Spending vs Leaving a Large Estate

[explanade]

We paid $177K security deposit to put my mother in a very plush CCRC apartment. It was $2,050 a month including 20 meals prepared by a Dutch chef. She ended up needing 24/7 private help @ $12 per hour, when she really needed to be in a nursing home setting. We got back 90% of the $177K at her passing.

Local nursing homes are about $7K a month. It doesn't take long to draw down pretty substantial savings of middle class people. Mom was down to her last $5k cash when she passed.

How does the deposit work, they don't draw the monthly and other costs from it so it's there in case you're unable to pay the monthly and other ongoing costs?


I wonder if the pandemic has changed perceptions of the nursing homes and other facilities for senior care.

Because some of the worst outbreaks occurred in these places and it's largely staff who didn't seem to care risking infecting the elders there.

There was one case where some nursing home facilities in Washington State went to some large wedding and they infected dozens of people across more than one facility.

This occurred well into the pandemic, when we knew large gatherings were a problem and how vulnerable seniors in nursing homes were.

In fact I believe the wedding party was breaking the state restrictions at the time on gatherings.

 

[audreyh1]

I think that particular wedding and outbreak was in Maine.

Personally I would feel just as vulnerable with nursing/helper staff taking care of me in my own home. Once you get to a certain age and need others to help you through daily living, you are vulnerable.

I would instead go for a facility with a happy well-trained decently paid staff and low turnover. I imagine nice CCRC type facilities are nearer the top of that list. 2020 can certainly give you a history of who handled it well and who didn’t.

 

[NW-Bound]

It's the over emphasis on college in the school systems that is part of the problem. People who can make things and fix things are in high demand and often earn more than many college graduates. But, thanks to many state legislatures that demanded 'higher standards' the schools have to assume everybody is college bound. So, we will teach our children all about quadratic equations in high school, but nothing about how to hook up two switches to the same light fixture. Or repair a cracked pipe that froze. Or hang a new door onto your old shed.

To be fair, they did not teach these life skills in school to me either. People developed and acquired survival skills and common sense outside of school. Kids did not have as many distractions as they do now.

Anyway, back on blowing dough by hiring help, I am still doing a lot of things around the house myself, but these are maintenance work or small projects, not back breaking work. I don't go to the gym, or take up heavy exercise or sports. I get my physical exercise from moving about, shoveling dirt, watering and fertilizing plants in the garden, washing and waxing my motorhome, etc... I read that the Provençal people stay fit and gain their longevity from working out in the outdoor, planting and pruning trees. They don't do weight lifting or run the marathon.

Not having anything to blow the dough on, maybe I will leave a lot of money to my kids. Well, I guess my wife will be the one to do that, as it is most likely that she will outlive me.

 

[daylatedollarshort]

We intentionally try to have low carbon footprint and look for ways to be happy that don't involve consumerism, so our extra will go to our kids and maybe charities. We've really enjoyed early retirement, which makes me happy to help fund that for our kids so they can enjoy it, too. They work pretty hard in their careers and are fairly careful with money, so I don't feel like money we leave them will be wasted. Plus homes are really expensive here, so we're happy to be in a position to consider helping them out when they seem interested in becoming home owners. Plus as others have posted, LTC is pretty expensive in the U.S. and who knows we could live to be over 100 in a care home.

 

[Ready]

Why do some LTC facilities require huge down payments, like hundreds of thousands of dollars, while others just charge a monthly fee for rent and care? And what happens to those substantial deposits when the person passes?

 

[marko]

Why do some LTC facilities require huge down payments, like hundreds of thousands of dollars, while others just charge a monthly fee for rent and care? And what happens to those substantial deposits when the person passes?

AFAIK, the down payments are for facilities that offer more than just LTC.

They are intended for healthy, independent 60, 70 and 80 year olds, who live a normal life, come and go as you please; go to FL for the winter for all anyone cares. The down payment is for an on-site 'condo'/apartment and access to amenities like a pool, etc.

Then, as time marches on, you can be moved to an assisted living area with closer supervision and then lastly to a LTC/nursing home arrangement.

At your death, the down payment is returned to your estate.

At least, that's how it was explained to me.

 

[bbqcoder]

AFAIK, the down payments are for facilities that offer more than just LTC.

We were looking to move my Mom into an assisted living facility back in Dec 2020. Looked at places in FL, CT, MD, and MA. Out of the 20 places we checked out, only one place had a large upfront deposit. It was an older facility in the Boston area with lower monthly payments. All of the other facilities had the traditional larger monthly fee. It's my impression that places with a large upfront payment might not have good financial backing as other places.

 

[explanade]

I thought some facilities, you're actually buying an apt or condo and your heirs will have to sell it, either back to the facility operators or to other occupants of the facility?

 

[OldShooter]

... It's my impression that places with a large upfront payment might not have good financial backing as other places.

Before plunking down a bunch of money, I'd suggest pulling and reviewing a D&B reprot. I think most attorneys can get them for less than individuals can, but it looks like worst case a couple hundred $ gets it done: https://www.dnb.com/ca-en/products/finance-credit-risk/business-credit-reports.html

When I used to get them they showed liens and judgments as well as estimated or submitted financials. Very illuminating.

 

[RunningBum]

I thought some facilities, you're actually buying an apt or condo and your heirs will have to sell it, either back to the facility operators or to other occupants of the facility?

That's how it was for my parents at their first retirement place. When they decided to move into another place, they had to sell their existing place to get their money back. It would've been the same had they died living there. Their buy-in was barely six figures. Their second and third (current) places had no upfront fee, or maybe a trivial application or similar fee.

I don't know if that's true of all places where there's an upfront charge. Unless you have no other choice, there's no way I'd recommend moving into a place with a large six figures non-refundable up front charge. If it was a $300K buy in and you lived there 10 years, that works out to $2500 extra per month, and 10 years is probably longer than average.

 

[explanade]

Before plunking down a bunch of money, I'd suggest pulling and reviewing a D&B reprot. I think most attorneys can get them for less than individuals can, but it looks like worst case a couple hundred $ gets it done: https://www.dnb.com/ca-en/products/finance-credit-risk/business-credit-reports.html

When I used to get them they showed liens and judgments as well as estimated or submitted financials. Very illuminating.

That link looks like some credit reporting for business owners?

So you can get a report of your own business or can you get reports on any business?

 

[OldShooter]

That link looks like some credit reporting for business owners?

So you can get a report of your own business or can you get reports on any business?

Well, it's a report covering financial and legal information about a business. So if you're contemplating becoming an unsecured creditor it may have stuff you need to know. Or, later, wish you had known.

D&B tries very hard to get financial information from companies but will estimate where the company is not cooperative. They also get information from public records like liens and judgments. But generally it is in the interest of companies to cooperate because pulling a D&B report is the first step when they apply for credit somewhere. That's the way we used them.

It's definitely not just for getting a report on your own business but that is actually a good thing to do from time to time.

 

[Clover5]

My travel agent said she’d tell her clients “if you don’t fly first class your kids will”. I’ve always loved that. My mom left me 300k via a property in So Cal. I then bought my first house in San Francisco (2001) for 390k which we gut renovated and then invested the rest. It wasn’t so much money that I quit working but it was enough to seed my future. I’d pick a number for your inheritors and what you need to keep you secure then spend the rest at will.

 

[gooddog]

If you are happy, why would you need to spend more? Having a lot of $$ to leave to (select) relatives is a great thing, something I plan to do myself. Wife and I have whittled down the list of inheritors as time has gone by. Those who couldn't be bothered trying to get ahead in the first place don't need anything from us - they would just waste it. Those who would create more opportunities and wealth for following generations, and have a proven track record, are the ones getting the $$. Being well off in your last years beats worrying about the bills anyway, so why not be well off and help others - or even the local animal shelter.

 

[ychuck46]

Similar Situation

We are in a similar situation and just a few years younger at 67. Our net worth kicks off more than we need in a year, but we live a great lifestyle already in our estimation. No debt, lots of travel, give to local charities, as well as our only child and her husband. If we wind up with a goodly amount after living a great life, I will be happy leaving it to our daughter that we love. Don't overthink this; enjoy your life while living within your means, and let your heirs and others deal with the estate. A nice problem to have.

 

[audreyh1]

My travel agent said she’d tell her clients “if you don’t fly first class your kids will”. I’ve always loved that.

Good one!

 

[gayl]

I am watching my NW jump up despite helping 2 kids + 1 GS survive unemployment during covid. I never thought I could have this much. So now I am looking to beef up the legacy account not sure where to put it. GS1 / DD / and DS (mostly on the last one -- depressed after divorce) are acting responsible about saving for their retirement. I'd stick some in their Roths but they did it already. Then -- get this -- I'm getting SSA in a few months. It's just become numbers in the account.

 

[brett]

We are in a similar situation and just a few years younger at 67. Our net worth kicks off more than we need in a year, but we live a great lifestyle already in our estimation. No debt, lots of travel, give to local charities, as well as our only child and her husband. If we wind up with a goodly amount after living a great life, I will be happy leaving it to our daughter that we love. Don't overthink this; enjoy your life while living within your means, and let your heirs and others deal with the estate. A nice problem to have.

This is our plan...with one exception. We set up an education fund for each of our grandchildren at birth. Our current wills dictate a lump sum off the top for each grandchild's post secondary education. We will adjust this going forward as we age.

After that it gets split down the middle between our two children.

 

[ERsoonihope]

I need to be more like my dog than worrying about these things.

Thanks for reminding me of this - https://www.poetryfoundation.org/poems/47252/golden-retrievals

 

[Skitso999]

We have the same (first world) problem at age 66/64, the money is piling up much faster than we’re spending it **, and we live a very comfortable life wanting for nothing really. We’d love to give more to charity, but with 30 odd years to go and no secure income other than Soc Sec, I can’t bring myself to spend more. DW is even less inclined to spend more. Historical odds are very good but geopolitics or other factors can screw up any plan and I don’t want us to depend on others. We had a $150K boat that cost me $15-20K/yr to race but I sold that and won’t buy another. I’ve looked at a couple six figure cars but I just can’t bring myself to buy, especially knowing how fast cars depreciate - I don’t really want one anyway, seems frivolous for me.

I’d love to know how to thread that needle now versus nearer the end. We don’t have kids, so charities and nieces/nephews are our beneficiaries.

** Not that I believe it but FIRECALC says our residual will be between $5-40M, average $20M at 100% success rate.

My suggestion is to buy a Mercedes-Benz CL 600! It has a V-12, twin turbochargers, and it is an honest-to-God hardtop. A hardtop is an extremely rare body style these days. Most people don't know what a hardtop is!!!

You can easily buy a used one, about 10-12 years old, for $20,000.

 

[KrisS]

Not really a forecasting issue

We often frame this issue as a logical one with the answer pivoting on planning and forecasting. In all honesty, it's actually an emotional issue for most people who have achieved this level of wealth. "Bag lady syndrome" (at least that is what we call it) or the fear of ending up broke is very common. It's friend, "what will happen to it when i'm gone" is just another version of it (and often a reflection of one's own feelings and issues about money).

One does the math (a lot of times in many cases as a tool to contain the fear). The math, and simple logic, says one has a vanishingly small chance of losing it all. So why does the (outsized) fear persist?? How is this fear shaping my choices? What would I do (or not do) if this fear was proportional to the risk? And, most importantly, what do I want to do differently??

One may not like to use the word "fear", so it is simply a matter of picking another word that works and go with it.

Net net, it's as important to acknowledge and do the emotional work as it is the financial planning IMO.

 

[Dd852]

My mother died this year. She and my father always lived frugally, and in fact my sister and I always assumed we were quite poor growing up - we always had thrift shop clothes, rarely took vacations ... and behold, both my sister and I will now be getting seven figures. Nice for us, but a bit sad - I’d have preferred it if they’d treated themselves more luxuriously during their lives. And certainly my plan never included an inheritance. But the “poor immigrant family craving security and fearing the worst” mentality was deeply set. And in the end I don’t think they regretted anything, but still it seems a shame.

 

[rkser]

I never thought I would have this much money at age 65/DW is 60 yrs, where was this money when we were struggling living in apartments in our 20's, on top of feeding 2 kids. Life is sarcastic in some ways.

The problem with us is, it is tough to shake off the frugal habits, (at least) I think I am not cheap, but I do look for value in things we spend money on. And again it is tough for us to fly first class, I do not know on what & how this stash of $8 m will be spent.

Although we do not go into kids finances, I think both kids are reasonably frugal, they do not ask us for money and are on their own financially.
We started gifting $30k (The limit without any tax consequences) a year to each of them. As one has 2 kids I gift them into their 529 Plans & Christmas.

We support one needy student's yearly tuition at the State School following the 'Teach them how to fish principle' and we donate to our church. Wife keeps looking for causes to support.

The money totals keep building up, I want to manage DIY the stash as long as I can. We will start deaccumulation phase in a few months & will see how that goes. Various Retirement Calculators have us supporting twice the spend of our present yearly expenses.

Thanks for a good contemplative thread to follow.

 

[whatnot]

Rkser
Can you explain the process for gifting into Grandchildren 529?
Our daughter has set up accounts for both GC. Do we write a check to our daughter and then she can deposit into the 529. In this case, would she get tax deduction?

Or do we need to set up 529 for each GC and make deposit directly. We then get tax benefit.

 

[SecondCor521]

Rkser
Can you explain the process for gifting into Grandchildren 529?
Our daughter has set up accounts for both GC. Do we write a check to our daughter and then she can deposit into the 529. In this case, would she get tax deduction?

Or do we need to set up 529 for each GC and make deposit directly. We then get tax benefit.

Not rkser, but:

Yes, you can gift to DD and she can contribute the money to 529 and she would get any tax deduction. You'd need to keep the gift in mind for the $15K annual gift tax exclusion if you're doing that, and technically DD could just keep the money herself, but for most people neither of these would be an issue.

You can also set up 529s for the GCs and get the tax benefits if you want.

There may be financial aid differences down the road to consider. With the new FAFSA rules it appears that grandparent 529s may be better than parent 529s, but I expect that to be corrected soon if it even exists now. (The financial aid rules changed in December and there is not much guidance on what the new rules mean.)