Ali Habashi: So, I’ve spoken to a few people now, on the podcast and otherwise, who through their own caregiving experiences have learned a lot about how to set themselves up and their children up for success as they themselves age. I can only imagine coming from the professional background that you do, that you came away with perhaps even more insight, at least about how to set yourself up financially in the future, no matter where you’re living or what your end-of-life plans are.

There are a lot of uncomfortable conversations that you have to have with your loved ones in order to set yourself up for success as a caregiver in the future, or as somebody who’s being cared for in the future. There are discussions about health and power of attorney, work to be done on wills and family trusts, questions about whether or not you plan to age in place in the family home, or move to a senior community. There are end-of-life celebration plans and funeral planning preferences, and of course the question of how we plan to finance all of these things.

So, in this episode, I’d like to focus on how we as caregivers can set ourselves and our families up for financial security in the future when we will also inevitably need caregiving ourselves.

So, first question: how do we kick off all of those difficult, often uncomfortable discussions that we need to have with our partners or kids about our futures and how we want to be taken care of if we become incapacitated?

Natalie Kime: That is such a great question, and I think a really good place to start for this episode. I would start by saying those conversations will never be easy. However, they’re extremely necessary, and the sooner we can have those conversations, the better, and let me use my personal experience in kind of speaking to why I say that. My parents kept all of their financial documents, their retirement information, their funeral planning information for what they had prepaid for, my dad’s veteran information for when he passes away, how to contact them for all of those special things that are included in the red folder.

For years, my mom and dad would say, “Hey, Natalie, Sean (who’s my brother), let’s sit down and take a look at the red folder.” And my brother and I would look at each other and say, “Nah, we’re good. We don’t want to have those conversations. We don’t want to think about your mortality. We’ll deal with that when we get there.”

And then about nine months before I retired myself from corporate America, we found out my mom had been diagnosed with dementia, but she’d been diagnosed a year before that. My parents are old school. They don’t want us to worry. And so we only found out because our mom fell and had to be taken to the hospital, and they did some CAT scans to see what was going on.

And so of course we knew that something had happened and that was the catalyst for us finding out what was going on. Now, because of what I do for a living now in helping people in this exact arena, I instantly went and transitioned into what I call business mode. There are things that need to be taken care of.

And so I started flying home quarterly for my mom’s memory care appointments. And the first time I went home, we sat down to start the process of putting together a living trust for my parents, which meant we were going to pull out the red folder and have those conversations. It was very emotional, very difficult.

We didn’t all see eye to eye, and just seeing your own parents or, or a loved one in general that you care deeply for, to see them even talk about their own mortality and what that’s like for them is extremely emotional.

So I will say it was a conversation that was tear-filled, and my parents had always lived in Utah. My brother’s always lived in Utah. I’m the one who moved to Texas almost 20 years ago. And I am also the person best equipped schedule-wise, and also because I’ve had the desire to be a caretaker for my parents someday and that idea for my brother to have my parents move 1200 miles away was hard for him, even though he could see that it might make more sense.

And so after having that conversation, after getting the initial A, B, C, D things out of the way, it felt kind of like we could breathe a little easier now. It was another nine months from then that we found out my parents couldn’t live on their own anymore. And then it was revisiting some of those conversations and solidifying a plan, which again, was a little bit difficult in the reality of talking about moving my parents for real, and there was a timeline attached to it.

But because we had had those initial conversations, navigating through them the next time was much easier, less emotion-filled, and really more easily focused on what makes the most sense for mom and dad.

And I look back now, and I wish the 10 or 15 years before that when my parents said, let’s get out the red folder, I really wish we would’ve done it then when there wasn’t something so eminent. Because even though it was nine months before that happened, it was still very eminent. We knew it was really coming and I feel like some of that might have been a little easier when we didn’t have the emotion of that sitting heavy on top of us at the same time, if that makes sense.

So I just believe the sooner, the better. And I came home from that conversation with the red folder and my mom and dad and brother and I sat my son down. He came home, my son was in the military, came home for leave over the holidays that year. And we sat down one night and we had that conversation. I’ve been a single mom for, well, at that point it had been almost 20 years and with him being in the military and who knows what that could mean.

We have that conversation on both sides. What are my wishes for the future and what do I have set up and where can he find the information if and when he should ever need to? And vice versa.

Making sure that I had all the contacts through the military, should I ever need them. Making sure that I know what he would want things to look like at this point in his life. And he has since got out of the military and is safe and sound, but the truth is something can happen to a loved one at any point in time, and it is without a doubt, easier to have that conversation and know before you’re in a position where maybe they can’t tell you.

As far as what to discuss, what do they want when it comes to care? When they’re older, from a caretaking perspective, exactly like you said, do they want to remain in their home?

Do they want to be in a retirement community or a nursing care facility? And a lot of times we don’t get to make that decision depending on their condition and the level of care that they need, but to know what they would want in different scenarios.

And so that would be what I would say is the importance of having the conversations now so that you don’t have to do it later. And making sure that all of that documentation, all of those important things are in place. There’s just so much peace of mind in knowing what somebody that you care deeply for truly wants when you have to make a hard decision.

Ali: I think that makes sense, and it doesn’t compound the stress. Especially when you get what is already difficult news, a new diagnosis or a fall. I know, at least for me, I really like to be prepared for things like that so that you can kind of glide into it as smoothly as possible because it’s already difficult.

So I want to speak on the red folder. What is in the red folder? What belongs in a red folder for a family?

Natalie: So the red folder, and we call it that because that’s what it was for my parents, but the red folder contains all of the information around life insurance, long-term care, living benefits, financial products or retirement accounts you may have in place, banking information.

If you have a financial professional, their contact information should be in there. Doctors’ names and numbers and what they treat you for. So if you have a cardiologist, you see a memory care doctor, all of their names and numbers should be included in there. All the medication that your loved one takes.

I would suggest that that medication list included a description of the dosage, the frequency you take it, and what the pill actually looks like.

There should be a copy of their will or trust documents in that red folder if your parent or loved one is a veteran and they want military honors, if they qualify for and want those military honors, the paperwork and information around that program should be included in that folder, all of their medical insurance information.

So what coverages they have, copies of their medical cards, their prescription cards. Every single thing that you could think of that would be necessary. If they have dietary restrictions, they should be outlined in there. If they have exercise routines, those should be outlined in there because in any situation, something can happen completely unexpectedly, and so the person who should or maybe does know all of the information, may not be the first person there, and it could be another family member.

So to have literally everything in that folder that they could possibly need takes a lot of stress off in a situation like that as well. But to know that you have one specific place to go. Everything is included. I would suggest that when you do a living trust, all of their assets are put inside the trust.

I would also make sure there’s copies of a deed to a house, titles to vehicles, any property or tangible assets they have. There should be documentation for those inside of there. But I talk about a trust. I talk about it all the time, because a trust does multiple things.

One, it makes sure all the assets’ ownerships are within that trust, but number two, it avoids probate. So in every trust is a living will, and that living will designates who gets what. But a trust ensures that it stays out of probate, which can become a very timely and costly process as well as extremely stressful and overwhelming for a family.

And so I always lead people towards, “A will is good, but a trust is great.” A trust takes care of everything, and you can avoid a lot of contentious situations with a trust. And I will say too, when you’re putting together your red folder, you may get a lot of opinions from a lot of people. It’s important to remember who this is about and what their wishes are, and make sure that everything within the will and the trust documents exactly what they want to ensure it happens exactly that way. Everybody is going to have their opinion.

Everybody’s going to have their wants and their desires. But at the end of the day, what did your loved one want most? And it doesn’t matter that we may or may not understand, what matters is that was their wish.

And I would also say there should not only be one copy of that red folder. I have a copy of everything here at my house. My brother also has a copy of that, and we also have what is called a digital vault, and that is basically a cloud storage where you can upload all that documentation so that if the worst happens, your house burns down or the red folder gets lost, there’s someplace that you can go to get that information and you can set those digital vaults up with multiple people, trusted people that have access to it so that you don’t constantly have to update it, should something happen to somebody else in the process.

Ali: Makes sense. It also makes me think I need to make a red folder of my own at this point in time.

Natalie: I’m actually in the process of updating mine because I’ve added a couple policies since I last put it together.

Ali: So you mentioned new policies, so I do want to get a little bit into some of the more nitty gritty insurance questions. So we know how to organize everything, but what types of policies is it smart to have? And, and I know it probably differs between situations. I think families probably don’t have the same policies as people who are just single living on their own. But any information about insurance and what to look into, I think we all have that question.

Natalie: Yeah, absolutely. It’s a great question. So I would say the most foundational product that you can have in your financial portfolio is a product that protects your life, your health, and your income.

And what do I mean by life, health, and income? I’m talking about life insurance policies that don’t just protect you if you die too soon, but actually provide coverage if you live too long.

When you understand that the average life expectancy in America is 85 years old, there is about two thirds of us that are going to need some level of care, whether it’s a short-term situation, three to five years, or it extends for longer than that.

And so making sure that you have products that, yes, of course if something happens and you’re no longer here, your beneficiaries, your loved ones, get the proceeds from that life insurance policy you put in place. But if you live too long, and what I mean by that is to the point where you may be faced chronic illnesses or critical illnesses or terminal illness diagnoses, that you have the ability to access the death benefits of a policy while you’re still living, and we call those living benefits.

It can provide for literally whatever you want. Once you qualify for the benefit, the money comes. You don’t have to do a transactional reporting of what you use it for. And so I tell clients all the time, should I ever face a terminal diagnosis, and a terminal diagnosis means that you’re expected to pass within six to 12 months, I will be accessing those resources from my life insurance and checking off every single bucket list item I can with the people I love most, because the only thing we take with us are the memories and they’re the most important things we can leave behind.

But living benefits are very, very versatile and touch on a lot of things where long-term care is something different.

Long-term care provides when you cannot do two of your six daily activities to care for yourself. So you can’t get dressed, you can’t bathe or shower on your own, you can’t toilet on your own, you can’t feed yourself, you can’t transport yourself. So two of those things can’t be done, you can activate a long-term care policy.

So I recommend looking for one that’s attached to a life insurance policy because that means one way or another that policy is going to get used and therefore the financial investment you made in that policy eventually comes back to you or your loved ones.

A standalone long-term care policy is just for long-term care. Well, if you’re part of the 35% that never needs that, then you spent that money for that policy that you never utilized. But if you can get that attached to a life insurance policy, then you’re guaranteed one way or another that money you’re putting in for that coverage. The coverage is eventually going to come back to you or a loved one.

So those are the things that I would say are the foundational pieces you should have in place. Now, in addition to that, you want to look at financial power of attorney, the medical power of attorney. Beyond that, I would say using an example from my parents, my parents had a significant amount of money just saved in the bank. I don’t recommend that for a couple of reasons. One, the interest you earn in a bank never outpaces inflation anymore, so it’s not really growing for you there. Now, I do recommend you have maybe a minimal emergency fund there, and that’s a good thing should a situation happen where a family member needs to step in and access some cash to take care of something immediately for you. That’s a great thing. So make sure that their bank has a copy of that financial power of attorney. All their doctors have copies of the medical power of attorney and that the people who are in that role have copies that they can carry around with them and provide when they need to.

But when looking at my parents’ financial situation, we also utilized fixed index annuities for my parents, which are also contracts with insurance companies, where we were able to put those lump sums of money that they had that they don’t need today, but very likely will in the future.

The reason that we use fixed index annuities and that I use them with my clients is because they provide protection from losses. They provide a really great growth opportunity on that money. They provide a death benefit. So should your yourself or your loved one pass away the money inside of one of those accounts transfers to beneficiaries just like a life insurance policy would.

And they can also provide things like some of them have writers attached to them that provide long-term care or a multiplier on income from an annuity that doubles if somebody’s confined in a long-term care situation. In our case, we put our parents’ money there because we know at some point the care that mom needs is going to be much more extensive than I can personally give her or my dad, and we may need to bring in full-time nursing care in the home.

And there may come a point that she needs to be in a full-time nursing facility. Those facilities can cost, depending on where you’re at and the kind of room you want, if you want a private room for a loved one, you’re looking at anywhere probably from five to $10,000 a month, and that does not include the medical things that go along with it.

That just includes them a place to live. So you need to think about that. If you’re talking three to five years on average from a long-term care perspective, you need to do that math and be looking at, especially for yourself, do you have things set up that are going to generate that kind of an account that can be there when you need that, or a loved one needs to step in and access that on your behalf.

So utilizing those fixed index annuities through insurance companies as well can provide added benefits. Most importantly, it can provide income for your loved ones in retirement as well.

So once you have the conversation, once you get the documents in place, you’ve got to start educating yourself on how those processes work and what financial products your parents have in place, and how those work, how you access them, who their financial professional is that can help you navigate any of that should you need to.

But another important thing about that is the longer you wait to put those products in place could put you in a situation where you can’t get them. Because once you have a diagnosis, you can no longer qualify for life insurance. In a lot of cases, you can no longer qualify for living benefits or long-term care in a lot of cases.

And so the younger you get and the less expensive they are, the peace of mind that it gives you. And then of course, any health challenges you could face in the future could absolutely stop you from getting the coverage that you need.

So that that would be my recommendation is to make sure that your life, your health, and your finances are protected, and that you work with a financial professional to help framework what that looks like as you go through the different stages of life.

Ali: So speaking of financial professionals, what should we look for when we’re looking for a new professional to help us with our finances?

Natalie: I would say most importantly, somebody that starts by providing you an education, a thorough education, because that is what allows you to stay in the driver’s seat. So one thing that I tell all my clients is we’re going to start with a financial education, and that’s it.

How money grows, how it gets taxed, all of that good stuff. Then we get into what are their concerns? What does their current financial picture look like and where are there opportunities to maybe fill in some gaps or provide some protection, whatever it might be.

And I tell my clients, you can ask me the same question 10 times if that’s what it takes for you to understand it. I never want to put somebody into a product that they don’t see the value for, for two reasons. One, they’re wondering why they ever did it, and if they got taken advantage of, and number two, they’re not connected to the purpose for that, they may not keep it in place. If money gets tight, they may throw away the policy that could take care of them and their families forever. If you don’t have somebody that takes you through all of those steps and can provide you products in the market if you want products that are protected, if you want life insurance, all those things, if they’re not covering all those bases, I would recommend sitting down with somebody who can, or finding an additional partner that can fill in the gaps that they’re not providing because each of those areas is very, very important.

Ali: I only have one last question here, and it seems prudent to put it at the end of our episode, but that’s this: can you speak a little about the importance of planning for funeral costs?

Natalie: Yes, absolutely. You have to realize having life insurance is not the final answer because life insurance can take 30 to 90 days on average to pay out. And if there’s any. Questions about the passing, any kind of investigation, situations like that, it can take even longer. And so you have a life insurance plan and you think, yeah, my family’s good.

If something happens to me, they get a hundred thousand dollars or half a million dollars, whatever it is. But there’s still going to be a delay in that process. And so it’s important to either save in your budget an account. That can pay for a funeral or even better yet, what I have in place is called a final expense policy.

It is a $50,000 policy. It’s basically like a life insurance, but it’s an immediate pay life insurance. And so I pay a much smaller monthly premium but if something happens to me, my son makes one phone call and within 24 to 48 hours, that money is in his bank account to pay for whatever those final expenses are.

I would say the average funeral, again, depending on location, is probably around $10,000 to $20,000, depending on how fancy you want. If you’re looking at cremation, probably $3,000 to $7,000 because you still have to buy a casket and things like that that a lot of people don’t realize.

But I’ll also say when it comes to final expense policies, a lot of them have what’s called a funeral concierge. In mine specifically, I have that. So I was able to speak to somebody and record all the information. This is the kind of funeral I want. These are the kind of flowers I want. This is the kind of casket I want.

They can even help you research pricing in your area to decide what funeral home you want to work with, what cemetery you want to be buried at, or if you’re being cremated, how you want your ashes managed. You can plan ahead of time, and they keep it on record. And so not only could my son make a phone call and have the financial piece of that covered in 24 to 48 hours, but when he makes that one phone call, they say, we’ll take care of everything.

They call the funeral home, they select all the things that I chose, and my son can literally just focus on losing his mom and lean on loved ones instead of having to make hard financial decisions and hoping he’s honoring my memory in the way that I would want.

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