Client Profile:

Ravi and Kanika Patel

Ravi Sunder “Ravi” Patel (64), is married to Kanika (61). They reside in Newark, Delaware. Ravi and Kanika have one daughter, Smita, who is 31. Smita is an engineer and lives alone in Oakland, California. The Patels have no financial responsibility for anyone other than themselves.

Health Status

Ravi and Kanika are pretty much in good health in general. Ravi is diabetic, Both Ravi and Kanika are on maintenance drugs for cholesterol which is   a genetic problem on both sides of the family. Recently, Kanika has been diagnosed with epilepsy after more than a few nocturnal seizures that she suffered over the last one year. As such her doctors have not been able to pinpoint to any specific cause as her vitals seem to be normal and ‘above average’ for her age-group. Kanika is on seizure-prevention drug and probably will have to continue with the medication for the rest of her life. Kanika otherwise is a very healthy and active person both physically and mentally. Both Ravi and Kanika keep themselves busy with their work which they seem to enjoy. 

Kanika’s mother passed away in her early 50s and father in his 80s. Ravi’s parents had a normal life expectancy by Indian standards.

Employment Status and Expectations

Both Ravi and Kanika are working and plan to do so as they enjoy their work and because they see that as their way to spend their day. Neither one of them have developed any specific hobbies. Ravi loves to read and listen to music. Kanika is always dreaming of writing her own autobiography and spend her retirement days volunteering as a Financial Literacy Counselor for Immigrants. 

Housing Expectations

Ravi and Kanika live in a ranch and the decision to downsize and go for one-floor living was done eight years back. The property does have a lot of land which needs regular landscaping maintenance. They love the location and their home environment. Most of the landscaping work has been given to a contractor as none of them love the yard work but really enjoy the greenery surrounding their house. In fact, recently, they have added two sunrooms as improvements to their property and seem to enjoy that very much. The property is valued at $450,000, and they plan to live there throughout their retirement or at least until they are in perfect health. Being first generation immigrants, they have strong ties to their birth-country and have been discussing of spending the last phase of their life in India. Nothing has been planned out as in their own words many-a-times, they appear to feel like a foreigner in their birth country’. This back-and-forth discussion has kept them in a limbo as to what the final phase of retirement would look like. Kanika is a big-time planner and not really knowing what the future looks like has been a little stressful for her. 

Caregiving Expectations

Ravi and Kanika do not expect to be caregivers for anyone else. Both worry about their own options as they do not want their daughter to be responsible for their care.  They have discussed moving closer to their daughter post-retirement but do not seem to agree as to what they really would like to do. Kanika is extremely independent and does not feel comfortable being a ‘burden’ on anyone including her daughter. However, that has not been discussed with Smita.

Prior Planning

Ravi and Kanika have estate planning documents that need to be reviewed periodically Ravi is very organized and maintains documents in a three-ring binder kept in his personal filing cabinet at home.

Goals and Objectives

DFH had a detailed conversation with the Patels to understand their main goals and objectives. Since both Ravi and Kanika came to US on F-2 visa, their main goal has always been education and protecting their assets for retirement. They have expressed interest to fund a 529 Plan for their future grandchild. They have also expressed their interest in buying a second home for retirement in India. 

• Protect their present lifestyle which includes travel to India every year. Presently they fly economy but are worried that as age progresses, they may have to travel business class or break the 16-hour flight into two parts with an overnight journey break in a hotel.

• Travel Expenses for staying in India for 3 weeks every year.

• Minimize taxes. 

• Identify and mitigate the risks and potential burdens of caregiving that accompanies the normal aging process, diminished capacity and end of life.

• Ravi and Kanika have indicated that they would like to leave at least $750,000 to their daughter when they are both deceased.

Employment & Income

• Ravi and Kanika are both working and their combined is approximately $300,000 

• Ravi plans to reduce his work to 60 % five years from now.

• Kanika is presently planning on changing her career and may take a one-year break from employment.

• Kanika plans to go for another graduate degree that will cost her $60000 over the next two years.

• Kanika has a pension plan which entitles her to receive $2,400. 

• Kanika will receive $2,995/month SS at 67 FRA.

• Ravi will receive $3,258 at FRA of 66 years and 10 months.

Housing

• Ravi and Kanika Patel reside in Newark, Delaware, and own their primary residence outright.

• The home is a ranch-style property with two sunrooms. They previously chose one-floor living to support their preference for remaining in their home as they age.

• For purposes of this illustrative case study, the home's estimated value is assumed to be $450,000, subject to confirmation using a property-specific valuation.

• The property is intended to support aging in place, provided their health and care needs allow.

• The home's value is not assumed to fund additional retirement spending unless the couple later decides to sell, downsize, borrow against the property, or otherwise access its equity.

Other Planning

• Ravi and Kanika own a 2009 BMW which does not have much value.

• Patels plan to buy a hybrid that might cost $40,000. This value will depreciate 10% annually.

• Ravi and Kanika own a $1,000,000 personal umbrella liability insurance policy.

• They have a hybrid LTC Insurance with a face value of $100,000. The annual premium is $10,000.

• Ravi and Kanika last updated their estate planning documents in 2022.
  

Elder Care Planning

Long-term care (LTC), sometimes called Eldercare, refers to the physical, medical, social, and financial support often needed later in life. The uncertainty of life events throughout elderhood makes specific planning challenging, but thoughtful and flexible plans while one is healthy can relieve significant stress on everyone involved when the need for care arises.

The Patels have a goal to formalize their long-term care plan to reduce the burdens placed on their daughter. The financial planning analysis and recommendations report is designed solely to assist the Patels and their attorneys as they attend to the stated goals and objectives. Nothing in this report should be construed to be legal advice or an offer of legal opinion.

LTC planning requires extensive discussion and consideration of at least four different, but inter-related components:

• HOUSING. “Where will I live as I age?”

• COORIDNATING HEALTHCARE. “Who will coordinate my healthcare when I am unable to do so?”

• PAYING FOR ELDERCARE. “How will I pay for care?”

• LEAVING A LEGACY. “What will I leave behind and how will be remembered?”

The need for sustained Long-Term Care of either Ravi or Kanika could have a significant impact on all these components. Choosing where one will live if incapacitated is usually dependent on the level of care needed and whether adequate care can be provided at home. Choosing a nursing home or other facility will not only impact paying for care but will also affect the legacy that is left for their daughter.

There are three potential sources of funds for paying for long term care.

1. Self-pay from income and assets

2. Insurance

3. Medicaid

Eldercare Planning

• Retain eldercare legal counsel to evaluate and update existing documents.

• Durable Financial Powers of Attorney

• Health Care Proxy, Durable Healthcare Powers of Attorney

• Wills and trusts

• Beneficiary statements

• Living will or other advanced directive

• Appoint a Trusted Contact to intervene in the event diminished capacity or financial exploitation is ever suspected.

• Ravi is very organized and maintains a set of 3-ring binders that are kept in his

personal filing cabinet. Because they are new to the area, list of local resources should be added to his records.

Should we buy a retirement home in India?

International Snowbirds: The Patels have discussed numerous times about their desire to spend the winters in India when both have fully retired. 

Foreign property ownership and tax laws are complicated and change from time to time. The best way to protect yourself is by consulting with a tax accountant or a real estate attorney or both in the US and India. Below are some of the points you should consider. 

Five Things NRIs Buying Property in India must know

1. Nature of the property: A Non-Resident Indian (NRI) can buy an immovable property in India Payment cannot be made in foreign currency. The Indian currency funds used to purchase should have been transferred in the country by means of normal banking channels.

2. Taxation: Taxes are deducted at source (TDS). When property is sold is the tax rate is 20.6% on long term capital gains and 30.9% on short term capital gains

3. Power of Attorney:  NRA's have an option to give POA to their friends or relatives to complete the property purchase process in India.

4. Home Loan: You can get loans to buy residential property in India. The loan is sanctioned in Indian currency and must be repaid using the same currency. The loan amount cannot be credited directly to the bank account of an NRI but must be dispersed to either the seller or the developer 's account. 

5. Repatriation of funds back to the foreign currency: The amount repatriated cannot exceed the original amount paid for the property.

How will we pay for medical expenses during retirement?

Medicare is the primary insurer for the 65-and-older crowd. It does not include things like dental, basic vision, and over-the-counter medicines.

• If you’re eligible for Medicare and neither you nor your spouse is working, you usually can enroll in Medicare while living outside the U.S. Pay monthly Medicare Part B premiums for coverage you can’t use outside the United States.

• Delay enrollment until you return to the U.S. Remember you will  have to then pay permanent Part B late enrollment penalties.

So, how do you decide?

Ask yourself: 

1. Are you planning to live outside US for short-term or long term?  If you plan to be an expatriate permanently, there is obviously no need to sign up for Medicare.

2. Do you think you might decide to come back to US if your health conditions change? In that case, it might be a good idea to sign up for Medicare Part B and avoid permanent Part B penalties.

3. Do you plan to be ‘international snowbirds’? Spend the winter in your birth country and the summers in US? If so, it would make sense to sign up for both Medicare Part A, Part B and even Part D or any Medigap plan that might be right for you. This needs further discussion. Medicare is very complex, and rules keep changing. 

Total Out of pocket hospitalization cost(lifetime) if you are on Medicare would be at the most approximately $55K if you are hospitalized for more than 5 months. The calculation is based on cost estimates 10 years from today. Of course, you need to add to it the additional cost if you end up needing skilled nursing care, homecare, or hospice expenses.  These decisions cannot be made today but it is important to realize that your plan to buy property, relocate, and/or become ‘international snowbird’ hinges on many of these moving parts. It is important that we revisit this annually or more frequently if your situation demands.  It would be nice to get your daughter involved in this planning phase as ultimately, she may have to make the decisions for you based on all the estate documents that you have filled up.

4. If you decide to sign up for Part B while abroad, you can do so by contacting the nearest U.S. embassy or consulate in the country where you live. You can find contact information on the Social Security Administration’s international webpage. Both Medicare supplement insurance, commonly called Medigap, and Medicare Advantage, also known as Part C, are tied to enrolling in Part B 

Aging in Place

It is the ability to live in your ownhome, as part of your own community— safely, comfortably, and independently— regardless of age, income, or ability level

Few things you need to consider if you desire to age in place.

• Driving: Assuming that you want to continue living in your present home,  think about provisions you might need to make if you no longer able to drive. Do you think you will be able to get uber service easily?

• Home modifications: Some modification may be needed but for most part you have already made the move to one-level living. Maybe, at later stage you may have to think about bathroom modifications and/or hand-rail provisions depending upon your need.

• Home monitoring: Given that your daughter lives in the West coast, it might be a good idea to think about home-monitoring and some provision for her to be able to contact local services if needed in case of an emergency. You can also think about life-alert service.

• Companionship care and homemaking services: Since both of you have been working professionals, and have not been very good at socializing outside your work-environment, it is crucial for you to visualize scenarios like, what if only one of you is alive and retired? Socializing is a big part of staying healthy as human beings are social animals. If you decide to continue staying in US or even if you decide to be international snowbird, you need to do some research on your local options for companion care and homemaking service. How do you plan to 

• Home health aide

•    Adult day care services 

• Monthly Cost of care for Delaware for 2031 is provided in the additional document in the appendix.

End of Life Conversation

• How do you want to spend time as options in your life become limited? 

• How do you want to spend your time? What tradeoffs are you willing to make? 

• Who do you want to have make decisions when you reach the point that you can't?

• And who do you want to have make decisions when you reach the point that you can't?

• We can talk about Five wishes during our next meeting. I know you already have the basic estate planning documents already in place. I still think it would be a good idea to get the digital version of Five Wishes and share it with your daughter.

• Check the website https://www.fivewishes.org/ for more details.

• I am also enclosing an audio file on “Making end of life more humane”. This is entirely based on numerous discussion that we have had about not prolonging your life medically but rather respecting the life that you have lived and honoring your wishes.

Social Security and Required Minimum Distribution

The analysis is based on conservative assumption of investment return of 6% and inflation of 5%

Current Assets

• Brokerage: $115,000

• Retirement Pretax Account: $2,190,000

• Roth: $510,000

• Total: $2,815,000

• Emergency: $45,000

• Home Value and Mortgage are not part of the analysis.

• Total Portfolio for Calculating RMD: $2,190,000

• Patels max out in their retirement contributions. The savings from 2023 through 2029 has not been taken into consideration for the Need Analysis

• Need Analysis assumes that the Patels will only withdraw the RMD from their retirement portfolio.

• It is assumed that both Ravi and Kanika will start on Social Security at Full Retirement Age.

Table: Retirement Cash-inflows and cash-outflows