that this is often the very first time they learn that they could have used some of Mom’s own funds – before those funds were depleted – to pre-pay “this and this and this” that Mom always said she wanted for her funeral. As the conversation continues, they begin to learn that everything Mom wanted could have been pre-paid using her own funds. This is when they also learn that a cost guarantee on the services and merchandise could have also been locked in at the same time.

By this point in the discussion, the look on their face pretty well tells the rest of the story. With the realization that the good options are now gone, they embark upon the uncomfortable discovery that even the less-than-desirable options are fading fast. As the frustration level mounts . . . we can just about predict what they will say next: “Boy…I wish someone would have told us that a couple of years ago when we could have done something about it!”

A few key points are relevant here:

1. When a person’s funds are being depleted at a rapid rate to pay for skilled nursing care, most people discover – sooner or later – that their funds will simply run out. When this happens, many are left with little alternative but to apply for Title XIX (i.e., Medicaid) to help cover the significant ongoing expense of the skilled care.

2. Title XIX eligibility often requires the liquidation of certain liquid or semi-liquid assets such as cash-value life
insurance. More often than not, this life insurance was intended to pay for, among other things . . . you guessed it: funeral expenses. Now, in order to qualify for Title XIX, the policy must be liquidated and the proceeds used to pay for the skilled care that has, paradoxically, already consumed all the other liquid assets. When people don’t know what they don’t know, funeral costs will become the responsibility of other family members.

3. A properly established, pre-paid funeral account is safeguarded – even if you’re on Title XIX – to pay the funeral-related expenses for which it was established. This means that, if the mother in the illustration above had liquidated all of her assets and was qualifying (or already qualified) for Title XIX to cover nursing-related costs, her pre-paid funeral account would be protected, if only she had established it, and it would have covered all of the “this and this and this” that she had prepaid.

Whether you’re sandwiched, or know of someone who might be, it’s never too early to take a closer look at the
financial picture of aging parents.

Next month, we’ll conclude this three-part “Sandwiched” series with a closer look at some considerations that may help avoid a few difficult “a ha” moments for you or someone you know.

Until then, remember: if your planning doesn’t do what need it to do when you need it do what you GOT it to do, it’s about like having no plan at all.

Remember Well.