UPDATE: My elderly uncle has dementia -- do I pay off his mortgage before he can no longer live alone?
By Quentin Fottrell, MarketWatch
This man is the sole caretaker and advocate for his 76-year-old relative
I am the advocate and caretaker of my 76-year-old uncle, my father's brother, who has dementia. I took over his financial affairs five years ago and things are fine (now) but the requirements for care and the related expenses are growing. He still lives in a nice home that is 77% paid for and the monthly mortgage is about $1,400. There is a comfortable flow of income from a pension, social security, an annuity and a 401(k) that covers most of the daily living expenses.
Sadly, his condition will not improve nor will it stabilize. It will just continue to get more severe and, at some point, we will likely have to move him to full-time institutional care. He does not want to leave his home that he is very proud of and I want to respect that wish to the degree possible, but my sense is that his care needs will exceed in-home care (http://www.marketwatch.com/story/new-ways-to-pay-for-long-term-healthcare-2015-07-09).
My question is about the mortgage. Should I be paying it down at an accelerated rate while there is the opportunity to ensure that his home is an asset that can be made liquid in the event we need to move him to a facility? Based on my research, the monthly expense of a facility will exceed his income by at least 30% for even the most modest condition appropriate care solution. He has a good rate: 3.89%.
Don't miss: My stepsister moved into our late sister's home -- is she entitled to any inheritance? (http://www.marketwatch.com/story/my-stepsister-moved-into-our-late-sisters-home-and-tried-to-take-money-from-her-bank-account-2017-01-17)
I have a career and a family to support including one about to start college. While we do just fine sitting squarely in the middle class we do not have the volume of disposable income required to bridge the expense gap for my uncle in a full-time care scenario and still cover his mortgage. I don't mean to sound selfish, but the math just comes up short. I hate that I can't do more without dipping into my retirement savings.
The rest of the family (including his daughter) seems comfortable with me handling all of this -- which is fine, I guess -- so I think it unreasonable to expect any of them to step up as expenses escalate.
The goal is to be prepared for the greatest need and not to make an impulsive decision that has unforeseen implications. I am trying my best to be strategic, but I am burdened by a sense of dread that I'm overlooking some critical component in this calculus. What would you do?
Jim from Illinois
You're not selfish. In fact, you're quite selfless. And that may need to change.
You need to call a family meeting, and approach this as a team, or find someone who will help you with this burden. Even if his daughter lives in another state, she should help with financial planning. From what you say in your letter, she seems happy enough to sit back and let you do all the heavy lifting. That has to stop. (Of course, she may become involved, like so many relatives who write to the Moneyist, when inheritance becomes an issue.) There may come a time when you can't do all of this alone. Prepare for that now.
You haven't said whether you are officially his power of attorney. That needs addressing as soon as possible. A power of attorney, as my colleague Alessandra Malito noted (http://www.marketwatch.com/story/why-every-adult-should-appoint-a-power-of-attorney-2017-01-25), is a document given to a trusted person who has authorization to make personal, business and legal decisions on behalf of someone in the event they are incapable of doing these things themselves. In this case, the power of attorney will have to deal with insurance companies, doctors, elder care facilities and financial institutions.
Also see: I (secretly) charge an hourly rate for caring for my mom (http://www.marketwatch.com/story/i-secretly-charge-an-hourly-rate-for-caring-for-my-mom-2015-02-06)
Your uncle's house has equity, given that 77% of the mortgage has been paid off and I assume it has increased in value since he originally bought it. "Once the decision is made to move him, select a facility where he can pay monthly rent and will not have to put a huge down payment," says Emily Sanders, an Altanta-based certified public accountant and registered financial gerontologist (a health care professional who specializes in ageing).
Renting out your uncle's home will preserve his cash and, if the expenses escalate, then you can decide to sell, says Sanders, who is also a managing director at financial management firm United Capital. Given that interest rates have been at historically low levels (http://www.marketwatch.com/story/mortgage-lending-is-so-tight-more-people-arent-even-bothering-to-apply-2017-02-14), she doesn't recommend burning through cash by paying off the remaining mortgage.
"In many families, the adult children and other capable relatives chip in to create a monthly stipend for the elder person that will supplement his living expenses," Sanders says. "If the house proceeds are not enough, when combined with his pension, social security, annuity and 401(k), you'll want to prepare his other relatives now that they'll be asked to share the burden."
Read:7 beautiful things Debbie Reynolds and Carrie Fisher taught us about caring for an aging parent (http://www.marketwatch.com/story/7-beautiful-things-debbie-reynolds-and-carrie-fisher-taught-us-about-caring-for-an-aging-parent-2017-01-06)
Medicare doesn't cover long-term care expenses and, assuming your uncle doesn't have long-term care insurance (http://longtermcare.gov/costs-how-to-pay/what-is-long-term-care-insurance/you) and, given his age, you wouldn't incur any penalties for dipping into your uncle's retirement savings. (In most other cases for younger people, there are very, very few occasions when this is a good idea (http://www.marketwatch.com/story/when-its-ok-to-tap-your-401k-2013-11-07).)
The Moneyist has received so many letters from people who don't want to take care of their relatives and about people who are taking advantage of the equity in their home (http://www.marketwatch.com/story/my-sister-is-pushing-our-mother-to-sell-her-2-million-home-2016-10-17) and money in their bank accounts (http://www.marketwatch.com/story/help-my-late-uncles-girlfriend-cleaned-out-his-bank-accounts-2016-01-27). It's a welcome change to hear from someone who just wants to get it right, and is asking the right questions now, before there's a crisis, financial or otherwise. Unlike so many letters I receive, you never mentioned any possible inheritance (http://www.marketwatch.com/story/my-drug-addicted-friend-signed-away-his-800000-inheritance-to-his-brother-now-hes-clean-can-he-get-it-back-2017-01-24) or wills (http://www.marketwatch.com/story/how-do-i-overcome-my-angry-stepmother-to-get-hold-of-my-late-fathers-will-2017-01-23) once.
It sounds like you've done a great job so far. You should be very proud.
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-Quentin Fottrell; 415-439-6400; AskNewswires@dowjones.com
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11-14-17 0012ETCopyright (c) 2017 Dow Jones & Company, Inc.