The Collateral Crisis: Adult Daughters Caring for Elderly Parents

I personally lived through this experience a few years ago when my then-78-year-old mother was diagnosed with a terminal disease. I lived halfway across the country at the time and ran my own business, but I quickly moved back home to share the responsibilities of caring for my mother with my two working sisters. Just a few years later, my father neared the final stages of his life. He was in an assisted living facility and had started to run out of money. His last remaining assets and Social Security benefits were being used to continue his care. Eventually, all he had left was a small life insurance policy.

My sisters and I didn’t think twice about the decision to help our mom and dad in their last years — just like so many adult children of older Americans. But it’s also true that caring for them adversely impacted the finances of my sisters and myself.

Not only had I stopped earning income during the times of caring for my parents, my sisters and I were paying for many of the costs of our parents’ long-term and end-of-life care. No money coming in, and lots of money going out. Compounding this impact was the fact that I wasn’t able to contribute to my own future retirement needs (i.e., pension plan contributions). It didn’t occur to me until later that not only was I not saving for retirement, I wasn’t contributing to my own Social Security.

Life Settlements

Had I known that my parents’ life insurance policy could be sold through a life settlement for immediate cash, it might have been a great help. In a life settlement, a policyowner sells their life insurance policy rather than letting it lapse or surrendering it back to the insurance company. The policyowner always receives more than they would in a lapse or surrender and can then utilize this “found money” to pay for healthcare or assisted living, fund their retirement, or serve whatever other purpose they choose.

Life settlements can also prevent adult children (or other unpaid caregivers) from having to use their own savings, as well as support them when they step away from their own careers to become a caregiver for a parent. In my dad’s case, a life settlement would have relieved some pressure on him and my sisters by helping to subsidize his continued care in assisted living.

Life Settlements are a Sensible Solution

While my father purchased the policy to provide for his loved ones, our mother had died a few years prior, and my sisters and I were all grown women with our own careers. My father’s need for care – and the cost of that care – far outweighed any death benefit. Had we known about life settlements, we would have immediately sold the policy and used the money from the sale to pay for his care.

The lack of awareness that surrounds life settlements is perhaps the greatest challenge, as many people don’t realize that life settlement companies pay owners an average of at least four times the policy’s cash surrender value. Furthermore, adult children are often unaware that their parents even have a policy.

Every financial professional – financial advisors, insurance agents, and others – should find out if their senior clients own a life insurance policy, if they don’t already know. Having that policy appraised by a life settlement company is free to the policyowner and will help determine the policy’s living benefit. Advisors should also bring their clients’ adult children into the discussion to raise their awareness about life settlements — because of the impact caring for their aging parents will surely have on them.

Long-Term Impact

When I scaled back my business to help my parents before their deaths, it never dawned on me how the loss of income would affect me financially since I was so focused on taking care of them. The statistics show that I am not alone in this experience. The collateral crisis of adult children caring for their parents is widespread and particularly impacts women.

Over the next decade, an estimated $2 trillion of life insurance death benefits will lapse or be surrendered by seniors that could instead generate tens of billions of dollars if they are sold If more people knew about life settlements, they could take advantage of this growing market and make a great difference in the lives of older Americans and their adult children caregivers.

Anne Long is senior vice president of business development at LightHouse Life, headquartered in Conshohocken, Pennsylvania.