Posted by Robert L. Arone

According to a 2015 study conducted by the National Alliance for Caregiving and AARP, approximately 43.5 million caregivers provided unpaid care to an adult or child during the prior 12 months. Those who have taken on the role of caregivers for ill or disabled spouses, aging parents, children or other loved ones with special needs are typically selfless and giving individuals who may not stop to consider their own financial and estate planning needs. It is likely that you have clients who are providing this type of care. It is essential to broach this subject with your clients to ensure they have financial and estate plans in place that address both their own needs and those of their care recipients.

As their trusted advisor, you can encourage them not only to recognize their own emotional needs and develop the skills needed to deal with the stresses of caregiving, but to take the time to create financial and estate plans, or if they have those plans in place, to reevaluate them at regular intervals. It is crucial for caregivers to ensure not only that their own future is secure, but to also create plans that provide for their families and their care recipient if something should happen to them. The following are some suggestions about how you can help clients who are caregivers.

Discourage isolation. You have developed a relationship with your clients and meet with them regularly. When you become aware that one of your clients has taken on the role of caregiver, it is important to encourage them not to neglect their own needs. Urge them to seek out the emotional support of others, either family members or other caregivers, who can understand and empathize with both the rewards and the physical, emotional, and financial burdens associated with caregiving.

Create a budget. Caregiving may involve additional expenses, particularly if the care recipient is a spouse, a child with special needs, or even a parent who lacks their own financial resources. A recent report by AARP estimated that family caregivers spend $7000, on average, on costs related to caregiving, which translates into nearly 20% of their income. Your client may also need to reduce their hours at work or stop working to provide care for their loved one. You can help your clients stay on top of their finances by assisting them in creating a budget and advising them to take steps to save for the future. Even if they are only able to set aside a small amount each month, over time, it can grow into a substantial nest egg. You can also help your clients to explore state or federal aid and tax credits or deductions that may be available to caregivers to ease the financial burden.

Contribute to retirement accounts. If your clients have employers that offer 401(k)s and match their contributions up to a certain percentage, they should contribute as much as they can up to the amount the employer will match. In addition, you can help your clients establish either a Roth or traditional IRA to take advantage of the tax benefits provided by those accounts.

Consider long-term care insurance. Clients who are caregivers are more aware than most people of the high cost of medical and nursing care. Encourage them to consider long-term care insurance to help cover the cost of their own in-home care, assisted living care, nursing care, and hospice care when the time comes. Although long-term care insurance is expensive, paying for long-term care out of pocket is much more expensive and can quickly deplete their savings and investments.

Create or revise an estate plan. In addition to the typical concerns about providing for family members, clients who are caregivers for their parents, spouses, or loved ones with special needs may have a heightened level of concern about what will happen to their loved one if they pass away or become too ill to care for them. Who will care for their loved one, and how will it be paid for? Remind your clients that a well-thought-out estate plan can provide them with peace of mind by ensuring that plans are in place to provide for the needs of their care recipients. The estate plan should be reviewed regularly to make any modifications needed to address changing life circumstances and laws.

Name a guardian.

Parents who are caregivers for a special needs child should name a guardian—and more than one alternative—in their will or revocable living trust to serve in the role of parent if the parents die or are no longer able to care for the child. Otherwise, the decision about who will act as a guardian will be left to the courts, which may not reflect the parents’ wishes.
If the care recipient is an adult, it will be necessary for the caregiver to ask a court to name the caregiver as their loved one’s guardian and/or conservator to be able to make decisions about their health care, living arrangements, and finances. A conservator, who typically handles financial matters, may need to be a different individual from the person providing day-to-day care.

State law varies regarding the designation or appointment of a successor guardian for an adult. Some states allow a standby guardian to be appointed at the same time the first caregiver is appointed or to be designated in the initial guardian’s will or another written document, as long as it is properly witnessed. If anything happens to the initial caregiver, the standby guardian can immediately step in to begin providing care. Some states allow a standby guardian to serve for a brief time but require court approval before being appointed as the permanent guardian. Still other states have laws enabling the court to consider an individual your client nominates in their will as a successor guardian when the court is making the decision about who is the best person to take on that role. We can help your clients determine the best course available to them.

Consider a special needs trust.

A will alone is unlikely to be adequate to address the needs of your client’s care recipient. If your client leaves money outright to the person for whom he or she is caring or to another caregiver, it could be spent in a way that is contrary to your client’s wishes, and it is vulnerable to creditors. In addition, it could make your client’s loved one ineligible for government benefits or aid.

A special needs trust is one estate planning tool that may be very beneficial for your clients’ care recipients. A special needs trust can help preserve the beneficiaries’ eligibility for government benefits, name a well-qualified trustee, designate a care manager, and preserve their loved one’s quality of life. You can help determine which of the caregivers’ resources can be used to fund the trust or provide products such as life insurance policies to ensure that sufficient funds are available in the trust to provide for the beneficiary’s care. The funding plan should be revisited regularly and updated when necessary, providing you with the opportunity to continue to properly manage the assets. Together, we can help your clients develop a plan that sets aside, protects, effectively manages, and distributes assets for their care recipient’s lifetime, and equally important, designates a trusted individual to act as an advocate for their loved one if they cannot.

It Requires a Team Effort

Helping your clients design a plan that addresses both their own needs and those of their care recipients is a great way to provide tremendous value and solidify your relationship with them. Your clients rely on you to help them plan and make wise decisions to enhance their financial security, but it is important to assemble a team that can work together to create a comprehensive financial and estate plan. Depending upon the individual circumstances of each client, this could include you, as the financial advisor, an estate planning attorney, a tax advisor, a trustee, and care service providers. Please give us a call to discuss how we can collaborate to provide your caregiving clients with the optimal plan for their individual circumstances.