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May 18, 2015
Create a plan for dealing with dementia.
The costs of Alzheimer’s disease and other forms of dementia can be staggering. And not just for the person suffering from the disease, but for those around him or her who serve as primary caregivers.
Dementia can easily derail a family’s finances, and it can quickly drain retirement savings for those who have not prepared.
“There are enough challenges without having to go through the financial challenges,” says Mark LaSpisa, a certified financial planner and managing advisor at Vermillion Financial Advisors in South Barrington, Ill.
LaSpisa stresses the importance of meeting with a financial planner and other professionals as soon as possible to make finance and legal decisions. “No decision is unilateral. It’s always a complex decision based on an array of goals and objectives.”
Alzheimer’s is a progressive, degenerative disorder that attacks the brain’s nerve cells, or neurons, resulting in loss of memory, thinking and language skills. It can also lead to behavioral changes. It’s the only disease among the top 10 causes of death in America that cannot be prevented, cured or even slowed, according to the Alzheimer’s Association.
Unfortunately, the odds of you are someone you care about having the disease when older are high. One in three seniors will die with the disease, or another form of dementia, according to the 2015 Alzheimer’s Disease facts and figures report.
Rising Costs Associated with Dementia and Alzheimer’s
In 2015, Alzheimer’s and other dementias will cost the United States $226 billion, and that figure could grow to as high as $1.1 trillion in 2050, data show.
The hours of unpaid care that family and friends provides those with Alzheimer’s and other dementias also adds up. In 2014, informal caregivers provided an estimated 17.9 billion hours of unpaid care, a contribution to the nation valued at $217.7 billion, data show.
“This is approximately 46% of the net value of Walmart sales in 2013 and nearly eight times the total revenue of McDonald’s in 2013,” says the Alzheimer’s Association in a statement. Yet, 41% of caregivers have a household income of $50,000 or less, data show.
On top of these costs, families caring for a loved one with Alzheimer’s spend, on average, more than $20,000 per year for care, according to a 2014 study by Caring.com, an online resource for family caregivers and senior care services referral source.
Create a Plan of Action for Dealing with Dementia or Alzheimer’s
One of the first challenges with this disease is knowing whether signs of memory loss, or other changes in behavior are signs of dementia. Be proactive about seeking a medical professional’s advice. If a diagnosis is made, creating a plan for the future is key to ensuring that everyone’s needs are met — and can go a long way in preventing the stress associated with mounting medical bills, managing property and other assets, and more.
In some families, the afflicted person may be the breadwinner of the household, which means other family members need to be looped into financial planning activities as soon as possible, says certified financial planner Hank N. Mulvihill, Jr., principal at Mulvihill Asset Management, LLC in Richardson, Texas.
“I have been through what happens when the primary wealth accumulator/manager becomes incompetent,” Mulvihill says. “If dad has been making all these financial decisions alone, the families need to decide who will help in the decision-making process as soon as possible. Families who wait too long become completely handicapped because then dad is making erratic decisions.”
Rational decisions makers need to be identified long before a loved one can no longer handle their affairs. In addition, plans must also be in place for when the individual with Alzheimer’s or dementia can no longer live alone, drive or requires additional health care support.
“You need to have a plan of action,” LaSpisa says. “If this happens, we’re going to get rid of our second car. Or if this happens, we’re going to hire a live-in caretaker. Having these plans in place will go a long way in preventing undue stress.”
Here are a few additional tips for dealing with dementia:
1) Build a Network
Having plans in place to alleviate the stress of last-minute decision making includes expanding one’s network of loved ones and professionals.
It’s imperative that those with Alzheimer’s or other form of dementia put in writing that family members and professionals can talk to each other, Mulvihill says.
If you are not already working with a financial planner, you might want to find one and make sure permissions are put in place so that family members can speak to them.
For example, without written permission, your financial planner may not be able to speak with your elder care attorney about specifics related to your case, which makes executing the best plan of action for all involved much more difficult.
“I end up talking to attorneys, doctors and other professionals frequently in cases where a client has some type of dementia,” Mulvihill says. “Authorizing the financial planner to talk to the attorney allows for an exchange of information. It helps families with peace of mind. If, for example, an investment manager is saying to do X, Y, or Z, the family knows other professionals can weigh in.”
2) Discuss Long-Term Care Costs and How to Cover Them
Getting a plan in place for how to care for someone with dementia and how to pay for that care is critical.
One option is long-term care insurance.
Long-term care insurance, unlike traditional health insurance, is designed to cover long-term services and supports, including personal and custodial care in a variety of settings, such as your home, a community organization or other facility.
However, once an individual is diagnosed with Alzheimer’s, he or she will not be able to apply for long-term care insurance coverage, notes the Alzheimer’s Association. So, making this decision prior to a diagnosis being made can be a risk as well, in that it may not be used if a person never needs the services the insurance plan covers. For those who buy a long-term care insurance policy at age 60, the probability that they will use it before they die is 50%, according to the American Association for Long-Term Care Insurance.
But for those who take the gamble and discover they have the disease, the benefits are well worth it.
“Long-term care insurance has saved families from major financial challenges,” he says. In fact, the annual cost of a nursing home for a person with dementia averages $42,000 and can easily exceed $70,000 in many places, according to Alzheimer’s Association.
3) Take Stock of the Finances of the Person with Dementia as Well as the Finances of Loved Ones
Of course you will look over the finances of the person who has dementia. But family members should also use this as an opportunity to assess their own retirement plans.
A financial advisor can be extremely useful or an online retirement calculator can help you assess your current and future financial situation.
Often times, planning for a loved one with Alzheimer’s or some form of dementia goes beyond the individual and extends to the entire family.
“It doesn’t do anyone any good to bankrupt the family in the process of providing their loved one with care,” LaSpisa says, noting that there are many financial tools and programs that can help offset the costs associated with this progressive disease.
“The best thing you can do is starting planning now,” he says. “You need to focus on the big picture, and financial planners can help with that. Decisions need to be made as part of an overall plan for the family.”
4) Start Estate Planning
Estate planning incorporates living wills and powers of attorney, and is one of the core topics of financial planning.
A living will is a written, legal document that spells out medical treatments you would and would not want to be used to keep you alive, as well as other decisions, such as pain management or organ donation, according to the Mayo Clinic, a nonprofit medical practice and research group based in Minnesota.
“By planning ahead, you can get the medical care you want, avoid unnecessary suffering and relieve caregivers of decision-making burdens during moments of crisis or grief,” Mayo Clinic says in a statement. “You also help reduce confusion or disagreement about the choices you would want people to make on your behalf.”
Many financial planners advise appointing durable powers of attorney (POA) for health care and finances.
A POA is a type of advance directive in which you name a person to make decisions for you when you are unable to do so, according to the Mayo Clinic. The person you name may be a spouse, other family member, friend or member of a faith community.
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