Financially viable senior living.

Strategies that preserve residents' assets, too

WHILE THE SENIOR LIVING MARKET WILL GRADUALLY recover from slow fill-up and flattened occupancies, there are some new and innovative strategies that can be deployed to accelerate that recovery.

Sponsors and owner/operators need new and sharpened market positioning that helps them sell the primary benefits they offer: product, price, and value. They are also seeking new approaches to capital formation while overcoming the seniors' rational and emotional concerns about finances.

Seniors want to live out their final years with physical and financial security while having a comfortable living arrangement that offers ambience and dignity while enhancing maximum independence. Many also want a living arrangement that avoids the increasing hidden costs and growing hassle of home ownership. But what many seniors and their families fail to focus on is a sound financial plan that preserves their assets, allowing them to leave a legacy--one of their scorecards in life. That plan should allow them to leave a flexible, liquid estate while offering them a tangible return on any upfront (entry fees, etc.) costs of their current senior living "investment."

These sponsor- and consumer-desired outcomes really come together if we deploy this senior living position: Opting for senior living can be a prudent, practical, and necessary personal financial investment initiative--just like health insurance, life insurance, and estate planning.

There are at least 25 senior living personal financial and investment positioning strategies. Here are five:

Jim Moore is president of Moore Diversified Services, a Fort Worth, Texas-based national senior housing and health care consulting firm, and author of Assisted Living 2000 and, his most recent book, Assisted Living Strategies for Changing Markets.

* Hassle-free living that avoids the increasing hidden costs and growing complexities of home ownership for seniors 75 and older. The key challenges these seniors face are increasing real estate taxes, complicated home maintenance and upkeep, and escalating insurance and energy costs. A common concern is the loss of future home value appreciation when opting for senior living. But this financial concern is usually offset through the more contained cost of senior living while realizing the financial benefits by investing liquidated home equity.

* Minimizing health care service delivery costs by accessing reliable, high-quality services on an as-needed basis within a senior living campus. This is a high-value alternative to premature nursing home admissions, ineffective and costly home health services, or the delaying of necessary preventive or corrective health care initiatives.

* Home equity is a $1 trillion national asset that is really at the core of most seniors' financial planning resources. Progressive communities are showing seniors how to put their liquidated home equity to work now-while preserving most of this cash plus their current savings portfolio principal as a legacy to their estate.

* Prudent spend-down plans may be necessary for some to private-pay for desired services that maximize independence and quality of life. You should show seniors how to avoid unnecessary spend-down, while offering them reasonable approaches to planned spend-down that will not leave them destitute within the period of their remaining expected life.

* Tax shelters and arbitrage are not just for high rollers or sophisticated Wall Street investors. Advise seniors that, under specific conditions, they can deduct a significant portion of the service fees paid to the community as a medical tax deduction. (See "When are fees deductible?" November 2000 CLTC, page 28.)

Arbitrage is a fancy term sometimes used to describe the benefits of the alternative cost of money. Simply stated, a for-profit sponsor might have to borrow money at 9 percent while a senior is willing to accept a 5- to 6-percent return on a portion of their savings portfolio. Would you be willing to give the senior 7 percent for the use of some of her money? This is the essence of an innovative win-win pricing strategy being developed. The senior has to take less money into taxable income each year because she is being credited with a lower monthly service fee. The for-profit sponsor saves 2 percent on the cost of capital, which can result in hundreds of thousands of dollars in additional annual cash flow.

Most of us prudently hedge future lifetime risks. We have wills, trusts, life insurance, and sometimes even long term care insurance. We want enough income to live a normal lifestyle. But after age 75, many seniors' lifestyle is far from normal and frequently little thought is given to preserving an estate accumulated over a lifetime of conservatism. Many older seniors have planning denial, but astute senior living sponsors can immeasurably help while sharpening the positioning of their senior living community.