sandwich generation members generically comprise those baby boomers caring not only for their grown children but also their aging parents. although the grown children conversation has its place, we can focus our conversation on aging parents and caregivers. the sandwich generation may ultimately find themselves in their parents' shoes in the next 30 years, after caring for their parents.
the center for medicare and medicaid services estimates that more than 70% of americans over age 65 will require custodial care. custodial care becomes necessary when you cannot manage two out of your six activities of daily living (adl). your adl's comprise bathing, continence, dressing, eating, toileting, and transferring.
many hope that either government entitlement programs, friends, relatives, and/or their own financial wherewithal can provide or pay for the care; however, the february 2011 medicare guide specifically notes within section 5 that it does not cover custodial care costs. with that entitlement program nixed, you can consider medicaid, but why choose poverty when you can create options earlier in life?
industry experts wisely recommend that consumers consider other options towards financing your future custodial care costs other than entitlement care. my professional opinion gravitates towards estimating future custodial care costs without governmental entitlement programs. prudence demands that you estimate the worst case scenario as a starting point.
imagine building a million dollar legacy, and an unplanned and protracted custodial care situation reduces 75% of your wealth; or, imagine a loved one slipping into poverty without medicaid services, potentially creating your own financial bankruptcy providing that backstop.
preserving your family's financial legacy starts with understanding that unmanaged custodial care risk can potentially compromise intergenerational wealth transfer desires. custodial care requires financial resources, whether personal, familial, non-profit charity, or government entitlement. the various financial resources listed vary based on flexibility, control, and customization, with personally owned vehicles affording the most options.
consider custodial care insurance options or setting aside funds specifically earmarked towards satisfying future custodial care costs or insurance premiums. most custodial care insurance carriers will consider applications for consumers over the age of 40 with varying medical underwriting methodologies. premiums will increase year by year becoming more expensive as you age with medical underwriting becoming potentially dicier.
for clients with complex legacy needs, the conversation takes on a more pressing dimension, potentially benefiting or inhibiting intergenerational wealth transfer. without proper guidance and strategic foresight, you may find that a lifetime(s) of financial asset accumulation may wither under a protracted custodial care situation. most people generally do not want that situation.
we can save the optimal age to buy custodial care insurance and its financing strategy discussion for another time. until that time, consider discussing your concerns with an adviser laser focused on meeting your legacy needs. your adviser should coordinate your custodial care solution within an overall strategy context, such as addressing alzheimer's disease and legal competency.
blake mendez owns and operates mendez & co. financial counselors, an independent human capital practice specializing in intergenerational wealth transfer and pension development. you can reach him directly at 00 + 1.432.288.3243 or via email at blakemendez-mendezco@clear.net.
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