0:00:49.0 Kurt Baker: Do you understand the distinctions between assisted living, memory care, and continuing care retirement communities, as well as the contract types involved? Do you understand the advantages and disadvantages of each? With over 20 years of experience in senior living sales, marketing, operations, and leadership, including 11 years with Solutions Advisors Group, Paul O’Brien is here to teach you general knowledge regarding the cost of future care and to assist you in starting a conversation with your aging parents about the move. Today he will make you feel relieved that you can contribute to the development of a plan to keep your parents safe in the future. Alright, Paul, I appreciate you coming on. We meet all the time we run into each other at these different places. Even as somebody who is kind of quasi-involved from the financial side of this thing, every time you go to one of these facilities, it seems like they came up with a new way to do things. So I guess let’s just start off with the basics. You want to address each type of unit and what the differences are for us?
0:01:50.7 Paul O’Brien: Yeah, sure. Senior housing and senior care is always evolving. And now’s the time of year, as adult children, some of us are seeing our parents for the first time in a number of months and may notice changes. So it’s important to know what’s out there for them. So I mean, assisted living is pretty well known, right? And that’s for folks who need help with what they call activities of daily living. And usually that’s bathing, dressing, meal preparation, some level of socialization. Skilled nursing is, people are going into rehab and injury. Often times they have long-term care as a component there as well, where that’s the traditional nursing home that we are looking at. But lately, and lately, within the last five, 10 years, we’re seeing independent living creep up and more and more so in New Jersey. And independent living can come in a number of different flavors, right? It can be as a rental on its own. Sometimes it’s packaged with assisted living and memory care as part of that same community. And when it is, it’s usually in a rental format. But then there’s something that’s very different called a continuing care retirement community. And based upon your personal financial goals and situation, this could be a really good answer for you.
0:03:37.6 Paul O’Brien: And as a financial advisor, I’m sure some of your clients may be pondering this as well. It can get very complex. And it’s purchasing a contract for future care. And in other words, you’re also leveraging or you’re mitigating future risk of the cost of future care by preserving your assets and engaging in one of these contracts. So, typically, there’s an upfront entrance fee in a continuing care retirement community. And that could be anywhere. I mean, in New Jersey, there is a large breadth of ranges of different types of communities with varying amenities. But you’re going to look for what’s called a fee for service contract entry level probably somewhere in the mid-100s to low $200,000. And then you’ll also be paying a monthly service fee. And then there’s, I had mentioned that that is a fee for service contract. And in the industry, they call that a Type C. There’s also a Type A contract, which is called Life Care.
0:04:54.0 Kurt Baker: Oh, that’s for Type A personalities, no? No.
0:04:57.2 Paul O’Brien: Well, really, it’s for people who are planning and looking to preserve their assets. And what Life Care does, it’s really the difference between ordering à la carte off a menu and ordering for price fix. So à la carte or fee for service, you know what, I’m in independent living. I’m going to continue living here and enjoying life and having all these great things going on to keep my life having purpose. But let’s say I need some care in the future and I decide or the community helps decide with me that maybe assisted living is the best thing. You’re going to pay what that market rate is for assisted living. Whereas if you are in a Life Care contract, depending upon the community, you’re going to be paying pretty much the same rate that you were paying when you were in independent living. And the value of that is in the difference between what market rate assisted living would be versus independent living and how long you live there. And when you’re talking about the costs today, assisted living, really, we’re talking a starting point at $7,000 a month. And the more care you need, the more services that are required, the costs are going up and up and up.
0:06:17.4 Paul O’Brien: So with an average assisted living stay at about two years per person, those costs add up. Considering that if you are in assisted living, you’re probably going to be then transitioning to a higher level of care or maybe long-term care. And those costs are $13,000 a month. So when you do that math and you add that up and then you look at that entrance fee and that monthly service fee, you could quickly see that, boy, this really makes sense. So how do we have these conversations with our parents when we’re seeing that maybe the home that they’re in is not quite safe? Their environment may not be giving them a sense of purpose or social engagement. Maybe they’re losing weight because they’re just not cooking the way they used to, or maybe they’re going out to eat for most of their meals. That is really a difficult decision when you’re talking about being an adult child and how to have this conversation with your parents, how to bring it up. We might feel uncomfortable about it, but more often than not, the parents are pushing back. And think about you. When we were kids, our parents tell us to do something, what do we do?
0:07:47.7 Paul O’Brien: It doesn’t matter what it is. We push back because we want to assert our sense of control and independence.
0:07:54.2 Kurt Baker: Well, it’s tough when the children come in and try to assist, so to speak, and the parents may be in decline. And there’s a lot happening here. So we meet with the parents and usually you’re seeing some type of decline. It’s a physical decline, might be a cognitive decline. And you start getting worried about it. As you pointed out during the holiday, that’s when you tend to see your parents if you haven’t seen them in a while. And now you need to somehow open up that conversation. So we’ve got really a couple of pieces here. One is just approaching the conversation, first of all, and then getting in the nuances of maybe what works for them. So any recommendations you might have, like, okay, well, how do we open this up to our parents? Because one of the things that financial services, what we try to do at least is you try to do a multi-generational planning. And when you do multi-generational planning, a lot of these topics will kind of come up because it’s part of the planning process.
0:08:46.1 Kurt Baker: But let’s assume that hasn’t happened for a moment. If they haven’t actually had the generations involved, because the finances, of course, you want them to flow properly from one generation to another. And part of that is, of course, taking care and preserving the wealth through this type of planning for long-term care and assisted living and things like this that may occur. What do you say to the people that maybe haven’t had this conversation yet? So what are some ideas about how do we maybe bring this up to them in a way that doesn’t quote a… Because some parents are being like, “Oh, yeah, it’s great. I’d love to talk about it.” And some other parents are like, “Nope, I’m good. Leave me alone.”
0:09:18.0 Paul O’Brien: You are so right. When we’re fortunate enough to have both parents with us, more times than not, one of them is open to moving. The other one is not open to moving. And more times than not, the female is open to moving, mom, and the male is not. And why is that? Well, life for the husband doesn’t change that much over time. The woman seems to still have the traditional roles of maintaining the interior of the house, whereas the husband may have farmed out his responsibilities to the household, whether it be exterior maintenance or interior maintenance work, what have you. But for the most part, a lot is still riding on the woman’s shoulders, and she’s exhausted. She doesn’t want this anymore. But he’s saying he’s not going out of this house, but feet first.
0:10:20.3 Kurt Baker: Right. And another part of that, which is you’re probably talking about, is that… I don’t know about you, but my parents is like… My dad was happy sitting at home reading a book all day long, whereas his wife, my stepmother, she wants to go out, interact with people. She’s much more social. Now, I don’t know if that’s always the case, of course. I mean, that’s being a little bit sexist, but there may be one party that’s much more apt to want to be socializing. The other one’s just fine being kind of doing their own thing, right? A loner-type hobby of some kind. And these facilities tend to be really good. That’s one thing I’ve noticed as we were younger, is the facilities. It’s no longer you kind of put them away and they just look almost like a holding cell, so to speak, for somebody. I mean, it’s kind of sad. Now, I mean, I know a financial advisor personally, he actually went into a facility. He’s perfectly happy. He’s perfectly fine physically, but he wanted to have the amenities. And he liked the simplicity of the fact that, hey, it’s all taken care of.
0:11:17.9 Kurt Baker: I’m gonna go in, they take care of the house, and all of a sudden independent living is what he did. And with the idea that, hey, look, if I need to, I just move down the hall, I’m good to go.
0:11:25.2 Paul O’Brien: And that is someone who’s a great planner, has foresight, and understands the benefit of making this move while you’re young, so you can enjoy this. However, that’s an exception, not the rule. And you had said, how do we start this conversation with our parents? And one of them is being mindful of language. And in our industry, you just dropped the F-bomb by calling these places facilities.
0:11:48.8 Kurt Baker: Oh, sorry about that.
0:11:50.0 Paul O’Brien: Hey, you’re not offending me. But when we’re talking to our parents about this, we wanna be very mindful of that because facilities are cold, dark, cinder-block walls, and just a very cold and dark place is what we envision when we say facility. But when we talk about a community, communities are vibrant. They have things going on, people from different backgrounds and different types of things to experience.
0:12:20.4 Kurt Baker: So I definitely wanna talk about that, but let’s talk about the facility, which we don’t talk about anymore, the community, which I know it much more is like, because I’ve been to a lot of these that are really actually very nice. We’re gonna take a quick break. You’re listening to Master Your Finances.
0:12:47.8 Kurt Baker: Welcome back. You’re listening to Master Your Finances. I’m here with Paul O’Brien and we’re talking about the different types of community care locations not to be called facilities, which is what I always had called them growing up. But they really are. So anybody that’s been involved in this a little bit, I know my father went around and they literally were shopping these locations with the idea that, hey, if and when the time comes they have all the financial planning part in place. So it’s more of a matter of like, what do they want and when maybe they might need it. So that’s the best way to do it, obviously. The earlier you plan, and as I mentioned, I have an advisor friend of mine and he literally lives in an independent living facility because he likes the convenience, the fact that he can just come and go when he wants and that’s it. Nothing to worry about. Everything’s done. He likes the activities. So it’s kind of like going away on vacation every day a little bit.
0:13:38.6 Paul O’Brien: Kind of, kind of. You know, a lot of people who do make the move into these communities, they always say, I wish I had made this move five years earlier. But it’s a battle. It’s a battle within themselves because of the perceived giving up of independence. So much of our identity is wrapped up into our home and these possessions that, this is the dining room table where we had every holiday dinner and none of the kids want it.
0:14:10.2 Kurt Baker: Right. That is true. Kids don’t want the furniture, that’s for sure.
0:14:12.9 Paul O’Brien: No, no. When I was growing up, we were taking all furniture from our parents. Anything free was good. No one wants that furniture anymore. So it’s becoming increasingly difficult to downsize. But getting back to like, how do we have this conversation? And based upon who your parents are, the dynamic, your relationship, it’s going to vary. But one thing is going to be common, that they are probably going to perceive this move with giving up some level of choice and control over their future.
0:14:46.2 Kurt Baker: It’s like taking away their car keys.
0:14:50.1 Paul O’Brien: Well, that’s the next one. That’s the next step after that.
0:14:53.4 Kurt Baker: You lose that little bit, you feel like you’re losing it, but you’re really not.
0:14:58.1 Paul O’Brien: You’re not, but it’s the perception. Think about them as adults and they’re losing their friends. Maybe they’re not comfortable driving at night anymore.
0:15:07.2 Kurt Baker: That’s an important factor that you just pointed out. I talked to my father about this a lot. As he’s had his friends pass away, I’m like, look, you need to continue to make new friends. There are people, they’re not going to be ones you knew for 60, 70 years, 80, whatever the case may be, but you can make friends and you continue to do that. That keeps you active, it keeps you engaged, it keeps you healthy.
0:15:32.3 Paul O’Brien: It is. That is so scary. I still have this memory when I was in kindergarten, riding on a truck, crashing with some kid. We looked at each other and we said, well, you want to be friends. There you go. Then we’re like, yeah, we’re friends. But it’s much more scary when you’re in a senior community all alone. You don’t know anyone. It’s very difficult, but it becomes just as easy as when I was in kindergarten to make friends and have great relationships. Really, I’ve said purpose a lot here, but that is also something very important that we make sure that our parents have throughout their entire life and that we have, because purpose drives us. It keeps us youthful.
0:16:14.6 Paul O’Brien: That’s just very important. Many of these communities have many volunteer opportunities where people can use what their profession and their skills are and put that to good purpose for the greater community.
0:16:27.8 Kurt Baker: One piece of this I think is always important, from my perspective at least, is I try to emphasize to people, you want to continue to be their children and not their caregivers. Part of this process, I think, is what will happen, at least what I’ve seen, is what will happen is they’ll say, okay, I just need you to come over and cook dinner for me once or twice a week, and then it’s three or four times a week, and then it’s all week, and then it’s like I need you to do the laundry. Now all of a sudden you’re becoming the caregiver, so when you come over, you’re not really excited to see your parents because you know you have a list of chores you have to do, which all of us as children don’t mind doing things for our parents, but we don’t want that to be 90%, 95% of our visit. If you plan properly, you’re coming over and you have the services in place. You’re coming over to visit with your parents. In fact, I have frankly learned a lot more about my father since he’s retired, and I’ve become closer to him on a time basis by visiting without other things that need to be done, like I’m going to school or he’s going to work or these kinds of things.
0:17:21.9 Kurt Baker: You get to have deep conversations. You get to actually learn who your parents are if these other things aren’t happening in front of it.
0:17:29.3 Paul O’Brien: Absolutely, and you’re happy to be there and engage rather than trying to run through all these chores and then run home to do your home responsibilities as well. There’s a lot of great story writing services out there that help our parents out there, but in any event where we get back on track with having this conversation with your parents, working with facts is best rather than your opinion or our opinion, and if they happen to have a financial analyst or someone that’s working with them, that would be a great way to start the conversation by looking at what is it that we have here? What’s at risk? What does the future look like? It can be as simple as starting that conversation, say, “Hey, maybe we should start talking about what the future looks like”, and maybe not over Christmas dinner, but planting those seeds and then following up on them, because really you only know what options you have until you know what you have. Many times people are staying in their house because they think they can’t afford to make this move, but when they add up what their monthly cost is to stay in that home, oftentimes it’s equal to or less than to move into a community that’s including all of your utilities, a good portion of your meals, social engagement, transportation, you name it.
0:19:08.0 Paul O’Brien: And allowing them to use the time to do things that they want to do instead of things that they have to do.
0:19:15.1 Kurt Baker: No, I agree 100%, because and sometimes if you’ve been fortunate to own a home your whole life, you probably have a decent amount of equity involved, and now you’re really just transferring it over to something that’s probably a little bit smaller, it’s probably a little bit more manageable, and as you point out, then that frees up your time, and it also frees up assets that you can use to pay for this, because if they’re invested properly, then you’ve got the income and the availability to cover all these costs, and you can preserve the capital if you want to for your kids if you want to, or use it for your own living, and that’s what you earned it for, is to take care of yourself as you age. Just by taking care of yourself, you’re taking the burden off your children, because in some cases they’re not always planning properly or weren’t able to plan property for whatever reason, and now a lot of this burden comes down to the children, and I have known situations where that occurs as well, where maybe the parents aren’t quite ready, and then the family really gets kind of involved, because somebody has to help take care of them, at least a good family is going to say, “Hey look, somehow we take care of mom and dad, what are we going to do as a family to do that?”
0:20:17.3 Kurt Baker: So have you seen those types of situations where the kids kind of get involved and try to help them with this process to manage this?
0:20:23.3 Paul O’Brien: Absolutely. One thing that you did mention there about those who do move in and the kids getting involved, a very common phrase that people who move into a continuing care retirement community say is, the greatest gift I ever gave my children was moving to a community like, insert name here, because it does take the burden off of the kids that they can visit with them, that these parents as planners understand the value in being the parent and the child being the child, and that the caregiver is a third party.
0:21:02.7 Kurt Baker: And that’s a great point, because part of the planning, that’ll often come up, that comment will literally come up, like look, I want to make sure I take care of this now, so it doesn’t become an issue that my kids have to deal with later, even if the finances are fine. It’s just, I want to be able to say, “Hey, when the time comes, this is what I’m going to do. It’s all taken care of.” You just turn the switch on and we move through. And that way, you’re going to the facility you want to, you’re going with the terms that you want to go with, and so to speak. So it really takes a lot off the family, because the other side of the coin is people don’t plan and all of a sudden there’s a tragedy, and all of a sudden you’re in panic mode, and you don’t really want that to happen.
0:21:37.4 Paul O’Brien: We see that a lot as well. The emergencies is typically when a family member has a fall in a home. Many times we see that once someone has a fall, then there is a string of things that happen after that, and yet begins the decline. And that’s another reason for trying to help them get out of the house. Many times, if we’re able to intellectually appeal to them and they say, yeah, you know what, this sounds like a good idea. But to get them out of that house now that they’ve been living in for 50 years with all of that stuff that no one wants, but they have deep emotional attachments to, is the next phase in this whole process is how are we going to get them to decouple from their stuff and move forward with the sale of this home so that they can enjoy their life with out this stress and anxiety about getting rid of this house. Then there’s great services out there to help them called senior move managers. And I know we…
0:22:53.5 Kurt Baker: That was great I was going to bring that up, but you brought it up. Because there are people that actually help with that whole process, and that are experts in helping you to take your possessions and send them off to places that will do good. And that’s the thing. I think a lot of times people are like, why do I want to throw this away? I don’t want to get rid of it, because it’s nice.
0:23:06.7 Paul O’Brien: They want to feel good about it.
0:23:08.4 Kurt Baker: But if you couple that with somebody who actually needs whatever these items are, then you feel good about yourself, whether it’s a charitable thing, now you’re taking deductions, and whether somebody may want it, depending on what it is, of course you may sell it. But you can definitely go through the process, and they’ll know all the areas to send these things, because this is what they do. They help people to either downsize or move into a community like this. And so that way, there are people that will assist with that.
0:23:34.3 Paul O’Brien: It is worth every penny, and many times the community that they are thinking that they’re going to move to eventually will pick up that cost, or a portion of that cost. These services, they will even sit down with mom and dad, and go through box by box of what they’re going to keep and discard. They’ll take the floor plan of their future dwelling, and say, “Hey, what’s going to fit? What’s not going to fit? And now let’s create a plan for everything that you’re not bringing with you.” And that’s where all of these different entities come into play, whether it be auction houses or donations. It’s great. It helps the person get excited for the move, because there’s structure. They have a plan. And really, having a plan, whether it could be a two-year plan, but let’s start the plan. And having these conversations with the parents, I had mentioned language is very important. One of the things that I would say is, anybody listening to get the book, How to Say It to Seniors by David Soli, and if you’re just going to skim, I would pay particular attention to chapter two, which is all about control.
0:24:50.3 Paul O’Brien: And I can tell you a story about that when we get back.
0:24:52.6 Kurt Baker: Absolutely. We’re going to take a quick break. You’re listening to Master Your Finances.
0:25:10.0 Kurt Baker: Welcome back. You’re listening to Master Your Finances. I’m here with Paul O’Brien, and we’re talking about that transition phase. And honestly, as you were saying this, I think of these decluttering programs. They may want to do one focused on seniors, because it’s such a positive outcome when people go through this process. I think they would really show people, like, hey, this is actually a positive event, not necessarily a negative event, because when they’re done, it’s kind of like the stress of these things are off your back. And honestly, the people that are minimalists and things like that, that kind of declutter and remove all these extra things that really, they probably haven’t used them in years, most of the stuff. They just keep it because they never know. You never know when I might need such and such. And so you do that. Anyway, I know that everybody that I’ve ever had go through this has always said it was a good experience and may not be enjoyable initially, but once they kind of get going and they get through the process and it’s all done, they realize, hey, my life is a lot simpler, it’s a lot easier, and I’m enjoying it more because now I’m spending more time on things I actually want to do instead of holding onto things from many, many years ago that really aren’t in my life currently.
0:26:14.8 Paul O’Brien: And wondering what’s going to happen, what am I going to do with this? And now they’ve landed and they’re free.
0:26:21.2 Kurt Baker: Yeah, exactly.
0:26:23.2 Paul O’Brien: They are free. You know, I had mentioned the book earlier by David Soli, How to Say It to Seniors. In that book, he tells a story, and I’ll just paraphrase, of course, about a man probably my age, 55, having a conversation with his mother. She’s been in the house, the home he grew up in. Dad’s passed on years ago, and he doesn’t want to leave the house. She doesn’t want to leave the house. He keeps on saying, Mom, you got to go, you got to go. This is not safe for you. I worry about you bringing the laundry down the stairs and coming back up. I worry that you’re going to… All these things that we conjure up when our parents are living alone and we know that it’s probably not the safest environment. So his approach of telling her she had to move for years was not working until he decided to give it a different go. He said, “You know, Mom, let’s try to figure out how we’re going to keep you in this house. And in order to keep you in this house, we really need to move the laundry up from the basement to the main level. That’s probably going to cost X dollars.”
0:27:32.5 Paul O’Brien: I mean, he has a spreadsheet he’s done throwing down there. “Your roof needs… You need a new roof. You got it 30 years ago. We got to replace the roof. It’s leaking through. That’ll probably be another 10, another $10,000. We got to modify your bathroom. It’s not safe with that tub in there anymore. And it’s on the second floor. So we might want to talk about a stair lift or maybe we’ll bring a bathroom down on the first floor and that could cost $20,000, $25,000.” She’s quiet and he’s just looking at her. So we have a list that’s probably already over $50,000 on a very modest home. And she looks at him and she goes, “There’s no way I’m throwing that money into this s-hole. I’m moving.” But she came to that decision on her own. It was her choice. He was trying to help her stay home. When he called off the dogs and made it her decision, she arrived there on herself. But when we’re trying to jam this information, just like our kids, when we’re trying to, cause we know best, when we’re trying to tell them what they should do, absolutely.
0:28:44.3 Kurt Baker: If you tell me to do something, that’s what I don’t do.
0:28:45.8 Paul O’Brien: It doesn’t matter how much it makes sense. I’m probably going to say no, just to assert myself. And that’s what our parents are doing all the time. And we need to approach this differently. There are a lot of folks out there that we work with all over the country who have been thinking about this for years. Those folks are very unique. They’ve thought this way their entire lives, but many of us arrive here and figure now what? And we don’t want that crisis that we spoke about earlier. We don’t want that fall to cause a rehab stay and then an immediate entry into assisted living where now they’re being cared for. It would be great to get them on this train much earlier so that they can enjoy their life and not living in fear, having us live in fear. And these communities are really great. They do a lot of wonderful things. There are many in New Jersey. CCRCs are usually not for profits as well. So there’s a lot of good there.
0:29:56.1 Kurt Baker: No, I think it’s great. And I think you got to a basic human emotion there. I mean it’s better if we help to educate people in making the decision on their own without forcing them into that. So I think it’s a gradual process, I think, for all of us to go from being completely independent and building our house and raising our kids and doing all these great things that we did to the point where we actually kind of reverse that a little bit. I want to kind of simplify. I want to get rid of some of this stuff. But somehow you don’t want to let go of some of these things that you built up over the years. But if you start off with a process of, okay, well, let’s have somebody help you at home. And then when it gets to a certain point, that no longer makes any sense. It’s getting expensive. You start making modifications to the house. Maybe now it’s time to move on to something that actually makes more sense for you. And I think as long as there’s an education process… And I know most of these facilities, you can go in and you can tour them, you can see them, you can get a good night…
0:30:47.8 Paul O’Brien: You can stay a weekend if you want to.
0:30:49.8 Kurt Baker: And I think that’s key, right? To get a feel for what are… Because I don’t know what these places… Because I hear other ones where you’re in your own room and you’re kind of by yourself. Other ones were like, they eat dinner together. And they… I mean, there’s just all kinds of different ways of doing this, right? It’s like, what do you like? Right? So kind of walk through the different types of facilities that are out there and just how we educate our parents or even ourselves, depending on how old we are.
0:31:16.0 Paul O’Brien: So first off, I would try not to go on these appointments with my parents, if possible. Or at least not the first one. Or if you do, try to say as little as possible. Oftentimes we’re so excited that our parents are here and that they’re considering this, that we wanna try to sell them on it while we’re there. But what’s most important is for them to walk in and just feel that vibe and see if it jives with them. Anywhere you walk into, you kind of feel the energy of what’s going on in that place. And before you even talk to someone, it’s important for them to feel that and for them to have… For them to be the focal point and for them to spend time with people who live there, maybe have a meal with them or share a mutual activity or something. But we need this to be their decision. And we’re not helping by joining them on this journey. But back to your original question, what are these places? Well, like I said, what’s that vibe? What’s the personality of the community? Each community has a different thing that they specialize in.
0:32:34.9 Paul O’Brien: They all, for the most part, are having really good wellness programs that offer fitness instruction, great gyms. Many have pools, group exercise classes, options for personal trainers, but maybe fitness isn’t their bag. So what else is there for them there? Many have wood shops, many have clubs. The more you can find in a community that has more resident-driven programs, in my opinion, is the best because it’s what they want. They are in charge. And when we’re trying to provide for, we often miss the mark. We want it to happen organically and have these clubs occur and that these people who truly have these interests celebrate them. We have a community I work with in Freehold. They have something called their university, where a woman who was a college professor brings in guest lecturers, and she has a committee of folks who share what topics they want to hear. And they love it. They’re feeding their mind, and that’s what they want to do. Other folks may want to use the ride share program or swim laps or read in the library. We can still read if we go into these communities. We don’t have to be home.
0:34:04.6 Kurt Baker: I know one of my clients puts on a biennial show. They put on an actual performance twice a year.
0:34:09.8 Paul O’Brien: Yes. And oftentimes, they rope the staff into participating as well.
0:34:14.6 Kurt Baker: Yeah, so as you point out, a lot of these things are driven by the residents of the community. And if you get along, as you pointed out, the vibe, I agree with that 100%. When you go into almost any kind of facility, community or anything, for that matter, whether it’s a school or it’s a company or whatever the case may be, you get a sense of how people are a little bit. And you get that feel when you talk to people, like, how does everybody operate here? How do they communicate? How do they get along with each other? And if that’s something that appeals to you, you’re going to notice that fairly quickly, I think.
0:34:49.0 Paul O’Brien: Right. And do you feel that you can fit in there?
0:34:53.3 Kurt Baker: Right. Right. So once we get the process going and you make the decisions, right? So now what happens? You said there’s different types of contracts and stuff, right? So you want to kind of walk through, okay, we kind of found… We walked around, we’ve surveyed, we’ve seen things that are going on there. And now we need to go to the next step, which I think we’ll take a quick break. But let’s kind of go through the mechanics of, hey, I found a place. Now what do I do next to get myself ready? What are the best ways to be ready? And then actually to make that move to commit to a particular location.
0:35:27.9 Paul O’Brien: You got it.
0:35:28.7 Kurt Baker: You are listening to Master Your Finances, we’ll be right back.
0:35:42.6 Kurt Baker: Welcome back you are listening to Master Your Finances. I’m here with Paul O’Brien and we’ve kind of gone around and we got our parents are a little bit engaged and we left a minute ago. And so they’re at least thinking about that process. And I think the best way to do is just have open communication, let the decision be theirs. Kind of just talk about the different things. How do we take care of things? Like if you need to go to the second floor, we have to move the bathroom. I mean, who’s going to take care of the roof? Who’s going to start maintaining these things? I know that was my father. He moved from a large house into a townhouse. He’s been there very happy for many, many years. But at the time he’s like, I don’t want to give up my acre of land. I don’t want to give up all the stuff I’m doing. But once he moved, he’s like really happy. So he’s already in that mindset where he knows that when he moves from the townhouse into something might be a little more care involved. He’s done that once in his life. So he’s kind of experienced that, oh, what I thought was great is actually better now that I have less that I have to do and I can focus on what I enjoy doing.
0:36:31.7 Kurt Baker: So once they found a location, they got the vibe and it’s the kind of place they want to go to. What happens next and how do you engage with a facility and get yourself kind of moving?
0:36:42.6 Paul O’Brien: Before I answer that question, you had said something that I held on to and you said thinking, right? And when we look at folks who are pondering a move into some sort of senior living arrangement, we think of them in one of any four stages of readiness for change. So either we are in denial where I am never moving out of my house. I love my stuff. I love my family. I am never moving out of this house. Thinking, I wonder what life would be like if things were different. Planning, I’m moving. It’s just a matter of when and what am I going to do? What’s my next step to get to a place? And then action, hey, I’m ready to go. I just have to select the place. So what’s very important is that if we’re dealing with someone who’s only thinking about this, to not try to bring them across the finish line. Is that we want to address them where they are. But back to your question. So let’s say your parents have toured this wonderful community. They’re like, “Huh, maybe I could see myself here.” So what’s the next step? It’s really to review the financial part of the transaction is what type of contract am I going to go for?
0:37:56.0 Paul O’Brien: What makes most sense for our personal financial situation? And one of the things that may impact that decision is whether or not they have something called long term care insurance. Which…
0:38:14.4 Kurt Baker: Oh yes. Any planner is a big advocate of that because it takes a big burden off your plate.
0:38:18.8 Paul O’Brien: My God, does it ever. Depending upon your policy, of course. But just to define what long term care insurance is, is that once you’re unable to complete three or five activities of daily living based, whatever that policy will say.
0:38:35.1 Kurt Baker: Yeah it’s two of six?
0:38:35.3 Paul O’Brien: Two of six?
0:38:38.0 Kurt Baker: Right, two of six, right.
0:38:39.4 Paul O’Brien: That might enable you to benefits for home care in your house or assisted living services and other types of things. And that certainly will help defray the cost of a continuing care retirement community. And if you do have a good long term care policy, you might want to get that fee for service contract. But maybe your spouse doesn’t. So maybe a life care contract works best for them. But once you make that decision of fee for service or à la carte versus life care or price fix, between those two, there are also degrees of refundability.
0:39:19.1 Paul O’Brien: So I mentioned this is an entrance fee. So it could be 100,000. Many communities have million dollar entrance fees. It depends on the accommodations, the size of your apartment, et cetera, et cetera, et cetera. But they also offer anything from what’s called traditional, where at a rate of 2% per month after an initial off the top, usually amortizes the entire entrance fee to that community over the course of four and a half or five years. There’s also a 50% contract. There are 90% contracts, 100% contracts. And what that means is that that is refundable to you or your estate after you leave that community.
0:40:13.0 Kurt Baker: So let me kind of restate that a little bit. So let’s say there’s a 2% per month. So if I give you $100,000 and that’s 2%, so it’s 2,000 per month, they’re keeping, correct? So after I stay there a month, there’s 98,000, then it’s 96, and then 90… Okay, I just wanna make sure I’m…
0:40:26.5 Paul O’Brien: Correct. And if you leave within two years, well, then you’ll have a refund due to you.
0:40:31.0 Kurt Baker: Right. So you have a refund. So I guess, I didn’t mean to interrupt you, but let’s say I’m in there, I’m in there for a year or two, and I’m like, this is a good facility, but now either I wanna move or I need to move. And that’s when these refunds come into play, right?
0:40:45.9 Paul O’Brien: Correct.
0:40:46.6 Kurt Baker: I mean, is it a unilateral decision or… I mean, because sometimes the resident will make the decision and sometimes maybe the facility will make the decision saying, hey, your condition has declined to a point where we really can’t accommodate you anymore, right? Maybe they need memory care, maybe they need additional assistance physically.
0:41:00.0 Paul O’Brien: Maybe your kids moved to California and you wanna be close to them.
0:41:03.9 Kurt Baker: So how does that kind of process usually work?
0:41:04.0 Paul O’Brien: So it’s regulated by the DCA, the Department of Community Affairs, and that the refundability is in the order of notice given. So if I’m the 10th one who has given notice, then I will get my refund after the 10th apartment has been sold. So that’s a real dummy down version of how this refund works. But you could wait a year for that to be refunded to you, depending upon how many folks…
0:41:38.2 Kurt Baker: They have to re-rent or resell or whatever you call that.
0:41:41.9 Paul O’Brien: So it’s not that specific apartment that was changed, I believe, in 2017 or 18. It’s a sequential number of…
0:41:47.2 Kurt Baker: So four people leave this month, let’s say it’s just four for simplicity, then I have to wait till the other three, those units, whatever they may be, have been refilled, so to speak, then I would come next. I may still be paying that 2% per month until that happens or…
0:42:04.5 Paul O’Brien: That might be contract specific. Once you’re giving notice and you are no longer residing in that dwelling, you should cease from paying any monthly fees.
0:42:16.3 Kurt Baker: Okay. But at least it’ll be static. So let’s say they owe me, whatever, $75,000, I may have to wait a year or two until that money comes back to me. So they hold that until they’ve replenished the facility itself.
0:42:25.4 Paul O’Brien: Correct.
0:42:27.3 Kurt Baker: Okay, understood. All right. So now that I’m in a way… That’s pretty much either case, right? Many cases, either I move because I want to, because my kids moved to California, or maybe the location has said, “Hey, we can’t really take care of you anymore because we don’t have the capacity, we don’t have skilled nursing, we don’t have memory care, we don’t have… ” Whatever the case may be.
0:42:45.9 Paul O’Brien: Right, right, right.
0:42:47.0 Kurt Baker: And we’re probably better if you move to a facility that can actually accommodate you.
0:42:49.1 Paul O’Brien: Right, the community can make that request for your exit based upon care or a variety of other factors. And that same process would take place, is that there would be a waiting. Unless it’s a one off situation and they really want you out of there for some reason, I’m sure they’ll cut a deal. But yeah, the refunds due are regulated, like I said, by the DCA. It is state specific, so these rules do not apply in every state. This is specifically how New Jersey does it.
0:43:27.4 Kurt Baker: Okay, so it’s all regulated, so at least you have that…
0:43:31.1 Paul O’Brien: That is a level of comfort for the family, yes.
0:43:31.2 Kurt Baker: So they know… Okay, because I know initially there were some issues with that, which I think that’s been fixed by regulation a little bit, right?
0:43:37.4 Paul O’Brien: Yeah, back in ’17 or ’18, there was an issue with a family member who felt that the community was not appropriately marketing his former… His parent’s apartment. And so he sued. And that ended up changing the regulation. And I think it’s better for the consumer, to be honest with you.
0:43:55.7 Kurt Baker: Yeah, now it’s a much more known process. I think it’s better when everybody understands the process, so we all know our risks on either side of the coin.
0:44:02.6 Paul O’Brien: It’s much more transparent than it was, yes.
0:44:05.4 Kurt Baker: Right, yeah, because you don’t want it to be… Right, you don’t want cloak and dagger when you deal with this stuff. There’s a lot of money at stake, and many times it’s one of their largest assets, so we want to make sure we take care of that, right?
0:44:14.4 Paul O’Brien: Absolutely. And choosing between a 0% refundable, essentially, which is the traditional, the 50% of the 90%, your personal financial situation is going to be able to dictate what the right move is in that situation. Life care, fee for service, refundability. But there are a lot of factors to consider. I’d be happy to… If anybody wants to ping me on LinkedIn, I’m happy to answer your personal questions about that.
0:44:41.9 Kurt Baker: Yeah, these things get down to very specific situations. I know when we do things as well, a lot of it has to do with their personal choices, their family history choices, things that have happened to them, and the likelihood their kids might move, all kinds of things, right? You can factor into these things, then you kind of come down. As you ping off each one of these items, then you kind of come down to a kind of a consensus of, well, this probably makes the most sense, and get it down to a relatively small number of choices. Because there are a lot of choices, and I know there’s a lot of good facilities out there now. So I think it’s amazing what this sector has done for seniors in general, because I know many, many seniors like this type of living, which is kind of cool, right? I mean, I think that’s great.
0:45:20.9 Paul O’Brien: Well, they love it once they’re there. You know? We just got to get them there.
0:45:26.1 Kurt Baker: So if you want to touch on a little bit, some places have places that will actually help you find a place, but sometimes you find it on your own. So do you have any pros or cons for just shopping this on your own, or using somebody’s service?
0:45:37.6 Paul O’Brien: So like a referral service? Yeah.
0:45:40.7 Kurt Baker: Because I know there’s pros and cons to that. Do you want to touch on that at all?
0:45:44.3 Paul O’Brien: Sure. I mean, there’s a place for mom out there. They advertise a lot. But it’s important to know, when you’re using a service like a place for mom, they are only referring you to places that have agreed to pay them if you move into their community. So you’re not seeing everything. And maybe that great community is one of the ones that chooses not to work with a referral service agency like that. There are what they call, they use the term geriatric care managers or elder care managers. I would say they’re probably your best bet. They will, if you’re out of town, they would come check on your parents, see how things are going. They offer bill paying services, Medicaid, and anything you could imagine to be able to have someone in that case management role, if you’re not able to act in that role, or as we discussed earlier, don’t want to act in that role.
0:46:52.5 Paul O’Brien: That’s a great option because they are, in my opinion, as independent as you could be, because they are usually a sole proprietor who are very connected in the local community that your parents reside in and are connected to all different types of services that could benefit them.
0:47:14.3 Kurt Baker: Yeah. I think it’s amazing. I know we have to wrap up here now, but I think one of the points, and I’ll let you finish wrap up after this, but all these different things that are kind of mysterious to those of us that haven’t gone through this process, there are actually solutions for each piece of that, whether it’s to find a location, whether it’s to sell the house and hand off your assets to somebody, maybe if the kids don’t want the furniture, to even just taking care of your bills and all these other things. But when the process is done and you feel comfortable with each of these pieces, we find, at least that’s my find, that most people are very, very happy with it as long as they go through a process to satisfy all these other issues that may be of concern of theirs. So any last words before we sign off?
0:47:53.5 Paul O’Brien: Yeah. I mean, right now it is a process. During the pandemic, every community shut down and many shut down to admissions or new residents. And then 2021, it was like the floodgates opened and many communities saw record number of residents entering the communities. One, because people were stuck at home and two, because the real estate market was going out of control. And they were seeing numbers that they never thought that they were going to be able to get for their house in one day on the market. They don’t have to repair their home. There were so many positive signs that people were making this decision to make this move much more quickly. Now the usual gestation period of someone making this decision is usually 18 to 24 months. So we are going to be moving back to this decision taking much longer because of the financial environment. People are slowing down. So my advice would be, let’s start that conversation. Let’s get that book, learn how to talk to our parents and help them live their best life.
0:49:03.0 Kurt Baker: Awesome. Thank you Paul. I appreciate you coming on and helping us with that. You are listening to Master Your Finance. Have a great day.