Resources to Gracefully Age in Place

Gracefully Aging in Place

In the past I have talked about the benefits of community living (such as a Continuing Care Retirement Community) for clients in their later years. Most clients love this type of living as it provides a social network, a continuum of care, and advocacy.
 
However, many clients (or their parents) have either decided to finish out their lives in their homes, or this has been decided via a lack of planning. All of us know family members who have aged in place by staying in their home and half of all baby boomers state a desire to age in place. In many cases, the decision for parents to stay at home has required us (or our siblings in closest proximity) to step in to provide help paying bills, filling pill boxes, scheduling/shuttling them to doctors' appointments, providing advocacy, and contacting contractors to handle home repairs, and much more!
 
Help Available for Aging In Place Seniors
But what if there is no local family member to provide help, or what if we need help? Thankfully, if aging in place is the plan, there are professional service providers available to assist with meeting the varied needs of aging in place seniors.
  • Aging Life Care Association. 
    This professional organization provides information about and a directory of Geriatric Care Managers (also called an aging life care professional). Members are usually nurses or social workers that assess the medical/social/service needs of the individual. They help to recommend and pull together the services of local providers (and/or family members) to meet these needs with the purpose of helping the individual to live as independently as possible. They may assist you with selecting housing, assess your current home environment, or determining what home health care services are needed. At the website link above, you can search for a local member to assist you.
  • American Association of Daily Money Managers (AADMM). Members of this organization provide a range of personal cash management services such as bill paying, mail sorting, balancing the checkbook, making bank deposits/withdrawals, organizing tax information, etc. At the website, you can search for a member to provide assistance. I have met with a local member and owner of Final Business Matters that not only provides typical services (like the ones mentioned above), but is also able to assist executors with closing and administering an estate.
  • The Elder Protection Center is a resource that 
    helps the families of the elderly to manage the complexities and concerns that often come with struggling to help their aging parents. They provide help in the areas of elder abuse, neglect, and other issues facing your older loved one.
  • The National Elder Law Foundation website allows the ability to search for Certified Elder Law Attorneys who provide seniors with legal advice most relevant to them. This may revolve around advanced directives, asset protection, and Medicaid/Medicare planning.
But What About Help with the Home Itself?
The one big piece missing is assistance in maintaining or adapting the home. This may be to ensure the home (and its value) is maintained or to modify the home to accommodate mobility to suit the particular needs of the senior. Doing so can make the home nicer, and also reduce the likelihood of injury due to falls and trips to the emergency room. Worse, falls are the leading cause of "death by injury" for the elderly. This could involve installing grab bars, accessible switches, widening doorways, or putting in a chair lift or ramp.
 
I have a client who is in the business of helping seniors stay in their home as long as possible by providing ongoing home maintenance, improvements, and remodeling (as needed). The company is called Home Ideations.
 
They are local professionals that offer complete residential Property Maintenance Management services to allow clients to live in their home knowing EVERYTHING is cared for through a trusted, single point of contact. This may be a desirable service for those who plan to age in place, but it can also be an affordable and desirable alternative to moving.
 
Home Ideations can assist in making informed decisions on a range of housing options and provide home modifications, including mobility and aging in place upgrades designed to improve home equity. 
 
You can visit them at: www.homeideations.com

Managing Liability Risks - Get an Umbrella

Most individuals are covered for personal liability under their homeowners and automobile policies. There are limits, however, to the amount of protection these primary policies provide. Since these limits are lower than a typical client's wealth, they may well be exposing their assets (or future income) to risk of loss due to a lawsuit.umbrella
 
Naturally, your personal exposure is highly uncertain and depends on many factors, some of which include:
  • the risks you face (what activities you engage in)
  • your ability to pay - which is driven by your wealth (relative to the liability claim)
  • how your assets are titled (joint, individual, type of trust)
  • who causes the claim (your child, you, or your spouse)
  • laws of your state
  • the aggressiveness of the plaintiff and their attorney
  • sentiment of the jury
  • facts of the case
  • the nature of your assets (qualified plan, IRA, or individually owned asset)
Umbrella Liability Coverage as a Simple, Low-Cost, 1st Step Practical Solution
With all of these uncertainties and your potential exposure, Umbrella Liability Coverage is one simple way to provide the coverage you might need (beyond the limits provided under your homeowners and automobile policies) in order to protect your assets and future income. If there appears to be more you should do to limit your risks (re-titling assets, purchasing business liability insurance, etc.), this should be discussed with an attorney.
 
Umbrella Liability Insurance as a Form of Ransom Protection
The plaintiff's attorney understands that time is money and really wants to settle cases as quickly as possible because they only get paid a percentage (~33%) of the final case amount.  If they settle, it will be quicker, incur limited expense to try the case, and they will not worry about having the jury come back with a bad verdict, unfavorable negligence ruling, or a small payout.
 
So the plaintiff's attorney will look at the case, determine the potential payout, and look at the insurance coverage first and foremost.  If you are a high net worth client and have the appropriate coverage (considering your net worth/income), then they will just look to have the policy pay.  However, if you are wealthy and have limited coverage, and the case is of sufficient value, the plaintiff will not only go for the policy (if any) but ALSO look at personal assets/income. In that case, they will take the risk of going to a jury to get at your personal assets.  Juries don't have much of an issue sticking it to the wealthy.
 
So the moral of the story is to have enough liability insurance to incentivize the plaintiff's attorney to settle with the insurance company and not put any of your personal assets at risk. 
 
How much Umbrella Liability Insurance should you have?
  • For most clients, we recommend a minimum of $1,000,000 in umbrella liability coverage. However, your total umbrella liability protection should be equal to the higher of the following:
    • $1,000,000
OR
  • The total of the following:
    • Your Net Worth (e.g., $1,500,000) , PLUS
    • 2 Years Income (e.g., $250,000/yr)
    • ≈ $2,000,000
In this example, $2 million is the higher amount. However, have your agent also consider the following: 
  • Underlying liability coverage requirements. Most umbrella liability policies require certain minimum underlying coverage from your homeowners and automobile insurance policies. Confirm with your agent that you have the required amount of underlying liability coverage required by your umbrella policy for your home, cars, and other insurable property.
  • Extension of coverage. Your umbrella policy must specifically state the insured interests covered. Confirm with your agent that your umbrella policy extends coverage to all of your real estate and cars.

Conclusion
With all of these uncertainties, purchasing an Umbrella Liability Policy would be a simple, sensible, low cost (~ $200-$400/yr.) way to provide the protection you may need.

Do the Opposite!

 

Jump to 1:45 seconds once video begins.....enjoy!

 

Rising markets have two very negative and interconnected effects. First, a rising market facilitates unrealistic hopes and high expectations about future stock returns. Second, a rising stock market actually lowers the future expected returns. This is because (to some extent) these recent returns are the result of expectations of future growth which drives up prices. Therefore, higher prices today reflect borrowing of returns from the future.

 

Yet what do people do when markets rise? Investors buy; and that act of buying results in locking in poor future returns. In other words when markets rise, "curb your enthusiasm", and when they fall, "do the opposite" of what everyone else is doing and buy!
 
The most comfortable investment advice will always be short-term oriented. "Go to cash". "Get out now, until things look better". "Everyone is making money....I better get in now". Uncomfortable advice (which is the opposite of what you want to do) is typically long-term oriented, yet best for your financial future. "Emerging markets have been hammered and are on sale". "I better take some profit by rebalancing my portfolio". 
 
Warrren Buffett has used an analogy of two business partners where one is highly emotional and the other is unemotional. The business' chief competitor is always trying to buy their business for the fair price of $10/share. When the partners' business gets a huge order from Walmart, the emotional partner wants to buy out the unemotional partner for $15/share. Then, when the order gets cut the next week, he fears he will lose everything and is willing to sell for $5/share. If the unemotional partner remains calm, he simply waits for the emotional partner to become fearful so he can buy his shares for $5 each, then sells them to him for $15 each when he becomes euphoric. This is what contrarian investors do. They do the opposite of the emotional partner. They simply sit back and wait for the market to price stocks for less than they are worth (in the long run) so that they can buy and lock in higher future returns.
 
In other words, instead of following your emotional instincts, which are wrong,do the opposite! While our instincts are there to help us in time of danger (such as an attack by a lion), our instincts betray us when it comes to investing.
 
Let's take a look at what our instincts can do to our future returns.
 
Future stock returns are driven in large part by the prices at which you buy today. If you buy when prices are emotionally high (think tech bubble), you are locking in poor 10-year future returns. If you buy when prices are emotionally low (think the financial crisis), you are likely locking in good 10-year future returns. Investing is not about winning today, this month, or this year. Investing is about earning the LONG-TERM returns you deserve given the risk you have taken. When markets are cheap, they give us great future returns. But the only way to capture these returns is by doing the opposite of your instincts.
 
If you followed your instincts and invested at the peak of the tech bubble (in the S&P 500), your 10-year returns were -3% annualized. If you followed your instincts and bailed out of stocks in the midst of the 2008 financial crisis, you would have missed out on to-date annualized returns of 13.83%.
 
We know that investors' instincts are wrong because studies show they move into top performing funds/markets after most of the good returns have been realized. These investors then bail out of the funds/markets after most of the losses have been incurred. These studies generally find that investors earn 30%-50% less than the investments themselves due to bad instinctive behavior.
 
The problem is that you have to have the guts to do the opposite. In the video, think of how George Costanza drummed up the nerve to approach the attractive woman in the coffee shop. He had the guts to do the opposite and it paid off!
 
If it feels like a good and comfortable time to buy stocks, you are going to pay a premium, and will likely get poor long-term returns. When things are unpleasant in the world and people are scared, then markets are priced to give you very good future returns. Do you have the guts to do the opposite, buying when others (and you) are fearful and selling when others (and you) are euphoric? 

As Jerry famously said, "If every instinct you have is wrong...then doing the opposite must be right!"

   

 

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@MallardAdvisors