The reading of the will. It’s a stock scene in many a Hollywood movie. The wealthy uncle has passed, and the surviving family gathers in the lawyer’s office to see who gets what. Depending on the genre, the inheritance invariably goes to someone undeserving: the family cat or the comely nurse who cared for the old man in his dying days. Drama ensues.
That’s the movies. In the real world, the only thing certain is the drama.
When my father passed a few years back, I became the executor of the estate. My parents had lived frugally in their modest condominium, driving a series of used cars that always seemed just about to drop. There was one exception to that frugality: Christmas morning. Then their little living room looked like an FAO Schwarz showroom with lavish gifts for my mother, the kids, and the grandchildren. Normal life returned after that magic day, however, and a big night out was a dinner at Applebee’s, with everyone going Dutch.
When Dad passed, I didn’t expect to find much, but I set to work, chasing down the old bank accounts, annuities, IRAs, and life insurance policies. And there were creditors everywhere, some legitimate, others without evidence to back up their claims. I fought and cajoled and did my best to be fair.
The mortgage was paid down, but home prices in their neighborhood had collapsed. I worked diligently to clean out the house of their possessions, which included everyday items, junk, a few treasured pieces, and old love letters. There was so much stuff filling dumpsters from such an apparently small condo, it felt like I was emptying a clown truck at the circus.
At least four times a week, I drove the 45 minutes each way to manage the workers, work with the real estate folks, and pay the bills. I was determined to squeeze out every last $100 from that place. It took many months to sell, but when we closed for $65,000, I was convinced I had done my duty well.
When most of the dust had settled, it looked like the estate would have a net worth of something like $150,000—well beyond anything I had reasonably expected. My two sisters and I knew there would be more expenses, but it seemed reasonable to believe that we each might inherit $20,000, maybe even $25,000.
Spoiler alert: almost everything we believed to be true at this point was wrong.
Family Out of Joint
We didn’t recognize it all at once, but the family equilibrium had been knocked off kilter, and squabbles broke out. Most families have squabbles, but these had an odd new complexion. I began to appreciate the huge role Dad had played in keeping the peace. Now with his patriarchy passed, familial civil war was nigh.
My father had consciously made me the executor, but one of my sisters wanted to take control. My other sister and I decided to let her. It seemed like the right thing to do—we didn’t feel like pulling rank. Active-sister began making arbitrary decisions about who would get which furniture and what accommodations would be made for Mom. We began to sense that her decisions weren’t based on the same financial logic we operated under, and that she had different ideas on a range of issues involving Mom.
Meanwhile, Mom was a wreck. She had advanced Parkinson’s disease and acute dementia that was getting worse by the day. She and Dad had been holding each other up, and now that he was gone, she was deteriorating. She needed a new place to live, fast.
Three Facilities in One Year
This all took work, and since Active-sister wanted to do it, we stepped aside. We moved Mom into a very nice facility (#1) with the Level 4 care she required at $10,000 per month. After a short time, Mom was identified as a fall risk. Facility-1 would not let her stay unless she had full-time nursing supervision, which cost another $8,000 per month. That was when we found out no one had bothered to check if Facility-1 accepted Medicaid. It did not.
During the last years with Dad’s stage 4 cancer, they both looked like they could go any moment. But in Facility-1, Mom took her medications with more regularity, and her health began to stabilize. We realized we should make longer term plans, maybe even 5 or 10 years. But at an $18,000 per month burn rate, we had cash for maybe 8 months. We need to do something else.
We swiftly moved Mom to another facility (#2) that did take Medicaid and had less draconian rules about fall risks. All seemed to be going okay, but within a month or two, we realized Facility-2 was dramatically understaffed. When we asked the few staff we ran into if they would have their relatives live there, they all said, “Are you kidding me?”
We moved Mom to Facility-3, three moves within 10 months of Dad’s passing. This last facility was the best one for her: good care, nice staff, and Medicaid. In fact, it was something of a miracle this worked out so well, given how little money we had left out of the $150,000.
Nursing Home Calculus
With dwindling cash and family animus, we were very lucky Facility-3 took Mom in. These places don’t take everybody. I can’t say I was completely sure how it worked there, but here is what I surmised to be the business of assisted living/nursing homes.
When deciding to take on a new resident, the facility performs a lifetime value calculation. They estimate the cash flow a new resident can be expected to generate.
They calculate total lifetime value based on revenue potential and life expectancy and make a portfolio decision on which patients to take on.
Lest I sound ungrateful, I am not. Without the diligent efforts of so many people, my mother would have fallen through whatever safety net I thought might beout there, and several of our families would likely have been plunged into bankruptcy.
Heads I Lose. Tails You Win.
What I didn’t realize when this all got started was that we were on a one-way railroad ride where all of the estate’s assets would end up going to the assisted living/nursing home facilities. Part of me was still in that Hollywood movie, thinking there might be an inheritance, but that illusion would cost me.
Let’s play it out. Say there were three possible outcomes:
Which one is the best outcome? Trick question. It doesn’t matter. Not from the family’s perspective anyway. They’re all the same. In each case all of the estate’s money goes to the nursing home that has agreed to take on Mom’s social security, pension, and Medicaid payments. The only slight difference is that with more money we might have been able to get her into a nicer nursing home, assuming that niceness and monthly nursing home expense are positively correlated.
Managing Your Losses in a No-Win Situation
Many estates are larger than $100,000, but life expectancy is climbing as well. If your mother ends up in a well-supervised facility where her health is monitored daily, she receives physical therapy and proper medication, she can easily live well into her 90s. The rule of thumb, then is to allow for $10,000 per month for at least 10 years. So, if your 80-something mother has anything less than $1.2M, you should be planning for a Medicaid solution from the get-go.
This isn’t all about dollars and cents. Let’s assume that in order to achieve the heroic results described above, the executor had to take actions that weren’t well understood by other family members … and that this all resulted in a major family fissure, after which Thanksgiving dinners never happen again, and entire portions of the family are disinvited from weddings.
Add onto that the professional strain on the executor of performing a fulltime job for no compensation and little resume value. In Ohio, the guidelines suggest an executor is entitled to compensation of about 4% of the estate’s value. Mindful of the optics, however, most executors don’t take that money. Even if they did, would that be 4% of the $150,000 estate value at the beginning of the process ($6,000) or 4% of the $2,000 left just before Mom goes on Medicaid ($80)?
So, let’s not kid ourselves, the executor works for free for two years. Plus, they’re often out of the job market, weakening them professionally as well as emotionally and financially.
It’s Mayday. Not Payday
What initially appears to be the opportunity for a nice payday is in fact one of the most treacherous situations the family will ever find itself in. Don’t go it alone. Protect yourself and the family.
Set aside some of the estate’s liquid assets and use those funds to settle the estate in a professional and timely manner. That means quickly distributing and disposing of the furniture, repairing and selling the house, and settling with creditors. If you hold a tag sale, don’t worry about squeezing every last penny of value. It’s not your money anymore. It belongs to the assisted living facility. The tag sale is to get rid of all of the accumulated stuff rapidly and to reduce some of the costs of the transfer to buy you more time. It’s not about a payday.
Instead of spending all your time with contractors and haggling over the price of Dad’s old corded power tools, you should be watching over your mother’s health and trying to get through the family reorganization with a modicum of sanity and minimal anger. The family needs to transition to new routines that will allow the grandkids to interact with Mom at her senior best. . Mom also needs to feel she is still part of the family while she thinks over what her life has been about and the legacy she wants to leave.
There are companies out there that can help. The week after my father passed, I was approached by two such companies, each with the offer to buy my parents’ home lock, stock and barrel. It would have allowed me to walk away, but under the illusion of inheritance I turned them down. I’m kicking myself about that now. Estate planners and attorneys can also manage portions of the process. Yes, they’re making some money, just like you do when you work. Be grateful they’re willing to shoulder some of your heartache.
Just don’t do it alone. It’s too much. Your Dad would have wanted you to get through this intact. I know my Dad would have.
About Operation Relo
An Ohio based LLC founded in 2018, Operation Relo provides a comprehensive set of services for families with elders who may need to downsize, especially when the children are out of town. The company develops and executes elderhood plans addressing POA, medical, financial, executorial, and lifestyle coaching issues; preparing homes for sale with repairs and staging; relocating possessions through estate sales, storage, donations and disposal; clearing and cleaning the house; and conducting senior moves. Contact us at (877) 678 – RELO (7356), [email protected] and www.operationrelo.com