Estates, Inheritances, & Aging Parents: Your Checklist

Katie: Welcome back to another episode of The Money with Katie Show, Rich Girls and Boy—or should I say Rich Offspring? I'm your host, Katie Gatti Tassin. And today we are talking about how you as a Financially Savvy PersonTM, can help make sure your dear elder relatives are set up for financial success into their golden years. We did a Rich Girl Roundup a few months ago about how to plan for elder care, and your responses asking for a more thorough follow-up episode were overwhelming. In fact, much of the conversation we're gonna have today was informed by the questions that you sent us. So if you've reached out, I hope you hear your quandary addressed today. 

This is probably because our audience is primarily in that 25 to 44 age range, which is the group, especially on the upper end, that might find itself in the sandwich years, aka, that fun phase of your life where you're caring and paying for your own children's upbringing, but you're also responsible for caring or paying (or both) for your older family members too. So some of what we cover today may be outside the realm of your control. If someone has no savings entering their retirement years, it's gonna be tough on the people who support them. And there's no sugarcoating that fact. There's no shortcut. But for many, it comes down to just knowing which questions to ask and which boxes to check. Estate planning, long-term care, insurance, drawing down on your investments…it can be hard to know where to start, which is why I am thrilled to welcome Kim Davis back to the show. 

Kim is a partner and managing director at the Bahnsen Group, a wealth management practice, and she last joined us on the show in 2022 to talk about divorce law and prenuptial agreements in an eye-opening episode, which we'll link in the show notes. She's gonna guide us through to today's deep dive. 

Before we get to the conversation with Kim, I just wanna acknowledge that anytime you're mixing family with money, especially when it involves the recognition of our eventual mortality and the mortality of everyone you love, in the case of estate planning, it can be emotionally charged, to say the least. But while it's never too early to have these conversations, it's possible for them to be too late, which is why it's more often than not a good idea to approach these topics sooner rather than later. That said, if you're worried it's gonna get too heavy, you could also consider breaking it up into multiple conversations or intentionally scheduling a lighter activity immediately after. The point is, it's okay to take things step by step if the idea of introducing these topics into your family dynamic feels about as fun as participating in the insect-eating portion of that show Fear Factor. Some of us might have super functional families, but you still might need a professional to help walk you through the conversation.

A sibling that you can lean on or a therapist can also be very helpful too, if you're feeling apprehensive, as our guest Kim Davis is gonna talk about later in the episode. You'll wanna hire a good estate-planning attorney, and it does not have to cost an arm and a leg. You also might wanna talk with a certified financial planner, too. There's also an elephant in the room underpinning this entire conversation, which is that the infrastructure around care in general, whether you're talking about care for the young or old in the United States, leaves something to be desired. And in a culture where the nuclear family is the norm and intergenerational living is rare, it means that most families are forced to seek privatized solutions at, well, privatized costs.

Now, I wanna keep today's episode relatively focused on the tactical elements of planning in the current reality that we have, but I do find the way that other cultures approach family structure—for example, living in larger communities, perhaps with multiple generations coexisting together and sharing the burdens of care and food prep and other things, can show us alternative, potentially better ways to address some of life's most fundamental, universal human needs without needing to be super rich or well-insured. So maybe we'll do an episode in the future that's a little more philosophically inclined. If you think that that's something you'd wanna hear about or if you have examples to share with us, email us at moneywithkatie@morningbrew.com.

Regardless, realizing you are financially responsible for your parents as well as your kids can come as a shock to an adult who might otherwise feel like they're financially cruising. So today, I'm asking Kim all the questions I have as a child of two “real” adults—because my self image is still that of a 17-year-old—as well as the many questions that we heard from all of you. We'll get into it right after a quick break. 

Kim Davis, welcome back to The Money with Katie Show. We're really grateful that you are taking the time to join us again. 

Kim Davis: It is my pleasure, Katie. Thank you for having me. 

Katie: Well, we definitely need your expertise today. So I would love to jump straight into the deep end first, 'cause why not? And let's talk about the pros and cons of a product that I hear mentioned pretty often anytime we're talking about elder care, which is long-term care insurance. So I'm curious—who does this make sense for? Is it a ripoff? What are the best or worst ways to get a policy? And just general thoughts that you have about this product.

Kim Davis: So this idea of long-term care has evolved, right? And the reason it's evolved and people are talking about it more and more is because, guess what? We're all living longer, which is a good thing, right? And as a result of us all living longer, many of us are gonna have increased care costs as we age into our seventies, eighties, nineties, possibly a hundred. So when I was a young person in my twenties and thirties, I don't know if I ever really thought about how long my parents were gonna live, but my mom and dad are now in their nineties. 

Katie: Wow. 

Kim Davis: They're 92 and 94; they are in their home and they do have care, which is very expensive. And I'll get into that later. But my point is this: In my forties, I should have said to them when they were in their sixties, “Hey, what are we gonna do if you need some care? So how are we gonna pay for that?” My parents do not have a long-term care policy. They did save money. They're not overly rich; they don't have over a million dollars, and I'm trying to parse out the money that they do have and subsidize with my own funds for their care. 

So why are we talking about long-term care? How do we fund that? When you're planning for someone, there are so many different assumptions that come into the plan that it's really hard to have a one-size-fits-all answer. It just depends on all their other expenses. But just assuming in your retirement you have somewhere between $3m and $5 million and you can live off of that money, you can probably fund your long-term care. But if you don't have that, I tell a lot of my clients…so part of the financial planning that we do is that we are not only looking at your portfolio and trying to figure out the best way to get you to the end game as far as your investment strategy, but we're also looking at your risk management. What kind of long-term care insurance should you have? And we're also looking up how to set up your money, right? Because you will probably hopefully have a 401(k) or some sort of retirement money, but then you should also probably have a bridge account, because a lot of people now are retiring a little bit early so they need to have something before those RMDs kick in. 

Katie: And for the listener, bridge account would be something like a taxable brokerage account so you can access it before you’re 59 and a half without any fancy footwork, and your RMDs that Kim is mentioning, we talked about those a little bit in the Traditional versus Roth episode, but that's basically where…it stands for “required minimum distributions.” And so the government is gonna look at balances in your pre-tax accounts and say, “Oh, this is actually too high and you're 73 now, so we're gonna force you to start drawing this down and paying taxes on it.”

Kim Davis: And this is the thing: Some people who do wanna retire before 73, if they don't have a taxable account and they haven't kicked into Social Security yet, that would be what they're leaning on to pay their stipends, right? And so all of this comes together as to how are we gonna pay for that burgeoning long-term care that could come down the road? And so the thing is, I think everyone should look into long-term care if they are not able to realistically self-fund. Long-term care policies have come a long way. They used to be extremely expensive. They used to be for a finite amount of time. Usually they were for about five years. So you'd get five years of long-term care and you're paying these very high premiums. If you didn't use it, you would lose it. Now they have policies that will go on as long as you need them. They morph into a death benefit if you don't use them. So if you don't use the policy, then your kid can get some money as a little insurance policy from the long-term care. 

There are two types. You can get one that has an inflation rider—those are gonna be more expensive on the premiums, and then you can get some that are just flat. So I'm getting one now that provides about $8,000 worth of care a month. It does not have an inflation rider so it will stay at that finite amount, but I can have it for as many years as I need it, so I could need it for 10 years.

And the reason they had to start these kinds of policies is that again, people are living much longer. My parents could live to be a hundred. The point is, I don't want my three daughters to have to start, when they're in the middle of having children or maybe sending children to college or whatever they might be doing in their lives, I don't want them to have to take money out of their personal budgets to worry about where the heck they're gonna put me or who's gonna take care of me, because I don't wanna be a burden to them. 

So I don't think that they are a ripoff. I think you need to do your research. Not all long-term care policies are created equally. You need to make sure that you look for those hybrid policies. And I would say for cost effectiveness, obviously an inflation rider helps because you'll have more money when you need it. But hedging your bets a little bit as far as premiums versus benefits, you can get a better deal on the premium without putting that inflation rider on there. 

Katie: So what age would you say someone should be if they're looking at this for themselves? And then my other follow-up question is, can you take out this policy for someone else? If you know that this care is gonna fall on you financially anyway, could you pay for someone else's policy? 

Kim Davis: I think most people should start thinking about getting a long-term care policy somewhere in their late fifties, sixties. Obviously the younger you are and the healthier you are, the cheaper the premium's gonna be. So fifties, I think, is realistic. As far as someone paying for it, the policy is gonna be issued on the person who's using the care. I think what would have to happen is you would just have to pay the premium for them. But they are gonna be the owners of the policy because they are the ones that are gonna have to initiate and use it when the time comes for reimbursements or however they're gonna do it. And you can use long-term care. It doesn't mean you have to go into a facility. It can be for in-home care as well. 

Katie: I was gonna ask. Okay. 

Kim Davis: Yeah. So this isn't like you have to go to a facility where you're in memory care or assisted living. This is just for nowadays, most people wanna stay in their home as long as they possibly can. You know, my parents have lived in their house since I was two. So they've lived there for 62 years; they've been married 70 years. These are people who have not changed many things. When I went to look at facilities for them to stay at, there were a couple of issues. My mom has dementia; my dad does not. So if she was gonna be in memory care, he would have to be somewhere else, and they wouldn't be together. Also, to have two people in memory care, which would not be fair to him, is very, very expensive. So when I looked at some of the really high-end ones, and they live in the Pittsburgh area in Pennsylvania, with memory care and all the things that go with it, it was coming in around $175,000 a year for the two of them.

When I'm doing it at home, I'm using private nurses and we can regulate the hours because they do not at the moment need 24-hour care, but they need a lot of care, about 11, 12, can be up to 15 hours a day. That's coming in around $150k because you wanna keep your help, so you wanna pay them well, you wanna make sure everybody's doing everything by the book. So it would've been helpful if we had a care policy, but thankfully my father, who was an accountant, saved money and has a nest egg. But I'm kind of splitting the baby. I'm paying for some and I'm taking some out of their money 'cause I have to make the money last. They could live another eight years. You may have your, maybe someone can pay a child or whatever, but the care policy is gonna be in your name based on your health. 

Katie: The other thing that I wanted to ask you about, it sounds like long-term care insurance is a fairly decent way, at least these days, after it has evolved, to cover care and it's something that people should look into. Any other things that you would note as options that people should be considering when they are trying to figure out how they should prepare and save for expenses like assisted living? And I recognize that that question could be taken two ways. It could be for their own assisted living and it could be part of their retirement plan, but for many of our listeners, it might be, I'm trying to plan for my parents' assisted living. So I'm just curious if there are any other methods or tactics that you would outline in addition to long-term care. 

Kim Davis: Well the first thing I wanna say, 'cause I think a lot of people are confused about this—Medicare does not cover long-term care. Okay? So this is outside Medicare. Medicare is mainly for hospital stays and inpatient care, and then the part B of Medicare is for your regular health insurance, for doctor visits and all those kinds of things. So there isn't really any other way to pay for long-term care, whether it's in your home or in an assisted living facility, except through private funds.

If you're abjectly not having any money, I mean, you have to really have not any money for Medicaid to give you any money. I think last year it was, in California, if you had more than a thousand dollars in liquid funds, you couldn't get Medicaid. You could have a house but you couldn't have any liquidity at all. 

Katie: And are 401(k) plans considered liquid in the eyes of the state? 

Kim Davis: Yeah, you can touch that. 

Katie: Okay, cool. 

Kim Davis: That's an investment. If you have investments, you're not getting Medicaid. It depends on the state that you live in. But some states will not allow you to use Medicaid for in-facility care. Not all states allow Medicaid to fund assisted living like in a facility. It will cover things like personal care and things you need in a home, maybe transportation. But you have to look at your state. Every state is different. So it's a very tricky thing to use Medicaid, and you've really gotta be abjectly poor to get it at least in California. So most people are using private funds to fund long-term care, and this is where it's getting complicated because like you say, if you have parents and they can't pay, then you're probably gonna feel some pressure to make sure that they're taken care of in some way, shape, or form. 

And so the only way to really do this is honestly to plan. And it sounds boring and it's not a panacea; it's not some…there's no secret sauce to this. It really is sitting down with yourself, if you're of the age where you need…and like for me, I want my children to understand what I have and what I'm doing. So I'm getting the long-term care policy and this is what it's gonna cover and these are the assets I have. And if I needed to go into a facility or I needed to downsize, I have a home, I have equity in it, I might have to sell the home. So you have to look at your net worth statement and then you have to figure out from all the things that you're doing as a parent, as the person who might need the long-term care, okay, you know what, what is gonna be my ball of assets that I can work with here?

Some people may…when I run plans, I tell everyone who I think needs long-term care, I think you should get a policy. Because it's all well and good to complain a little bit about the premium. But if you're in your eighties and you don't have enough assets to care for yourself and you don't have someone who can come and take care of you, this is gonna be a real problem. 

Also with a lot of people, if they are overspending and not staying within their parameters, reverse mortgages are an option. So there are ways to get liquidity in to pay for this if you don't have a policy. But then you need to have your stuff very tight. You have to understand what pools of money you're gonna be pulling from. So how much of a retirement do you have? If you had a 40(k) and you rolled it into an IRA, how big is the IRA? How much money do you have in taxable brokerage discounts? Do you have any equity in your home? Do you have other assets? Or maybe you have rental income from things. 

And then if you're not capable of taking care of all those things, then you need to have also all of your estate planning in order. Who is gonna take care of certain things and be your power of attorney and your business representative if you're no longer able to make certain decisions? Because that money is gonna be the money that's gonna be paying for your care. 

So in addition to the long-term care discussion that you have with your parents and yourself, you should, at any age, especially if you have children, make sure that you have a trust that explains exactly who your beneficiaries are and that will escape probate. Make sure you have a will if you have younger children, because you can only put guardianship in a will; you cannot do that trust. So if you die intestate and you do not have a guardian appointed for your child who's under the age of 18, then the state will decide who takes care of that kid if both of you die.

Katie: I've heard this brought up before in these types of situations where someone might own their home outright but has nothing else, or very little. Is a reverse mortgage, that actual product or function or tool, is that meaningfully different than something like a HELOC? 

Kim Davis: Well, I think with a HELOC, what happens is that you're gonna get a line of credit up to an amount, okay? And then you can pay it over time. With the reverse mortgage, you can basically borrow the entire value of the house. But when you die, the house will be sold. You won't be able to leave it to anybody. If you've used all the equity because you've paid yourself. Now there are fees and things involved, but it's a little bit more forgiving because you can just keep drawing on it until all the equity is used up. And at that point, instead of it being, say, your daughter's gonna get it or your son or whoever, no one's gonna get it 'cause it's gonna be sold to pay back the reverse mortgage. 

Katie: And we'll be right back after a quick break.

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Katie: So we were talking about what Medicare will cover. We touched on Medicaid. You'd have to be basically destitute to have Medicaid cover any of this. I've heard in kind of the back alleys of personal finance world where people will reference these kind of schemes where parents will basically transfer all of their assets to their kids five years before, and then so it looks like they are on paper, they have nothing, and then they can use Medicaid for this. What does that process look like? Is that technically fraud? Is that a legitimate option or is that illegal? 

Kim Davis: I mean, people do do that, and I mean, if someone checked into it, is it fraudulent? Yes, because you're trying to negate the law by saying you don't have any investment assets. My only caution on that is, if you are trying to go down that route, Medicaid isn't gonna pay for some luxury facility. You're gonna end up in a state-subsidized facility. And I'm not saying they're bad, but this is gonna be pretty bleak. But look, desperate times, desperate measures, right? I mean, if you really are up against it and you have a parent that needs care, this is a real burgeoning problem for our country and for society because the population of older people is growing, and we have to get really, really serious about planning for our retirements. It's as important as understanding your investment strategy, because if you are in the middle of caring for your family and whatever goals that you personally have, if you are trying to pay for your own medical expenses that might be going up because you're getting sick more and health insurance covers a lot of it, but sometimes there are excess expenses and then you have to start caring for a parent. Well, this becomes overwhelming. And also a lot of women will frequently have to leave their work in their older age to go care for a parent because there's no one else to do it. 

Katie: Yeah. So let's go deeper down that rabbit hole. So I think what you're describing is what I've sometimes heard called the “sandwich generation,” is that you're trying to plan financially for your own retirement and your children and your parents simultaneously. So I'm curious, from where you're sitting, how would you rank these priorities financially? I assume children do change the calculus, but anything specific that you would note there? Or maybe for someone who's not gonna have children, I'm kind of just curious about when you have these competing priorities, they're all clearly important. How do you address them when you have, obviously just by nature of income, you got limited funds, your resources are not unlimited. 

Kim Davis: Everything's so personal about what our value systems are. But one thing I will say before I answer the question is, if you are not married and you don't have children, or if you are married and you don't have children, I always really think you should have long-term care in that situation as well, because you wanna make sure that you can have someone come into the house, that you can fund that so that someone can take care of you. But this is the thing: I always put my children's education first. 

Katie: Interesting. Okay. 

Kim Davis: Even at my own expense. Okay, so this is the thing that I'm often conflicted about, because far be it from me to tell anyone what they should be putting money into. So when I listened and I'm not throwing her under the bus, but when I used to listen to Suze Orman, she would always say, “Put your retirement first. Don't worry about your kids' education. You have to put your retirement first.” And on paper, that is the most sage advice anyone can give you. Of course that's what you should do, on paper. As a mother, for me, I put my children's education before my retirement. And so for me that was my choice. Was it the best financial choice? No, it was not. I will probably work for another 10 years 'cause I'm playing catch-up from my divorce. Also, the choices I made with the money I made initially was to fund my children's education and I'm very proud of them and I don't have any regrets. However, economically probably not the best choice to make, but now my kids are all self-sufficient, and so I have to weigh what I put towards that and what I put towards my retirement savings. And I'm now pretty ruthless about this stuff. It means for me if I'm gonna be on a savings schedule, which I am, I need to be ruthless about my discretionary expenses.

Katie: I think that answer really highlights, too, how all three things that we're talking about, which is basically childcare, higher education, and elder care. And then also retirement. But I'm kind of thinking of those three specifically. These are things that, not to beat a dead horse, it's not expected that you were gonna bear all those burdens individually in other developed countries. There is support for people through your tax dollars to kind of collectively support those things that everyone is gonna have to come to terms with, or somehow provide for themselves or their families, assuming they have families. So I do just wanna take that second to highlight. I know it sounds overwhelming, but that's kind of because it is, and that it's a bit of a tall order to be putting on individual people and individual breadwinners. 

I'm struck by your example where you've talked about your divorce and how you were having to also play catch-up; those assets get split, and you were taking care of your kids for a portion of your marriage and didn't have all this robust savings yourself, necessarily. And I think that a lot of people face that conundrum in the second halves of their lives and it's like, “Oh, shit. I don't have a ton of time to get this together now.”

Kim Davis: And look, I could have defrayed costs if they had gone to state schools and maybe done community college and then a junior college and then gone on. 

Katie: But even then, that is not cheap. 

Kim Davis: No, none of it is cheap. 

Katie: It's not like even a state university is inexpensive; you're still gonna pay tens of thousands of dollars. Yeah, I mean all of it requires planning. 

Kim Davis: All of it requires planning, and sometimes people don't plan or sometimes they don't have the resources to plan. And so a lot of this is also, to your point, I don't understand why we as a society are not talking about this. Who knows if Medicare is gonna be around in 10 years, but how long is it gonna last? I don't know. And so we are all at risk, really. And nobody seems to talk about this. As you say, I think in England and some in France, there are more pension programs that people get, kind of like Social Security, but they also have just different medical structures that aren't quite as expensive. They are in taxes I suppose, but as far as what you receive as an individual. 

Katie: Or even cultures where it's like your family all lives together, like you have multiple generations under one roof. So it almost, it's like you have your parents that are helping you with your kids and you might be helping with the parents and there's just a little more interconnectedness between those layers, which I think, given how individualist our society is in the US, it makes sense that that's the approach we've taken financially. It kind of tracks, but that doesn't, I think, make it any easier for the individual to really contend with unless you have a lot of resources. Okay. So switching gears. One of our readers reached out and asked about a continuing care retirement community. I've never heard of these. Granted, I'm not super well versed in the space, but I'm curious, what do we need to know about those? Anything of note with the CCRC? 

Kim Davis: Well, okay, so think of the CCRC as kind of this living arrangement that can morph over time depending on your needs. So you can go in as an independent living person living in your own apartment, and then you may need assisted living. And then some of them have memory care and some of them have skilled nursing facilities. So as you progress, you have options within the facility to move into those things. So you're kind of guaranteed a space, sometimes. The thing about these is that first of all, they're probably the most expensive way to fund care in your old age because of the fact that they have all these different services that they're offering you. But you have to be really careful when you read the contracts because sometimes they're not guaranteed; sometimes they don't have memory care and you don't know that. 

And I think a lot of people who find them attractive is because you can have like themed retirement communities. So you can have ones that are faith-based or ones that are based on culture and art or golf or whatever. So when you're still with it, right? And you wanna go find a place to live, they have these 55 and up communities and they have all these facilities, right? And you might be able, if you're really, really, I mean some of them could go up to like a million dollars for the contract fee… 

Katie: Oh my god. 

Kim Davis: If they're super luxurious, and you have spas and you have fine dining and you have top golf courses. They're like for people who just wanna have it fixed in. So the theory of these I think is that you pay a contract fee, you secure your space, and then you know that as time goes on you're gonna have a place to evolve as you may have diminishing health. Then the living charges, the average one now is around $6,000 to $7,000 a month and they will change as whatever it is that you need evolves. So you know, obviously if you need more nursing care it's gonna be more expensive. 

Katie: I see. 

Kim Davis: But you need to understand what the fixed costs are covering and how variable they are over time. And if, for example, if they do have memory care, do they only have limited memory care? Are you gonna be put on a waiting list? And I think the other things that people are finding in these things now is that the theory was you'd be doing your independent living, but if at some point you did need memory care, you were gonna move from wherever you were living across the campus to the memory care place.

Now a lot of people, once they get settled in their homes, just like my parents, they don't wanna leave and go into memory care. They don't wanna live in a facility. So they're having to accommodate that now because that would mean you'd have to have in-home care. So then you'll need to look at the contract to see, well, how is that covering…how is my monthly fee gonna go up and what is the care level that I'm gonna be getting? So there's a lot of nuances with these and they are very expensive. 

Katie: So it kind of strikes me as like the all-inclusive resort type style option, where it's not necessarily that you're gonna get everything you want, but that you're gonna pay a premium for the convenience of having some of these things. 

Kim Davis: Perhaps securing future services and keeping your place there. The other thing I would caution people with is, sometimes the deposit or the contract fee is not refundable, or only a portion of it is. So you need to really, really, really read these contracts very carefully, because if you change your mind at some point or you wanna leave, you may have plunked down a lot of money to secure that long-term stay and you might not get that back. 

Katie: It's a big commitment. Okay, so Kim, if we were gonna sit down and put together a checklist and I was like, hey, I haven't talked to my parents about this at all, but what would you say should be on my checklist as things that we should make sure we have? You've mentioned things like a will or a trust, an advance directive. I assume that there are probably inputs like, oh, you need to know where all those assets are. You need to know passwords to accounts, or you need to know things that if your parents do get to the point where, oh crap, Dad hasn't paid taxes in three years, I gotta step in and figure this out. What would you put on a checklist like that for someone who's gonna have this conversation with their mom or dad? 

Kim Davis: I think the first thing you wanna know is about their estate planning, and hopefully they'll be forthcoming about that. Do you have a trust? Do you have a will? Who are the beneficiaries? Who are the trustees after you die? Who has the power of attorney for all of the business aspects? Who has the medical directive powers? Who's gonna decide whether you live or die? All of those things are important for everyone in the family to know, right? 

Katie: And if they haven't done that?

Kim Davis: Then they should go do it. 

Katie: Is this an estate planning attorney that they would seek out? 

Kim Davis: Yes. And it doesn't have to be super expensive if it's basic, but everybody should do estate planning because everybody has things that they're gonna pass on. And again, I can't accentuate enough for people who have children under the age, if for some reason they die early, you can only do that in a will. And then if you're older, you should have a pour-over will. That means everything that hasn't been put in the trust will then get poured into the trust by the pour-over will. And then as many things that can go outside probate will, which means it doesn't have to go through the court system. But you need to understand, if they are going to maybe lose their cognizance later in life, who is gonna be taking care of all their finances? That is a very big discussion.

So I would say, definitely make sure all the estate planning is in order, because if you don't have power of attorney, you can't do anything for these people. I have to always carry my power of attorney with me anytime I wanna deal with a bank, anytime I wanna deal with investments, anytime I wanna deal with the tax man, I literally have my written power of attorney that I keep in my little thing when I go out to Pittsburgh 'cause I'm always having to whip it out. So that is a very important thing to have. So make sure all of that stuff is in order. To the extent your parents don't mind telling their kids, but understand what their investments are. What kind of accounts do they have? How are they set with respect to their home, their mortgage? Understanding their financial picture will help you, especially if you ultimately do get power of attorney, to understand how you're gonna help them fund these necessary things. And then of course, I know for us at the Bahnsen Group, we have electronic vaults for each of our clients has all of their important documents in there. So make sure your kid knows the password or somebody knows the passwords so they can get into those things and all your documents are available to them so that they know everything.

I would just do a complete inventory of all assets, art, collectibles, mortgages, houses, rental properties, anything that they own. So that if for whatever reason you have to step in, you're knowledgeable and you're able to get as much out of their assets as possible to make this burden lighter potentially for yourself. And also for them to be able to continue to live in dignity in their old age. And just also understanding any debts that they may have. 

Katie: That's a good one. 

Kim Davis: Things that might come back to haunt you if you have to deal with them. I've been very lucky with my parents 'cause my father never had any debt in his life and he never had a credit card. This guy walked around like a gangster. He always had a bunch of C-notes he was peeling off. Everyone thought he was in the mafia. 

Katie: I said it before and I'll say it again: king. That is great. Love it. 

Kim Davis: Yeah, I'm doing that now. I'm like, this is how I budget. I figure if I've got cash, I'm gonna… 

Katie: You're C-note mommy. 

Kim Davis: Yeah. I said to my husband, I'm turning into my dad; I am now walking around with C-notes. But I think knowledge is power. And the other thing I would say, too, is if you are in a relationship and you have parents and you and your partner commingle money and you’re a real unit, you need to have a conversation too with your spouse about how you are gonna care for your parents and their parents and how that might impact the family budget, so that everybody's on the same page and there's not a lot of resentment that goes down later in life.

But to your point, this is so complicated and it's something that no one has ever had to think about until now because of longevity. 

Katie: And I would just echo that estate planning attorney there's probably, it's worth engaging with. What would you say Kim, a specific type of CFP? Or is there any other professional that you would say is worth bringing into the fold if you're starting to have these conversations and maybe the situation's a little more complicated? 

Kim Davis: I would say for sure you need to go find yourself a good estate attorney, and they don't have to be exorbitant. There are a lot of very formidable estate attorneys out there that can do trusts, estates, powers of attorney. These are very normal things. And as far as planning goes, get yourself a good financial planner. If your advisor has a planning department or is a planner, CFPs obviously give them the designation that they know what they're talking about and they're just not making things up out of thin air. But doing a financial plan is so important, because when I do these plans, and we are a very planning-based business, most of what I do for people is enlightening them as to where they're gonna end up. And I did a plan the other day for someone who retired in their late fifties. We had done a plan before; the assumption on expenditures was reasonable. Got them to about a hundred, not with millions, but they still had some money. They don't have any kids. 

Katie: Yeah, I'd say that's reasonable. A hundred years old.

Kim Davis: They don't have to worry about legacy, they didn't worry about leaving anything to anyone. The problem was, between when that plan was done four years ago and now, the expense assumptions are totally wrong, by a lot. So more and more money was being spent. And so finally I said, okay, we're gonna rerun this plan again. And when we did, it showed that when they were 85, they were outta money. And so things had to change, like now. And also they need to get a long-term care insurance policy because they don't have children. And like I said, “This is now an emergency. I've been telling you this, you've not listening to me. Numbers don't lie.” So having a good financial plan in front of you, if you look at a cashflow and you see at 85, you may not have any money, and that might be exactly the time when you need care, that might inspire you in your younger self now to pay that premium.

Katie: Make a change, yeah. 

Kim Davis: Make a change and put some money towards a premium for long-term care because you're not gonna be able to self-fund that. And that's a problem. If you can't self-fund it, then you don't have a lot of other options, really. You have family, you have your own resources, but obviously if you can't self-fund, then you don't have that. You've got your Social Security. So perhaps you could go the Medicaid route. But it's bleak if you don't plan for this. Or at least think about it in some rational way. 

Katie: Kim, thank you so much for lending your expertise to The Money with Katie Show, not once but twice now. You were a very popular guest when you came on to talk about prenups, so I'm like, anytime we're gonna talk about something heavy, we're gonna call in the big guns.

Kim Davis: Can I talk about something happy next time? I don't know what that might be, but…I don't know. 

Katie: Next time we'll talk about vacation planning, something light. 

Kim Davis: Yeah, let's talk about vacation planning. I think I’d like that. I have all the heavy topics, but hey, it's part of life, right? All this stuff. 

Katie: It is. 

Kim Davis: I wish it wasn't, but it is. 

Katie: It is. Thank you so much. 

Kim Davis: Thank you for having me. 

Katie: We hope you enjoyed this conversation. And before we go, I wanted to share one last note from a listener who had some other wise words to share. This listener's father recently passed away, and she told us how important it was to him that he left something behind for his children. So as a result, they found other ways to pay for his care rather than drawing down on his retirement assets, because it gave him peace at his time of death to know he was leaving something to them. 

So more broadly, she encouraged us all to make sure you ask what someone's preferences are for life's final transition. Do you wanna be cremated and have your ashes loaded into fireworks? Do you want espresso martinis served at your funeral and a playlist of only your favorite bangers from 2014? Some of these desires may be outlined in the documents that you're gonna prepare together, but talking openly about your loved one's wishes can help make sure you're able to grieve knowing you have given their earthly selves the last final hurrah that they wanted.

We're gonna put our Kim Davis-inspired checklist in the newsletter next week, so be sure to sign up for that in the link in the show notes. And if you're not already subscribed, we share a lot of our favorite resources there. That's all for this week's episode of The Money with Katie Show. And I hope we have sufficiently answered your questions. We'll see you on Monday for Rich Girl Roundup. Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our chief content officer, and additional fact checking comes from Kate Brandt.