Case Study #4:  Concerned Siblings


Far too many American families avoid discussing important issues regarding their parents; especially when the discussion has financial implications.   However, proactive planning, across generations, can often lead to wise long-term decisions.


In this case study, we make the following planning assumptions:


  • Four adult siblings are concerned about their parents, both age 65.


  • Their parents rely on a combination of pension and social security income, as they have little income being generated from their assets totalling $200,000.


  • The siblings recognize that a Long-Term Care event would likely wipe out their parents assets; requiring their parents go on Medicaid or that caregiving would ultimately end up as their collective responsibility.


  • Two of the brothers own a successful business, and they understand any financial responsibility for their parents would fall to them.


Below is the scenarios which might play out for this family.....


Scenario #1 (Red Line):

If Long-Term Care is never needed, their parents pension, social security and asset base should last them throughout retirement.....assuming all goes well.


Scenario #2 (Purple Line):

In this situation, the retirement plan would be insufficient to withstand a 5 year Long- Term Care event.  The siblings would be need to step in to maintian their desired care for the ailing parent and prevent them from becoming dependent on Medicaid.  Based on today's costs, more than $450,000 might be needed to cover just the cost of care.  Additional funds would be needed to maintain the lifestyle for the parent not in need of Long-Term Care.


Scenario #3 (Blue Line):

The brothers who can afford to do so, implement a Long-Term Care plan for their parents once they realize they can spend less than $12,000 per year and cover the potential Long-Term Care needs which either or both parents might require.  This would leave the parents retirement plan in place as well.  


Scenario #4 (Green Line):

In their analysis, the brothers recognize covering the Long Term Care needs for either or both parents would be significant financial burden.   Assuming just ONE parent had a Long-Term Care need, they would "break-even" even after assuming the plan cost for more than 35 year!!   If both parents passed on, and never required Long-Term Care , the plan they selected would return $250,000 to them in the form of a death benefit. 


They both know there's an opportunity cost for their plan dollar, however they look at it more pragmatically.  They see a second "break-even" scenario means, where both parents may pass on at or before year 22, and their net-cost for the plan would be zero. 




By planning ahead, the family can implement a Long-Term Care plan and accomplish multiple family planning goals.  For a reasonable annual cost, the siblings can maintain control of their parents future healthcare needs and protect their parents retirement assets.  Most importantly, if Long-Term Care is never required, they have the ability to recoup much, if not all, of the plan costs.

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