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Geriatric financial management & asset allocations
Old 04-14-2011, 01:07 AM   #1
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Geriatric financial management & asset allocations

I'd appreciate the experienced perspective from anyone who's escorted their elders down this path.

My Dad's still recovering from surgery to repair his duodenal ulcer, but he's getting stronger at the rehab facility and staying happy. No morale problems. He just turned 77 and is controlling high blood pressure with medication. The tentative diagnosis is Alzheimer's, although I'm not sure whether that's been confirmed. (The alternative is vascular dementia. He's no longer capable of independent living.) He was showing symptoms at least 18 months ago and medications like Aricept may be contraindicated for ulcer survivors, so the medical plan is still being sorted out.

Dad stubbornly stuck to his independent ways as long as he could but it all fell apart in February. Now he's greatly relieved to be relieved of all the independent-living responsibilities, and his stress level is way down. He's thrilled that someone else is taking care of the cooking and the laundry. Instead of resisting the change he's actually more concerned that we take care of his few possessions and shut down his apartment.

My brother lives a few blocks away from the rehab facility, and he's filing the petition for guardianship & conservatorship. (Dad absolutely will not move to Hawaii, and for at least a few more years he'll be able to tell the difference.) My brother's plenty busy with visits & lawyers & care managers so I'm Dad's money guy.

Dad stopped using the Internet in late 2009 and I've been rebuilding his online access practically from scratch. Pension & Social Security are direct deposit to his checking account. I set up Fidelity's billpay and his bank's checking account is also linked to Fidelity so money moves OK. Snail-mail bills are getting turned into autopay or e-mails, although these bills will only last as long as it takes for us to get back to Dad's apartment and shut down everything. His 2009 & 2010 tax returns are paid and I've set him up to pay federal estimated taxes via EFTPS. State taxes use a similar website.

I've gone online with both his credit cards, too, and the CC companies don't seem to care who has the plastic as long as the bills get paid. I have e-mail alerts set up for any CC transactions. I think one of his cards expires this month, and I don't see any reason to activate the replacement. I'll probably let the other one expire too. If any of you have found any reason for a parent in a care facility to have a credit card then please let me know. I think Dad's personal spending will be mostly handled by the care facility's "house account", or by me over their website, or by my brother in person. Anyhow I doubt a CC company would want him to have their cards anymore.

In a month or two (after my brother and I shut down Dad's apartment) I'll have to submit changes of address. Luckily there aren't many, but I have to make sure that I do it correctly with Social Security and the IRS and his life insurance policies. I think I'm going to wait until we have the guardianship, and until then I can do a "temporary" mail forward. Please let me know if there are any surprises to this. I'm hoping to use my brother's snail-mail address but have all correspondence online.

Dad closed his IRA account about five years ago; he doesn't remember why. His Fidelity (taxable) brokerage account is a mishmash of 11 different funds, some of which he's had for decades and others that he bought as the dementia closed in. The cheapest expense ratio is 0.45% for their "Investment Grade" and "Mortgage Securities" intermediate bond funds. The highest is 1.09% for International Value. His Vanguard account just has a minimum balance in their S&P500 index. (He's been with Fidelity for 30+ years so I have no idea why he opened a Vanguard account. Neither does he anymore.) He also has a few shares of Hanover Insurance. I think he had an insurance policy from them (or one of their subsidiaries) and got the shares from their 1995 demutualization/IPO. Most of the funds have unrealized capital gains although Magellan is a big loser (and also sports a 0.75% ER). With Vanguard and the Hanover shares, according to Fidelity's analysis he's 85% equities, 10% bonds, and 5% cash.

I guess he felt comfortable with that asset allocation since he has more than twice as much pension/SS income as he had living expenses... for at least the last decade. Of course now in the care facility, when the Medicare B and the long-term care insurance run out, his "monthly expenses" will jump way up. I haven't had to pay a penny in medical bills (yet) so I really won't know the numbers until we figure out the long-term care insurance. It has a lifetime cap that works out to roughly three years of care. After that I think his savings will be spent down until he's eligible for Medicaid. The initial withdrawal rate is about 6%/year (including fed/state taxes) so I doubt he'll run out of assets. The savings from cutting expense ratios down to 0.2% could pay for as much as a month of long-term care expenses per year.

If John Hancock doesn't weasel out of their long-term care policy then I'll have plenty of time to work on reducing Dad's expense ratios by selling winners & losers in a tax-efficient manner. It's probably as easy as a 70/30 stock index/cash, either ETF or mutual fund, but minimal expenses. (I don't think bonds are a good idea for the next few years.) A quick screen turns up candidates like the "Spartan Extended Market Index" (FSEMX) and the "Spartan International Index" (FSIIX). Expense ratios are 0.1%-0.2%. Once the LTC runs out, and depending on the pension/SS cash flow against his care expenses, I might have to go something like 60/40 stock/cash. But even at an 8% withdrawal rate that's enough cash to bridge almost any bear market.

I could save a bit more money at Vanguard, but frankly I'm worried that they'd want a bunch of identity verification before they'd transfer the Fidelity assets. I've been with Fidelity for 25+ years and I'm comfortable with their website. I don't want to have to go through all the guardianship/conservatorship paperwork with Fidelity, let alone with Vanguard, so I'll stick to what's working (so far). I'll transfer the Vanguard assets "in kind" to Fidelity and then shut down the Vanguard account.

No family or generational/money issues that I can see. My brother and I aren't close but we get along fine. Mom died in 1987 and Dad's pretty much kept to himself the last 24 years. My brother's going to be the guardian/conservator and be the guy on the scene for the rest of Dad's life. But my brother's also plenty busy with building his business so I'm happy to take whatever other responsibilities he wants to throw my way.

I might have overlooked a few details. I'm sure there are a bunch of income-tax deductions or credits for patients in a care facility, but I'll figure that out later this year. Any other surprises I should be ready for?
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Old 04-14-2011, 04:24 AM   #2
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I'll kick off the comments. Some of this you already know.

First off... expect the unexpected!

What stage of the disease is he in? By the time it is obvious that he has a problem... he may only have a few years left. But there are drugs that help some hold back the progression of the disease a little. Talk to the doctor and find out what stage he is in and get a prognosis.

Sounds like your brother is going to be responsible for the care and oversight.


Normal disclaimers (for anyone reading this): For legal advice, consult with a competent attorney with experience in this type of situation. Consult with your health care professionals for advice on care options.

Some random thoughts below... just my opinion!

IMO guardianship is more intrusive than POA for health and finance because the court will want regular reports. But if oversight is needed, that is how it is accomplished. I think the guardian will be the only one legally able to access his assets and make financial decisions for him.

Assuming your father is of sound mind still... Get a living will so your fathers wishes are made clear. Otherwise, the burden of making final decisions does not rest on your brother.. It may not seem like it (now) but sibilings will disagree on the smallest matters about health care when it comes to the end and big decisions have to be made! Make sure one of the documents is a "do not resusitate" statement that is signed by him. It can have all kinds of conditions in it. Ultimately your brother will have to make those decisions if your father does not do it while he is of capable mind. I do not know anything about your family... but this can be a point of contention when the going gets tough!


Someone capable needs to live with your father. If there is no one that will do it... he can go to a nursing home. IMO - I would use his money to hire in-home help during the day (clear out anything that might be stolen). But some one trusted will need to be there at night (like your brother). Obviously, your brother will need to manage his care. You can use adult day care for awhile during the day. If there is no way to work out care to keep him at home... a NH may be the only reasonable option. Be careful, it is easy to misinterpret you father's ability (during the long slide). Waiting too long could result in a bad situation or crisis. One of the keys to managing this is to know your limitations (up front) and to make proactive decisions! Err on the side of caution!


For the money (don't take this statement personally)... Talk to a lawyer and follow his advice!

[IMO - about the money - The goal is to preserve capital and not take too much risk. Identify all assets. Unless you know for darn sure he has excess assets and resources (rich)... put his money in cash equivalents and very low risk securities that are not subject to too much risk (volatility, credit risk, company risk, etc)... Liquidity is important and you should assume things will occur near term unexpectedly. THE MARKET HAS A NON-DETERMINANT OUTCOME in the near term! If the market cuts his assets in half and the money is needed... You could be painted as negligent or as not looking out for his interest (or at best as stupid)! Do not take chances.... Remember, the guardian has a legal responsibility to manage that money for his needs... not to maximize the estate! Talk to a lawyer so you understand your responsibility and the posture you need to take in this regard! As a guardian I am pretty sure the court will be reviewing your decisions regularly! If they smell anything that looks like poor decisions or negligence (even if it is the results of unitended consequences)... they could take it out of your hands! Remember, your father will have a lawyer that is looking out for this interests (not yours or your brothers)... this lawyer might be court appointed if your father is not of sound mind right now!]

I would Pre-pay/plan for his funeral now! You can do this with a dedicated burial insurance policy at the funeral home (or deposit money in a trust with the funeral home). Do not try to use an existing policy... It will take too long to get that sorted out. In a worse case scenario (no assets left) you and your brother will have to pay for it... someone will have to be responsible for the debt! Word to the wise: Pre-pay Now! Do not rely on some asset covering it later!!! No matter what he has, or you think he has... decisions may be taken out of your hands! You can double check.... but I am pretty sure Medicaid will allow that type of expense in most states (if it comes down to it).
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Old 04-14-2011, 06:49 AM   #3
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I would echo going more conservative on investments, and would also second consulting an attorney.

I would also suggest anyone without a living will or health care power of attorney or a do not resucitate order get all 3 done now, regardless of age or economic situation. it will be money well spent.
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Old 04-14-2011, 07:04 AM   #4
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Nords:

I think you have covered most of it, but I would make a couple of suggestions:

- don't just not activate replacement credit cards. If he no longer needs the cards and you are ready to jettison them, call the CC companies and close the accounts (which you will probably need legal authority/guardianship to do). If you just don't activate the new cards the account remains open and is at risk for scammers.

- While you may be comfy with your intended 70/30 or 60/40 asset allocation, your views are beside the point. If the court requires regular reports or there is ever a squabble of any kind over money, you as manager of your dad's assets will be held to at least the "prudent man" and likely the "prudent investor" standard. That means if you color outside the lines on asset allocation and especially if there are any significant losses (bear market with a predominately equity portfolio), you personall and possibly your brother are exposed to litigation risk. That being the case, I would strongly suggest that you manage his account primarily for capital preservation and liquidity over a 5 year time horizon. That means the account should be mostly cash, bonds and CDs, with little in the way of extended durations. I would not push equities above 25% and I would stick to plain vanilla vehicles. Yeah, the account will generate some subpar returns, but reaching for more is not indicated and doing so exposes you and your brother to litigation risk.
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Old 04-14-2011, 07:18 AM   #5
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Nords:

I think you have covered most of it, but I would make a couple of suggestions:

- don't just not activate replacement credit cards. If he no longer needs the cards and you are ready to jettison them, call the CC companies and close the accounts (which you will probably need legal authority/guardianship to do). If you just don't activate the new cards the account remains open and is at risk for scammers.

- While you may be comfy with your intended 70/30 or 60/40 asset allocation, your views are beside the point. If the court requires regular reports or there is ever a squabble of any kind over money, you as manager of your dad's assets will be held to at least the "prudent man" and likely the "prudent investor" standard. That means if you color outside the lines on asset allocation and especially if there are any significant losses (bear market with a predominately equity portfolio), you personall and possibly your brother are exposed to litigation risk. That being the case, I would strongly suggest that you manage his account primarily for capital preservation and liquidity over a 5 year time horizon. That means the account should be mostly cash, bonds and CDs, with little in the way of extended durations. I would not push equities above 25% and I would stick to plain vanilla vehicles. Yeah, the account will generate some subpar returns, but reaching for more is not indicated and doing so exposes you and your brother to litigation risk.
+1

prudent man standard
and you might also want to know another term- legal list (applicable in state where father lives). Prudent man>legal list, but both terms might come up and both deal with managing assets for estates and other people.

and when you consult an attorney, they will tell you the same thing.
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Old 04-14-2011, 07:31 AM   #6
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Power of Attorney for you and your brother. All gov't and financial operations will all want one before dealing with you.
An advanced health care directive for your father. Make sure it complies with any state requirements where he will reside.
HIPAA release form from PCP and living facility for your brother. Another one for you wouldn't hurt.
Cancel the credit cards unless there is a compelling reason to keep one.
Formally authorize your access to his financial accounts. This protects you from being charged with unauthorized access down the road.
Agree with Brewer on capital preservation.

Where is your father going to live after he no longer needs the rehab?
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Old 04-14-2011, 07:34 AM   #7
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If he has substantial assets I would freeze his credit with the major companies. I did that on my own credit and it is pretty easy to authorize an exception if needed. Other than that I have no advice other than to empathize. DW and I are dealing with her father's Alzheimer's. It is a heart breaking experience. It sounds like your dad is staying in good spirits, my FIL did for the most part as well. That is a big help.
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Old 04-14-2011, 03:24 PM   #8
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I had to handle all of my mother's business for several years until alzheimer's disease finally killed her. I had a POA, but I discovered that no one has to accept your POA.

When I sold her house, the buyer's mortgage company, Country Wide Mortgage (Remember them? The megamortgage company that always did everything just right) insisted that I get a conservatorship. Fortunately, I had an experienced real estate broker who stepped me through that process as painlessly as possible.

I found that with the conservatorship in hand (signed by two doctors and the chancery judge) I was able to handle her business more effectively.

She had several thousand $ worth of US savings bonds that my late dad had bought while he was working. Some of these were so old that they had stopped earning interest. These were POD (pay on death) to my mother. The bank where I cashed these bonds would not accept a POA, but they were legally required to accept the conservatorship.

She had money market accounts at two large mutual fund companies. Neither company would accept my POA and even with the conservatorship they were rather difficult. I discovered that my mother had granted check writing privilege to me on both accounts. So, I wrote checks for the total balance in both accounts and deposited them into her credit union account. After the checks cleared, I simply ignored all correspondence from those companies until they got the message and closed the accounts.

My plan was to liquidate her assets and to deposit the proceeds in her credit union account. The folks at her credit union were wonderful to work with.
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Old 04-14-2011, 03:58 PM   #9
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When my father died in 1972 there was no estate or need to probate a will, since he held his assets jointly with his wife, my mother. Following that example, when my mother came to live in Hawaii, she made all her assets joint in my name. When she fell ill, and eventually had to go to a nursing home, with Alzheimer's, there wasn't anything I needed to do about power of attorney or guardianship and all that. Her pension income came automatically into our joint checking account, and I paid her expenses from that. I was urged a few times to arrange a living will, but I never got around to it, and I don't see that it would have made a difference. When she died, as with my father, there was no estate, and no need to probate a will. Her investments were in a Merrill Lynch joint account with me, and I simply wrote my sister a check on that to settle things up. An incredibly thoughtful person, my mother had years before arranged funeral plot, headstone, chosen a funeral home, so I had very little to do.

I don't suppose there is any useful information here for you, except possibly the usefulness of joint banking and investment accounts (if the trust is there).
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Old 04-14-2011, 04:06 PM   #10
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When my father died in 1972 there was no estate or need to probate a will, since he held his assets jointly with his wife, my mother. Following that example, when my mother came to live in Hawaii, she made all her assets joint in my name. When she fell ill, and eventually had to go to a nursing home, with Alzheimer's, there wasn't anything I needed to do about power of attorney or guardianship and all that. Her pension income came automatically into our joint checking account, and I paid her expenses from that. I was urged a few times to arrange a living will, but I never got around to it, and I don't see that it would have made a difference. When she died, as with my father, there was no estate, and no need to probate a will. Her investments were in a Merrill Lynch joint account with me, and I simply wrote my sister a check on that to settle things up. An incredibly thoughtful person, my mother had years before arranged funeral plot, headstone, chosen a funeral home, so I had very little to do.

I don't suppose there is any useful information here for you, except possibly the usefulness of joint banking and investment accounts (if the trust is there).
The joint account works well for you but is a risk to your mother. Should you have creditors or legal issues she could lose it all.

In general this isn't an optimal solution.
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Old 04-14-2011, 04:15 PM   #11
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The joint account works well for you but is a risk to your mother. Should you have creditors or legal issues she could lose it all.

In general this isn't an optimal solution.
Wouldn't it have worked fine to have a POA and a password to her online banking? With a password in hand and the income sources automatically coming in you could pay bills in her name with no issues.
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Old 04-15-2011, 12:12 AM   #12
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This is going further afield than the subjects of financial management & asset allocation, but we're covered on the medical directives and death/probate issues. In fact between the hospital and the rehab facility we three ohana Nords have signed more DNRs and medical directives in the last month than I've seen in the last decade. However the rehab facility is working with us and is happy to stack up the paper as high as it needs to go. No complaints there.

Dad wants to stay there "forever", and they have a care facility wing. However they don't have a secure memory-care unit so Dad's tenancy depends on his behavior. If he continues with his current happy attitude until he's immobile then there's no problem. If however he starts wandering or "bolting", as Alzheimer's syndrome can evoke, then the care facility would hesitate to keep him on. But it's a large city and a memory-care unit could probably be found close by in a week or two. The trick is being ready to respond to the crisis.

Thanks for the pointers on credit freezes and court reports-- I never thought of those. I'll shut down his credit cards once the guardianship/conservatorship petition has been approved.

It's ironic that the prudent investor standard would have a fiduciary buying an asset class (bonds) that's almost guaranteed to be in the red when it needs to be sold. IMO "preservation" will lose to inflation more surely (and more quickly) than a bear market. Dividends are also not appropriate here-- this is strictly a capital-gains liquidation situation. I'd rather stick with a money market, CDs, and a pile of equity index funds. But you're right, my opinion is irrelevant, five years is probably about right, and 25% equities is a good compromise. For the comfort of the court I can always sell off the high-expense funds first (balanced against the cap losses) to build up the cash, and then address the rest of the portfolio as the tax opportunities arise.

We've discussed POAs with two elder-law attorneys, and for dementia situations the POAs are barely worth the toilet paper they're printed on. The POA appoints an agent (for example me or my brother) who can be overruled at any time by the grantor (my father). If Dad's new best buddy stockbroker at the rehab facility thinks that he should be buying triple-inverse leveraged beever cheese futures, and that's what Dad wants to do, then a POA doesn't help anything. However a guardianship/conservatorship court order would avoid that problem.

In Dad's original legal jurisdiction, an emergency petition for guardianship would have precipitated a court appointment of a defense lawyer chosen from a rotating directory. This would have put lawyers on both sides of the situation with no motivation to arrive at a speedy conclusion. To avoid that, we essentially got Dad to agree with the hospital doctor that the only way the doctor would discharge him would be to the custody of the rehab facility near my brother (250 miles away). I was appointed "chauffeur", and we drove Dad's SUV, although the hospital or the geriatric care provider could have provided a Handi-Van/driver for about $1000. Now that Dad's in my brother's jurisdiction it's no longer an emergency, so a normal petition for guardianship can proceed with just the one attorney on the judge's calendar. Technically my Dad's still running his own affairs although he no longer has a computer, his files, his passwords, or his checkbooks-- and no longer remembers how to operate them anyway. My impression is that no authority cares unless the family members start fighting among themselves.

I've learned that dementia & Alzheimer's tend to make you more of what you already are. My father's pretty much living in the early 1960s and thinks I'm his ol' college roommate, but it appears to have been a happy time of his life.

I'm glad he's happy, but we sons have essentially taken on new full-time jobs. Hopefully the myriad of "one time" tasks will be finished over the next few months and this can go more into autopilot.
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Old 04-15-2011, 12:50 AM   #13
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I've gone online with both his credit cards, too, and the CC companies don't seem to care who has the plastic as long as the bills get paid. I have e-mail alerts set up for any CC transactions. I think one of his cards expires this month, and I don't see any reason to activate the replacement. I'll probably let the other one expire too. If any of you have found any reason for a parent in a care facility to have a credit card then please let me know. I think Dad's personal spending will be mostly handled by the care facility's "house account", or by me over their website, or by my brother in person. Anyhow I doubt a CC company would want him to have their cards anymore.
While most may suggest to cancel all of the cards, given the distances involved, I would suggest you think about possibly keeping one card open.

You mention that you already have it set up to give you an e-mail alert for any CC transaction, so if anything funny does happen, you'll know immediately.

So why keep it? Well, with you a thousand or two miles away (and even your brother in town) could there be a situation where something needs to be paid for or ordered? (think: medical device, medication, doctor specialist visit, etc.) Or even when the time comes down the road, even perhaps funeral preparations? Also, while the care facility might have a house account, couldn't that also lend itself to possible abuse by the staff? ("What's dad doing ordering 8 pizzas every Friday? And why is he tipping the hair stylist $30 when he's been bald for the last 5 years"

You could charge any emergency expenses to your credit card....but then you have to write yourself a check out of your father's account - and while you might have a respectable relationship with your brother and the courts, if there are suddenly a few checks written out to "Nords the scion" from your father's account, it just might start to make some people a little uneasy and not want to ask the question that they are thinking.
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Old 04-15-2011, 12:51 AM   #14
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Before you start selling off his investments develop a budget based on what you know now and look at his income stream. Study the long term care contract to ascertain how you trigger benefits. File a claim, if it does pay out add that to his pension, social security and any bond/interest income.

What I did was to develop a five year plan, determine what I would sell when. The money spent for care in a nursing home or other care facility is all medical expense (anticipate an annual 10% increase), the LTC policy could be exempt income depending on its status (look at that contract to figure that out). He will have a lot of deductions and not a lot of taxable income. If he has savings bonds declare the interest up to the point that it becomes taxable, you don't have to redeem them to do that.

If the cash flow after the five year plan is more than enough to pay expenses I don't see the need to liquidate his investments. You and your brother may want to set 'stop loss' orders to preserve capital but if they are neither stinky nor needed to meet your five year spending plan I wouldn't touch them. At this point I wouldn't make equity investments on his behalf.

That's what I did. I had the advantage of Mother's revocable living trust where I was residual trustee and all her assets were in that trust.

This period in your Father's life is no cake walk. Be thankful that your brother is nearby to juggle his medical issues. IMHO you should send him (and significant other) out for a nice dinner now and again. My brother played that role and it is more time consuming and stressful than you can imagine.
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Old 04-15-2011, 09:56 AM   #15
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Nords, it sounds like you have a firm grasp on this. Good luck doesn't sound appropriate - hopefully this works out as you expect. If you don't mind updating as this evolves that would be helpful - I will likely face a similar responsibility and can learn from this.

I thought POA was more effective. It has been in our case, but that involved a relative who was mentally sound (then) but physically disabled and all of her financial accounts and matters were centralized around one financial adviser. We do have much more experience with medical situations where the care providers will not allow us any involvement for an adult we support financially. Doctors and institutions need walk a fine line to meet HIPAA privacy regulations but also do what is best for patient and family.

If siblings or others are uncooperative or disagreeable a situation could get ugly and unmanageable - and I can certainly see that possibility. Careful contingency planning may be appropriate once there are early signs of Alzheimer's or dementia, beginning with a conversation with an Elder Law specialist. One more thing to do this summer.
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Old 04-15-2011, 03:07 PM   #16
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This is helping me think through all the little details of the whole process. There's a lot to do, even though this is actually going "quite well".

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You mention that you already have it set up to give you an e-mail alert for any CC transaction, so if anything funny does happen, you'll know immediately.
So why keep it? Well, with you a thousand or two miles away (and even your brother in town) could there be a situation where something needs to be paid for or ordered? (think: medical device, medication, doctor specialist visit, etc.) Or even when the time comes down the road, even perhaps funeral preparations? Also, while the care facility might have a house account, couldn't that also lend itself to possible abuse by the staff? ("What's dad doing ordering 8 pizzas every Friday? And why is he tipping the hair stylist $30 when he's been bald for the last 5 years"
You could charge any emergency expenses to your credit card....but then you have to write yourself a check out of your father's account - and while you might have a respectable relationship with your brother and the courts, if there are suddenly a few checks written out to "Nords the scion" from your father's account, it just might start to make some people a little uneasy and not want to ask the question that they are thinking.
Funeral expenses would be handled out of the estate, and my brother's the executor. No problems there. And whether it's credit-card fraud or house-account abuse, I guess the question is only over which is easier.

The sticky point in this situation is activating a new card. (Ironically they mailed him his new one last month, the week after he transferred to the care facility.) I'd have to change their record of Dad's mailing address & phone number to mine before I tried phoning the activation number. At some point a line gets crossed between "helping out my Dad" and "fraud". Believe me, with some of the bureaucracies I've encountered so far it's been a pretty strong temptation... especially since I've known Dad my entire life and can do a flawless imitation over the phone. But while I was with him last month I made sure to get his signature on the paperwork that needed to be signed, and I've told him that I'm moving it all online. He may no longer be sentient, but he's cooperative and grateful for the help.

You're right about who's a payee on the checks. All the money that's been leaving my father's accounts has been going to pay his apartment rent, utilities, & tax bills. I've paid for the lawyers & care managers out of my pocket because the one who's getting the most help from them is... me. I don't feel the need to be reimbursed for any of that. I figure the best way to demonstrate fiduciary responsibility is to not have any of his money end up in my hands. Or I guess the fastest way to destroy that credibility would be to have any of his money end up in my hands.

10 years ago Dad gave me $1000 to pay his LTC insurance premiums if "for some reason" he didn't. (Hancock offers this "third-party contact" system to avoid defaulting and canceling LTC policies just when there's a reason to file a claim.) I've split that with my brother so that he doesn't have to go out of pocket if Dad rings up some charges at the care facility. Otherwise I guess the care facility would invoice us and I'd pay that from Dad's account.

My brother also has Dad's 12-year-old SUV and will eventually transfer the title over to his name. He'll get some of Dad's apartment furnishings and sell the rest, so he shouldn't have to go out of pocket on incidental expenses. We'd all rather have the facility (and everyone else) invoice me so that we can keep the payment records centralized. My brother doesn't even want the logins & passwords to the accounts, let alone care to handle any of the money.

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The money spent for care in a nursing home or other care facility is all medical expense (anticipate an annual 10% increase), the LTC policy could be exempt income depending on its status (look at that contract to figure that out).
Thanks, I was wondering about that. I was afraid the inflation rate would be double digits.

I'd expected that I'd be spending an hour or two with a tax CPA later this year to make sure I do the TurboTax data entry correctly. So far all of Dad's medical expenses have been paid by Medicare, and when Hancock starts paying the care facility directly then I'd hate to have to treat that as income. But that'd be one heckuva medical deduction.

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He will have a lot of deductions and not a lot of taxable income. If he has savings bonds declare the interest up to the point that it becomes taxable, you don't have to redeem them to do that.
Yep, last year's tax bill was just his pension and a bit of dividend/interest income. No savings bonds-- just the Fidelity & Vanguard mutual funds and the Hanover stock shares. Not even a CD.

Dad told me last year that he was letting his checking account balance run up in case he made a mistake or even stopped balancing his checkbook. Since then he's made his bank a very very happy institution, but eventually that money's going to go to a good CD or it's going to go back to Fidelity. The only reason for that checking account's existence is because it's too darn hard to mess with the direct deposit of his pension & SS. We just got the online banking paperwork in the snail mail so now I can see what they have to offer.

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If the cash flow after the five year plan is more than enough to pay expenses I don't see the need to liquidate his investments. You and your brother may want to set 'stop loss' orders to preserve capital but if they are neither stinky nor needed to meet your five year spending plan I wouldn't touch them. At this point I wouldn't make equity investments on his behalf.
When the LTC insurance stops, Dad's portfolio will immediately start spending about 6%/year (plus the care facility's inflation). That's in addition to spending all the pension/SS income to pay for his care. My impression of Alzheimer's longevity rates is 10-15 years (even if his health was better than it really is), and I think even if the stock market repeats 2008-09 that his portfolio will handle it. Of course the key is to start liquidating assets now (in a tax-efficient manner) so that after a year or two there are at least 3-4 years of expenses in cash to get through the next bear market.

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You and your brother may want to set 'stop loss' orders to preserve capital but if they are neither stinky nor needed to meet your five year spending plan I wouldn't touch them. At this point I wouldn't make equity investments on his behalf.
I'm no longer a fan of stop losses, but I've stopped reinvesting the dividends. I'll gradually raise the 3-4 years' expenses of cash by selling the losers and the funds with the highest expense ratios, and maybe that'll push down the overall portfolio expenses enough that I won't have to do more than keep liquidating in subsequent years. I won't ask for trouble from the courts, but if the market hands me an opportunity to do some tax-loss swapping then I'd certainly move out of his current equity funds to a Spartan index.

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This period in your Father's life is no cake walk. Be thankful that your brother is nearby to juggle his medical issues. IMHO you should send him (and significant other) out for a nice dinner now and again. My brother played that role and it is more time consuming and stressful than you can imagine.
This all sucks, yet I figure I still have the better end of the deal.

My brother's dragging himself though his own particular hell. Our father's never been particularly close and since the 1980s (after our mother died) he hasn't made any attempt to stay in contact beyond three short visits plus an occasional letter or e-mail. (He hasn't even seen his gradddaughter in over a decade, although he kept up with the holiday cards and check-presents.) I made my own peace with all of that in late 2009 after Dad refused our help. Dad no longer recognizes me anyway, although we enjoy our conversations together. That ol' college roomie of his must've been a great guy.

Unfortunately my brother's been beating himself up for not spending more time with Dad over the last 20 years... despite my brother running his own business and having to drive a 500-mile round trip to visit, let alone never getting any reciprocating visits from Dad. I guess being "on the scene" with Dad is his way of personal atonement.

So I'm quick with a check, I was there to help at the hospital, and I did the chauffeur duty to the care facility. I'll be there whenever it's time to shut down the apartment. My brother has to do the petition paperwork (with the lawyer) but I'm offering to take over the discussions with the care facility and Hancock. I thought that would go better with my brother doing it face-to-face but it doesn't appear to be necessary. We'll figure it out.
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Old 04-15-2011, 04:41 PM   #17
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By 'stop loss' I intended to convey keeping an eye on them so if the market turned be prepared to sell, figure out at what point enough is enough.

Although many with Alzheimer's live many (5 or more) years my observation is that they are early onset or women who are otherwise healthy. I don't think even geriatricians predict longevity but if your Dad is in his 80s and his disease progresses rapidly recently he may not live as long as you think. Financially you need to prepare for an extended period of long term care but in actuality he may not exhaust his LTC insurance. Elderly women are made of strong stuff, guys not so much. The only basis for my opinion is observation of friends and family and many years of nursing home visits - my 70th birthday is soon approaching.
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Old 04-15-2011, 06:18 PM   #18
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I figure the best way to demonstrate fiduciary responsibility is to not have any of his money end up in my hands. Or I guess the fastest way to destroy that credibility would be to have any of his money end up in my hands.
Or any of your expenses in his account. That is a potential issue for you while you pay some of his expenses out of your pocket, but I donít think it is a big risk as long as you and your brother support each other in this.

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Thanks, I was wondering about that. I was afraid the inflation rate would be double digits.

I'd expected that I'd be spending an hour or two with a tax CPA later this year to make sure I do the TurboTax data entry correctly. So far all of Dad's medical expenses have been paid by Medicare, and when Hancock starts paying the care facility directly then I'd hate to have to treat that as income. But that'd be one heckuva medical deduction.
My aunt had 5% increases for each of the past 3 years, but going forward I agree 10% is a much safer planning number. The entire amount is deductible; the facility sends a letter indicating exactly how much for tax support. They only exclude personal expenses such as hair cuts and such.

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When the LTC insurance stops, Dad's portfolio will immediately start spending about 6%/year (plus the care facility's inflation). That's in addition to spending all the pension/SS income to pay for his care. My impression of Alzheimer's longevity rates is 10-15 years (even if his health was better than it really is), and I think even if the stock market repeats 2008-09 that his portfolio will handle it. Of course the key is to start liquidating assets now (in a tax-efficient manner) so that after a year or two there are at least 3-4 years of expenses in cash to get through the next bear market.
6% withdrawal should last even in spite of your fiduciary handcuffs. The large medical deduction will give you an opportunity to realize tax free gains. Medicare pays 100 days, after that you pay, so you can budget and should have a reasonable opportunity before year end to do some good tax planning.

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This all sucks, yet I figure I still have the better end of the deal.
Iím not sure there is a better end on something like this, except perhaps using it to set and example and show the way to your own kids when itís their turn.
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Old 04-15-2011, 08:15 PM   #19
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Medicare only pays for medically necessary skilled nursing care after a hospitalization (3 days or more?) and only so long as the patient is making progress toward discharge.
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Old 04-16-2011, 12:05 PM   #20
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Funny you guys should mention haircuts. The care facility's billing department (down the hall from my Dad's room) just sent an invoice to Dad's former address. (Maybe because they think someone's still living there? Or maybe because they know his mail is forwarded.) It's for $12 worth of "beauty and barber". I guess Dad saw enough of my ponytailed LBYM lifestyle that he decided not to emulate it.

The fee was deducted from their "trust fund" account which also shows a $50 "deposit from family". I guess that came from my brother or from Dad's wallet. Either way it's a good opportunity to talk about where to send the invoices and what their fees are.

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Iím not sure there is a better end on something like this, except perhaps using it to set and example and show the way to your own kids when itís their turn.
I think that much of my Dad's engineer-caliber organization of his daily routine and his finances was due to his determination that what his father's dementia did to Dad would not be done by Dad to his sons. Unfortunately Dad's system worked so well that it didn't alert anyone to his dementia until he nearly accidentally killed himself by other means.

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Medicare only pays for medically necessary skilled nursing care after a hospitalization (3 days or more?) and only so long as the patient is making progress toward discharge.
There are time limits on the Medicare benefits, but the facility also wants to get off the Medicare reimbursement rates and onto the "private pay" fee structure. Of course the 11 days in the hospital amounted to over $20K just for "room & board", so I'd much rather save the Medicare benefits for any future potential hospital stays than for the care facility. Two different motivations toward a common goal.

I mailed my brother an update yesterday, so we'll talk over everything next week.
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