James Sullivan

How CPAs Can Help Clients With Chronic Disease Care

Early planning is essential for clients with limited resources and a chronic illness. Without early planning, clients can run out of assets when they are most frail and vulnerable.

April 11, 2011
by James Sullivan, CPA, PFS

At age 85, Anna, a widow, struggles with multiple sclerosis (MS) and various physical ailments. She is confined to a wheelchair. Her husband was the full-time caregiver until his death in 2006. The couple did not have children or any close living relatives. Anna is what social workers refer to as an “unbefriended senior” with no family or close friends available to assist with care giving. Anna lives in the assisted living wing of a large Continuing Care Retirement Community (CCRC).

Shortly after her husband’s death, Anna hired a Geriatric Care Manager (GCM) to coordinate her care. The GCM holds Anna’s power of attorney (POA) for health. Besides the GCM, Anna hired a bookkeeper to pay her bills and track her income and assets. The bookkeeper holds Anna’s power of attorney for property.

Anna’s monthly income of approximately $2,000 consists of Social Security and a small pension from her husband’s employer. Her assets at the time of her husband’s death totaled $700,000 but due to large care-giving expenses have shrunk to approximately $300,000.

Full-time Caregiver Hired

In 2007, as Anna’s physical problems grew worse, the GCM arranged for a full-time caregiver to live with Anna. Prior to hiring the caregiver, the GCM asked the bookkeeper if the cost of $9,000 per month was affordable. She explained that, although there were other alternatives, the full-time live-in caregiver was the “ideal” situation for Anna. The bookkeeper replied that “Anna had plenty of money” and could afford the needed care.

With the hiring of the caregiver, Anna’s annual expenses rose to approximately $140,000 per year. With income of $24,000 per year, she would have to draw $116,000 per year from her investments to make ends meet.

The bulk of Anna’s assets were held in an account at a large bank. The personal banker who worked with the bookkeeper, however, had no idea what other assets she owned. He did comment that her assets were being drawn down quickly and mentioned his concerns to the bookkeeper.

When the bookkeeper decided to retire he contacted Anna’s attorney regarding the property POA he held for Anna. Given his pending retirement he wondered how he should handle it. The attorney called the bank while looking over the issues regarding the POA, to ask if they would honor a POA form she drew up, or whether the bank required its own form. In the course of the conversation, the banker mentioned his concern regarding Anna’s finances.

CPA Review

Based on the banker’s comments and a brief discussion with the bookkeeper, the attorney asked a local CPA to review Anna’s finances. The concerns were justified. The CPA found that Anna had only $300,000 left in her accounts and that she would run out of money in less than three years at the current level of spending. According to her doctors, Anna could live for another five years to 10 years.

The CPA contacted both the bookkeeper and the GCM to discuss the situation.

‘Ideal’ Care vs. ‘Adequate’ Care

At the meeting, the GCM defended her decision to hire a full-time caregiver because it was the “ideal” situation for Anna and, after all, the bookkeeper assured her that there was “plenty of money.” While there were other, less costly alternatives to a full-time caregiver, the GCM relied on the bookkeeper’s statement that Anna could afford a full-time caregiver.  

For his part, the bookkeeper did not feel it was his place to question the decision of the GCM, a professional healthcare provider. He did not know that there were alternatives available to hiring a full-time caregiver and maintained that the GCM should have mentioned them. Finally, he felt his job was paying Anna’s bills and keeping track of her assets, not doing the actual planning.

The CPA also found that the CCRC contract that Anna and her husband signed when they moved into the facility, provided for a below-market charge for stays in the skilled-nursing facility. Instead of paying the current fair market value of $8,000 per month, Anna would pay $6,000 per month. Neither the GCM nor the bookkeeper was aware of this provision.

Psychological Examination

During this time, the attorney ordered a neuropsychologist report or “neuropsych” report on Anna based on comments the GCM had made regarding Anna’s cognitive capacity. She questioned whether Anna had the ability to make the decision regarding who would hold the POA for property following the bookkeeper’s retirement.

The “neuropsych” report came back as expected: “Given the extent of currently identified cognitive deficits, (Anna) is unable to make independently informed medical, legal or financial decisions on her own behalf. It is recommended that she is provided a guardian with respect to property and financial management.” While the POA for health would remain in place, the GCM would make decisions regarding her care.

Meeting Future Care Needs

The CPA met again with the GCM. He explained to the GCM the amount of income Anna received monthly and the assets available to pay for care. He asked the GCM if there was an alternative to 24-hour care that would meet Anna’s needs and lower her annual expenses. He pointed out that at the present rate of spending, Anna would have to be moved to Medicaid to meet her long-term-care needs in three years.

The GCM said that while Anna’s current situation was “ideal” she could be moved into a skilled-nursing facility at the CCRC. The care she received there would be adequate and more than meet her needs. After figuring in Anna’s monthly income of $2,000, the net cost to Anna would be $4,000 per month. Drawing down $48,000 from her nest egg annually would provide Anna with approximately six years in the skilled-nursing facility before running out of money. At that point, she would have to move onto Medicaid.

The CPA’s Role As Planner and Communicator

Had the CPA been involved when Anna’s husband died, he could have had the same conversation with the GCM regarding Anna’s income and assets years earlier. Armed with that information, the GCM could have made a much different decision than she made initially. At the time of her husband’s death, Anna had sufficient assets for 14 years to 15 years of care in the skilled nursing facility. While this wasn’t the ideal setting for care, the GCM agreed that it would more than meet Anna’s needs.


When faced with limited resources and chronic disease, early planning is essential. But planning is not enough — there must be open communication between all parties. The CPA can plan a key role in these situations as both a planner and a communicator.

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James Sullivan, CPA, PFS, works with his wife, Janet, who is an elder law attorney in Naperville, Illinois.

* PFP Section members, including PFS credential holders will benefit from additional Eldercare resources in Forefield Advisor on the AICPA’s PFP website at aicpa.org/pfp. Non-members can click here to join the section.