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James Sullivan
CPAs can help clients make senior housing decisions

Assembling a team of experts, including a lawyer and a geriatric care manager, makes the decision easier.

May 13, 2013
by James Sullivan, CPA/PFS

CPA planners can play an important role in helping clients select a senior living facility. But when working with an elderly client on the financial impact of housing issues, the CPA planner should strongly recommend that the client also consider the legal and care issues. The CPA planner can assist the client with assembling a team of professionals to help—such as an experienced elder law attorney and a geriatric care manager.

Selecting a senior housing facility carries more than just financial consequences; it also can mean the difference between receiving the care needed and thriving or being misplaced and aggravating a senior’s physical and cognitive problems. The CPA has a role to play in coordinating the delivery of professional services to their clients. Yet too often professionals deliver services in a silo. CPAs need to broaden their outlook and make sure clients have as much information as they need to make a decision.

Senior housing decisions become more confusing

The housing decision has become more difficult over the years for a number of reasons:

  1. Seniors have more choices, from independent living in age-restricted facilities to assisted living, skilled nursing, and continuing care retirement communities (CCRCs).
  2. There is no one-size-fits-all care solution; different people have different needs. Care can be affected by a facility’s equipment, the skills of its personnel, and the condition of other residents. Mismatches are not unusual—an independent geriatric care manager (GCM) can help avoid these types of problems.
  3. The contracts differ from facility to facility, and the process of gaining entrance is typically unfamiliar to the senior and his or her family.
  4. The recent economic downturn and drop in housing prices made it more difficult for senior housing facilities to attract new residents. Senior housing facilities often require a large down payment. This down payment usually comes from the sale proceeds of a senior’s home. But as housing prices crashed in recent years, seniors became reluctant to sell their homes—hoping for an eventual “recovery” in prices. Some senior housing providers, desperate for new residents, lured seniors with financial enticements that were not good for the facilities’ long-term fiscal health.

Broader choices in senior living

Helping clients find the right senior living arrangement is easier if you understand what options are available. Let’s start with age-restricted independent living facilities. Typically, a new resident must be at least age 55 or older (for a couple, one of them must be age 55 or older). Children are not allowed to live in the facility. Such facilities are not licensed or supervised by the federal or state governments.

Assisted living facilities offer some services for seniors who may have mild physical or cognitive health issues. Because medical assistance may be provided, most states license and regulate assisted living facilities. As the senior’s physical or cognitive condition deteriorates, he or she may have to move to a skilled nursing facility for care that is beyond the type that the assisted living facility is licensed to provide.

A skilled nursing facility is licensed, regulated, and inspected by the state in which it is located. If a facility has Medicare- or Medicaid-approved beds, it must also meet the requirements of the Centers for Medicare & Medicaid Services (CMS), the federal agency that oversees Medicare and Medicaid.

A CCRC is typically an age-restricted community that offers a range of living options—from independent living to assisted living to skilled nursing—all on the same campus. This is convenient for seniors, allowing them to stay at the same facility as friends and family who have different health care needs.  

Responsibility for the regulation of CCRCs differs state by state. Typically, the independent living units are not regulated while the assisted living units and the skilled nursing facility are regulated by the states.

Assembling a team of housing experts

Because there are so many options, seniors and their families sometimes need a team of experts to help them make the right housing choice. The CPA planner, of course, focuses on the financial consequences of the decision. A CPA who holds the Personal Financial Specialist (PFS) credential demonstrates a comprehensive understanding of all aspects for financial planning (far more than just investments) that is crucial to seniors and their families as they make these decisions. An experienced elder law attorney, who usually charges a fee of $200 or more per hour, reviews the contract.

A local GCM, who can charge an hourly rate of $100 or more, is crucial if a senior will need care at a facility. By charging a fee, the GCM has no financial incentive to steer a senior to a particular facility (some professionals offer to assist with locating a facility for “free” but are paid a commission when one of their clients moves in). Many facilities offer to perform an assessment of the senior to determine care needs, but there can be a built-in bias favoring the facility. And since the cost typically increases as care needs escalate, the facility assessment may find more care needs than are warranted.  

Given the total amount that will be spent for senior housing, the investment in a GCM and an attorney is relatively small. More information on elder law attorneys can be found at naela.org, the website of the National Academy of Elder Law Attorneys, while information on GCMs can be found at caremanager.org, the website of the National Association of Professional Geriatric Care Managers.

Finally, it is important that the CPA planner clarify that he or she does not take responsibility for the work of the GCM or the attorney. Each is an independent professional. It is best to recommend several GCMs and attorneys for the client to interview.

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James Sullivan, CPA/PFS, is a financial planner in Naperville, Ill., who specializes in working with individuals suffering from chronic illness and their families.
* PFP Section members, including CPA/PFS credential holders, will benefit from additional elder planning resources in Forefield Advisor on the AICPA’s PFP website at aicpa.org/pfp. Members will also benefit from the free CPA’s Guide to Financing Retirement Healthcare written by this same author.

The AICPA’s PFP Section provides information, tools, advocacy, and guidance to CPAs who specialize in providing tax, retirement, estate, risk management, and investment advice to individuals and their closely held entities. All members of the AICPA are eligible to join the PFP section. For CPAs who want to demonstrate their expertise in this subject matter, apply to become a CPA/PFS Credential holder.