Personal financial planning is a critical component of business succession planning. The general subject of personal financial planning is broken down into four components: wealth development and financial independence, estate planning, credit continuity and exit strategy. Within the topic of wealth development and financial independence is sufficient personal income to facilitate independence from the continued success of the business. The presumption is that if you are dependent upon the business you will logically never release management control. Consequently, you will never be able to genuinely determine if successor management is prepared to assume the responsibility of ongoing leadership and management.
A related subject that predictably causes family challenges is the consideration of long term care. This is an important consideration because generally parents do not want to be dependent on their children in their final years. However, due to changes in family culture and medical science advancements long term care has become a more burdensome consideration.
Fifty to seventy-five years ago, adult children assumed responsibility for the care of feeble parents. There was no Medicare or Medicaid to fall back upon so the family stepped up. Additionally, the burden was more short term because with less technology and no health insurance for the aged, geriatric life expectancy was much shorter. In contrast, contemporary families are so dispersed and preoccupied that it is unreasonable to expect children to bring elderly parents into their homes for extended care. With the Medicaid nursing home provision for the indigent and the special care assistance that may be needed, there has been a development of a long term care industry that most children envision as the appropriate caregiver for their parents. In light of this evolution, irrespective of strong loving relationships, I do not support any client’s assumption that their children will provide the highest level of in-home care when they are old and feeble.
From a personal financial planning perspective, my clients are in an asset and income class that could easily afford the cost of long term care either in their home or in the best facility available. They classically state that they do not want to be put in a nursing home and appropriately so because Medicare provides very limited nursing home benefits. Meaning, 98% of nursing homes provide care based upon Medicaid’s bare-bones reimbursement for the indigent. My clients can generally afford the best of care and they expect the best of care. However, to assure fulfillment of their goals, my advice is that they only count on the long term care that they provide independently from the agreement or facilitation of their children. With children in a leadership role (remember you will be old and feeble), there is no assurance they will agree with the expenditure of their parents money (that they will otherwise inherit) on the quality of care their parent have expressed that they want to receive.
I will examine further how you can appropriately plan to ensure your long term care expectations are fulfilled independent from depending on your children or other family members in my next blog posting titled, "Long Term Care and a Living Trust."
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