Thanks to Cathy Sikorski, Esq for this guest blog post for LTCI Partners.
Cindy and Jim were one of those rare couples who had what could be considered a ‘friendly divorce.’ After all, they had been married for thirty-five years so all the water under the bridge could just stay there.
When it came time to negotiate the asset settlement, a fifty-fifty division seemed fair to Jim. But Jim was still working at his high-powered corporate job and Cindy hadn’t worked outside the home for thirty years. Indeed, Cindy not only raised their three children, was PTA president, soccer mom extraordinaire, but she also took care of her dad and Jim’s parents when they were in their failing years. That, in itself was twelve years of elder caregiving. Cindy was looking forward to re-inventing herself and her life.
Cindy believed her lawyers did a good job for her. She ended up with a nice nest egg, albeit she would have to be careful to make sure her savings lasted a lifetime. Cindy’s only income was her meager Social Security, so it was imperative that she budget her savings to keep her lifestyle comfortable.
And all went well….for ten years. Then Cindy’s 95-year-old mother moved in with Cindy. Mom had broken her hip, had other health issues and could no longer live alone. Cindy had a brother, but he lived on the opposite side of the country. There was no money to put Cindy’s mother into care or even pay for in-home care of any significance.
In short order, Cindy’s savings were depleted. Her mother’s care was overwhelming. And then Cindy got sick. The stress of caregiving and financial contributions to her mother’s care landed Cindy in the hospital.
Never once in all the negotiations around division of assets did anyone suggest Cindy would need to pay for her long-term care, or have additional funds available if she were called to care for her mother.
Jim had gladly accepted Cindy’s devotion to his parents to help them through their own elder years and illnesses, but Cindy received no compensation for those hours of care. Nothing was added to her social security, her IRA, or any other form of savings. Cindy, nor her advisors, considered that she should look into a long-term care policy for herself should she become sick and need care. No one ever discussed during the divorce settlement who would take care of Cindy if she became sick or how she would pay for her care.
These issues seem obvious when one is in the throes of a medical crisis, but rarely obvious at the divorce table. This is an opportunity for advisors to take the lead, change course, and open the conversation, especially in the ‘gray divorce’ world which is the largest growing divorce demographic at this time.
DIVORCE PRIORITIES: WHY GRAY DIVORCE IS DIFFERENT
Advisors who are brought into divorce are typically met with questions about child support, alimony, college costs for growing children, real estate assets and future pension accounts.
“Gray Divorce” as noted by Carol R. Hughes, Ph.D., LMFT, and Bruce R. Fredenburg, M.S., LMFT is defined as divorce among couples over 50 years of age. The rate of divorce for this demographic has doubled since 1990, more than doubled for those over 65 and may triple over the next ten years. The financial focus of these divorcing couples is quite different from those couples with young children or a robust work life yet ahead of them.
The reasons for any divorce are myriad but the financial implications in a gray divorce are unfortunately consistent. When divorce comes during retirement years, where the ability to grow income and savings is waning, it compounds the possibility that women will risk financial ruin if they are not prepared for caregiving: either as caregivers, or as one being cared for.
The National Institute for Health decided to undertake a study on the financial impact of gray divorce and the results were a financial decline for men and women but women would bear the brunt of this financial decision:
Results: Women experienced a 45% decline in their standard of living (measured by an income-to-needs ratio), whereas men's dropped by just 21%. These declines persisted over time for men, and only reversed for women following repartnering, which essentially offset women's losses associated with gray divorce.
Why your client is going to have a Caregiving Crisis with Costs
If you are an advisor to those who are in the midst of both retirement and divorce you need to know that the likelihood of these clients having a caregiving event is practically guaranteed.
The CDC recently noted:
The need for caregivers is expected to continue to grow with increases in the US older adult population. Currently, there are 7 potential family caregivers per older adult. By 2030, it is estimated there will be only 4 potential family caregivers per older adult.
- 17.2% of middle–aged and older adults who are not currently caregivers expect to provide care or assistance in the next two years to a friend or family members with a health problem or a disability.
- 20.0% of adults aged 45-64 years who do not currently provide care to someone expect to do so in the future compared to 12.8% of adults aged 65 years and older.
https://www.cdc.gov/aging/caregiving/caregiver-brief.html
In 2021, AARP Caregiving studied the out-of-pocket cost of unpaid family caregivers and concluded that the average amount spent would be in excess or $7,000 per year. If your client will be on a budget and has a mother, father, daughter, son or brother-in-law (like I did) to care for, one needs to calculate an additional $600 per month for caregiving….not care.
That’s if your client becomes a caregiver. The statistics are just as grim if and when your client will need care:
- Care Recipient Age: 46 percent of care recipients are age 75 and older (average age is 68.9 years old)
Family caregivers provide an average of 23.7 hours of care each week. This number goes up substantially for those whose care recipients live with them (37.4 hours per week), making caregiving the equivalent to a full-time job.
Why Gray Divorce Can’t Forget to Consider Long-Term Care
Understanding that a divorce changes a person’s financial status, usually for the worse, especially for older women, requires an advisor to then understand what the future of their client will likely entail. It is no longer about childcare, college costs or housing. It is about maintaining an economic lifestyle that has already been achieved in the face of a caregiving event and not placing others under an additional financial burden.
CRITICAL CONVERSATIONS YOU MUST HAVE
So, what is an advisor to do?
- Recognize that a long-term care conversation has to be an integral part of the divorce conversation.
- Make certain you understand what kind of care your client thinks they want or can have if they need long-term care.
- What is the plan to pay for long-term care?
- Does your client anticipate being a caregiver and do they know that that can come with an economic cost to them?
Advisors must continue to address the long-term care crisis in this country regardless of divorce. This is an economic question for both caregivers and caregivers and your clients are or can be both. It is imperative to extend this conversation to the divorce arena, especially to clients who will experience a gray divorce.
Cathy Sikorski, Esq. a Speaker, Elder Lawyer, Author and Media Guest unravels the complex financial and legal problems in the caregiving crisis. Cathy uses her own caregiver experience and expertise to educate, entertain and elevate the conversation around work, money, aging and caregiving. In October 2021, Corner Office Books released her latest book 12 Conversations: How to Talk to Almost Anyone about Long-Term Care Planning available on Amazon.
Click below to connect with Cathy at Linkedin. Or go to her website www.cathysikorski.com