On an otherwise normal Thursday afternoon, a reporter had lunch with a resident from a memory care facility. Apparently, he asked for details on some kind of story and the confused patient was happy to comply and enjoyed the meal out. Then the police showed up.
The story of Brooke Shields’ mother Teri being checked out of her care home by a freelance reporter looking for a scoop has served as a cautionary tale for eldercare since. Shields herself has become an advocate for Alzheimer’s care, and the National Enquirer donated a substantial sum to memory research by way of apology.
Eldercare. Long-term facility. Respite home. Nursing care. These less-than-desirable terms will most likely become part of our lives at some point. We might not all get sick or have major surgeries, but almost all of us will grow old and need support.
The expenses associated with long-term care, and specifically memory care, can be astronomical and the sheer length of time exhausting.
Financial planning for those with Alzheimer’s and dementia can help you prepare for a long journey and give you confidence in a difficult time. Let’s look at how you can care for your loved ones – and yourself – when they can no longer care for themselves.
The Numbers for the Long Haul
One in 10 people over 65 will develop Alzheimer’s. You can’t look down the street without seeing a house with a family affected by this disease.
The expenses for caring for a loved one can be intimidating. The national average cost of regular long-term care is enough, weighing in at $4,000 per month or $48,00 per year. Memory care adds another $1,000 per month to that, bringing your total average to $60,000 per year.
Those with Alzheimer’s are likely to need care much longer than other chronic conditions. You might suffer alongside a relative with a heart condition or a slow-growing cancer for a few years or months – with Alzheimer’s it could be decades.
The annual $60,000 bill might not seem like much for a patient with a healthy IRA who just started care, but what about 15 years later?
Power-of-Attorney – What if I Can’t Make My Own Decisions Anymore?
Your financial power of attorney paperwork should be in place before you even finish reading this paragraph! Designating a power-of-attorney gives you the discretion as to who will be making financial decisions after you no longer have the ability.
When we think of drafting a POA, we usually think of medical incapacity and physical care, but what about mental incapacity?
When drafting a POA, there are several factors to keep in mind. Here are a few to start the discussion:
- A financial POA and a medical POA are not necessarily the same document. A document that a hospital social worker or chaplain helped you create that addresses medical concerns doesn’t cover financial issues. Your financial POA needs to be drafted with your lawyer, and you can include medical wishes in that discussion as well.
- Power-of-attorney paperwork is often different state to state. Make sure your attorney is conversant with the details of the state law, especially if you are a snow/sunbird.
- Make sure to include explicit language about caregiving communication. HIPAA laws on sharing medical information are extremely strict, and your POA will need to know what’s going on with your care.
- Springing vs. Immediate Power-of-Attorney – A springing POA, “springs” into effect when your incapacity is determined medically, usually by two doctors. But Alzheimer’s is a gradual process, and your “incapacity” won’t change at once. An immediate POA lets you continue to participate in financial and medical discussions as long as possible until your caregiver(s) determine your decision-making power is no longer reliable.
There is no way you can fully anticipate the decisions your POA may need to make – this isn’t like computer programming. Choose carefully and wisely: Is this a person who will reflect your values and understands your vision for your wealth? Will they have your and your family’s best interests in mind when caring for you?
Designating a POA who you know well and whose character you trust is the table stakes of this conversation. So many other details come into place when your POA paperwork is drafted well.
Financial Preparation
Financial care concerns are also vital to the discussion and, without proper planning, can leave a legacy of frustration and dysfunction for your family members.
Consider a few financial preparation pieces that will help if you or a loved one struggle with dementia.
Roth IRA Conversions
Converting your retirement accounts to Roth IRAs can reduce the tax liability for your benefactors when the time comes. Carefully write the Roth conversion process into your financial POA paperwork.
This can be especially important now that Congress has passed the SECURE Act. An inherited traditional IRA must be fully drained within 10 years, which can make for a painful tax bite. A Roth conversion, done well ahead of time, can alleviate a tax burden.
Trusts
Make sure everything in your trust is titled correctly. If your designated POA is not your trustee or part of your trust board, make sure the two parties are in sync and share your vision and values for your wealth.
Pay Now for Care Then
The importance of long-term care insurance can’t be stressed enough, especially in these circumstances. Medicare will not cover long-term care expenses, and this can be a huge cost, even more so in dementia cases.
The average out-of-pocket healthcare costs for dementia patients can be up to 80% higher than those associated with heart disease and cancer. Common costs with dementia, such as hiring support for daily life activities like dressing and eating, isn’t covered by Medicare. Long-term care insurance and other arrangements can defray the cost of care at home and in a facility.
Your estate plan can also include funeral arrangements and costs. The average funeral cost is between $7,000 and $10,000, which isn’t a fortune but can be an irritating additional bill and cause tension among family members.
Keeping a Healthy Optimism
Alois Alzheimer, who first discovered the disease in the early 1900s, encouraged us to keep “a healthy optimism that cheerfully searches for new ways to understand” the disease. Dementia in all its forms is hard on victims and their caregivers especially. There is no cure, but there are ways to prepare your family for what’s ahead.
As financial advisors, we help people not just get healthy returns, but to plan for life’s transitions and ups and downs. Financial planning for those with Alzheimer’s and dementia is a difficult journey we’ve been honored to help many families navigate.
Let’s talk today about how your financial plan can support you and your family’s life journey.