Millions of Americans live with Alzheimer’s, by far the most common form of dementia and ultimately fatal, and the financial planning they need often gets pushed aside because of fear. This is unfortunate because one of the first things people have trouble with in the earliest stages of Alzheimer’s is personal finance management. Early-stage Alzheimer’s sufferers can make expensive financial mistakes before anyone even notices there is a problem.
Heightening the urgency to address financial planning matters is the sad fact that Alzheimer’s is the most expensive medical condition to treat. According to the Alzheimer’s Association, the total cost of treating people with the disease was about $214 billion in 2014. Of that sum, $150 billion was paid by Medicare and Medicaid. Other institutions picked up other expenses, still leaving a $36 billion tab for individuals to pay out of pocket, says the Alzheimer’s Association.
Spouses and children often care for patients, but it can be overwhelming, and few of them are financial planning experts. So when developing a financial plan for a person with Alzheimer’s or another form of dementia, it’s wise to work with a financial advisor experienced in dealing with this clientele.
According to a report by insurance giant Transamerica and the MIT AgeLab — a multidisciplinary research program that focuses on improving the quality of life for seniors and those who care for them — there are five main components of a financial plan for those caring for an Alzheimer’s patient.
Here are these components, as well as the questions you should ask about them in tandem with a financial planner:
ASSETS. Make sure your financial advisor has a thorough view of your loved one’s assets, including their home, and how they are managed. Many older adults incorrectly believe Medicare will cover their long-term care expenses. It does not. And Medicaid stipulates that individuals must not have significant assets that could be used to fund their care.
- Asset-related questions to ask your loved one in concert with your financial planner:
- Identify all the assets you have, including property, household items and real estate. Whose name are they in? What is their estimated value?
- How is your main residence currently titled? Have you considered transferring or gifting it? Do you want to keep it in the family?
- Are you considering selling your house, perhaps to move to a facility?
- Income and insurance-related questions to ask your loved one in concert with your financial planner:
- Have we identified all your main income sources?
- Let’s review the details of your employee benefit package.
- Do you have any supplemental insurance plans, such as long-term care insurance or other insurance policies with riders?
- Intentions-related questions to ask your loved one in concert with your financial planner:
- Do you have an elder law attorney? Should you contact one?
- Have you thought about where you want to spend your retirement? Have you considered assistant living or a nursing home?
- Have you arranged for a general power of attorney and a durable power of attorney for your health care?
- Have you thought about creating a joint bank account with me?
- Have you considered using a daily money-management service?
- Have you considered establishing a representative payee for government benefits?
- Care management-related questions to ask your loved one in concert with your financial planner:
- Do you have a long-term care policy we can review to help determine the extent of coverage for detention and Alzheimer’s?
- Have you considered hiring a geriatric care manager?
- Have you considered using a meal service such as Meals on Wheels?
INCOME AND INSURANCE. Identify all existing income sources, including benefits such as disability payments, Social Security, annuities and pensions, and how these payments could be impacted by the death of a spouse. Also review your loved one’s insurance plans to ensure they fit current and future needs and probe whether additional polices should be added to fill coverage gaps.
INTENTIONS. Understand your loved one’s wishes and how they can be fulfilled. These arrangements include where your loved one wants to live as the disease progresses, how the person wants care to be managed and delivered, and how the individual wants to insure his or her finances will be safe. (It’s difficult to think about disease progression, but this can help reduce stress later.)
BANKING ADMINISTRATION. As your loved one’s financial skills erode, he or she will require help managing day-to-day financial affairs, including tracking expenses and paying bills. You may already have taken over these responsibilities, but let the financial advisor help ensure your loved one’s financial responsibilities are being met. One way to manage your loved one’s affairs is to establish a joint bank account listing you and he or she.
Banking administration-related questions to ask your loved one in concert with your financial planner:
CARE MANAGEMENT: Lastly, you must discuss with your loved one how to finance and facilitate care, especially when the disease progresses and caregiving demands intensify. Talk with your loved one about preferences for long-term care and how to finance it. If your loved one insists on staying home, work with the financial advisor to help understand costs associated with modifications or renovations that may be required to make the home more accessible.
Note: Other good resources and articles about financial planning for Alzheimer’s patients are available. Here are Annuity FYI’s recommendations:
- The Alzheimer’s Association’s alz.org.
- The Alzheimer’s Association Alzheimer’s and Dementia Caregiver Center.
- The Alzheimer’s Association’s supplemental financial planning site.
- The Alzheimer’s Association’s Money Matters report.
- USA Today article about this topic.
- National Institute on Aging’s Fact Sheet on Legal and Financial Planning for People with Alzheimer’s Disease.
- Bankrate.com report on Alzheimer’s diagnosis and financial planning.
- Article by The Fiscal Times: “Financial Planning When Dealing with Dementia.”
- Top 10 Elder Law Strategies for Alzheimer’s Patients.
- Kiplinger Special Report on Financial Planning for Alzheimer’s.
– Steve Kaufman
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