Sometimes life doesn’t work out as planned. Sudden illnesses are not only devastating for the most obvious reasons; they also will take the best laid financial plans and completely upend them. Then there is the even more insidious burden of chronic conditions that can shadow the end of a life for years, even decades. One of the most frightening, especially given the nation's rapidly aging population, is Alzheimer’s disease, a neurological condition affecting cognition. Alzheimer’s affects more than five million Americans, and approximately one in three seniors will die with the disease or some sort of dementia, according to the Alzheimer’s Association. 

The cost to the patient is significant. A private room in a nursing home can come to $250 per day – more than $91,000 per year. Add to that doctor visits, prescription drugs and the many other costs. And the patient isn't the only one who pays. Data show that caregivers may shell out $5,000 per year or more caring for an Alzheimer’s patient.

This makes proper financial planning crucial. What should you do with your financial plans if you or a family member are diagnosed with the disease? (For more, see Dementia and Retirement: How Advisors Can Help.)

Take Action Early

Elder law attorney Debra Speyer says, “If a person is diagnosed with Alzheimer’s, they may at one moment be lucid and know who they and what their assets are, while later in the same day they may be incapable of having such understanding.” She continues, “While one may have the ability to understand and thus execute the documents, as the disease progresses their capacity to do so may get to the point that they do not have the capacity to execute these documents.

It is best to immediately have estate documents drawn up before the disease reaches the point of the person not having capacity. Each document has a different standard as to whether someone has the legal ability to execute it.” Here's what’s involved in getting your financial and legal affairs in order.

Step 1: Gather Documents

According to the Alzheimer’s and Dementia Caregiver Center, patients and caregivers should compile the following documents:

  • All bank and brokerage account information
  • Deeds, mortgage documents or ownership statements
  • Insurance policies
  • Reccurring or outstanding bills
  • 401(k) and 403(b) plans, pensions and other retirement documents, including Veterans Affairs documents if applicable
  • Social Security and Medicare documents
  • Stock and bond certificates

Don’t forget any online assets such as social media accounts, customer loyalty assets such as frequent flyer miles and any other digital footprint that may need to be managed as the person ages. 

Step 2: Create or Modify Documents

In most cases the disease progresses to a point where the individual is no longer able to make decisions concerning his or her best interest. Before reaching that point, put legal plans in place that establish who will make decisions on the patient’s behalf. Some of these could include:

  • Living Will  This document communicates the individual’s wishes for medical treatment toward the end of life. How aggressively will doctors treat him or her  in case of advanced illness? Will they perform CPR? Living wills can be as detailed as desired, but  for someone to be able to make choices about the document with the help of an attorney, he or she must be competent by legal standards. 
  • Will A living will ends when someone passes away, at which point the will becomes the governing legal document. It includes instructions on how to divide assets and also an executor to make sure all of the patient’s wishes are carried out appropriately. 
  • Living Trust  Depending on the person’s financial situation, a living trust may be more appropriate than a will. Speak to an estate attorney upon diagnosis if a will or trust isn’t already in place.
  • Power of Attorney – Once an individual becomes unable to make decisions on his or her own, somebody has to step in and assume the role of legal decision maker. Power of attorney is granted to that person through legal documents. While still legally competent, someone can grant power of attorney for a single decision or for all decisions. 
  • Durable Power of Attorney for Healthcare  This is a person authorized to make decisions specifically about healthcare when the patient cannot. He or she could decide on treatment, resuscitation, continuing life support, changing healthcare providers or just about anything else related to the patient’s medical care. 

When dealing with legal considerations, keep in mind that states create the laws governing most of these decisions and documents. You should consult with an attorney before trying to put these documents in place to avoid lengthy and expensive legal proceedings later on. Look for attorneys specializing in elder law and estate planning. UBS Advisor Courtney Liddy says, “Families should set up automatic bill payments, inventory key documents and use the national Do Not Call Registry, so the Alzheimer patient isn’t duped by a scam.” 

Step 3: Learn About Insurance

Early in the process figure out the extent of health insurance coverage. Policies are drastically different in their levels of care. Traditional Medicare will cover a portion of the expenses but nowhere near all. The patient will likely need a Medicare supplement or Medigap coverage. There are also Medicare Special Needs Plans that provide care to people with specific conditions, including Alzheimer’s. You can learn more about SNPs here

Financial professional and Long Island debt attorney Leslie H. Tayne says, “It’s also possible for people with early onset of Alzheimer’s to receive Social Security Disability Insurance (SSDI), which is paid to people who have worked enough years and are unable to continue to work due to a disability. For those who don’t have great assets, Supplemental Security Income (SSI) can be paid monthly to the person diagnosed. This monthly aid is provided for basic needs such as food and shelter. People with Alzheimer’s who are now veterans may qualify for long-term care from the U.S. Department of Veteran Affairs.” Be sure that any long-term insurance plans are identified and understood.

Step 4: Adjust the Portfolio

Prior to the diagnosis an older person's financial goals were probably different: traveling, purchasing investment property or leaving kids or grandkids an inheritance. Now much of his or her retirement funds will likely go to care. That may require adjustments. Consult a financial planner to constantly evaluate and adjust the portfolio.

One option to consider is a trusteed IRA, which has some of the estate-planning advantages of a trust, such as keeping heirs from receiving a lump sum and spending it all soon after the patient’s death. This may give the patient more confidence that any heirs will be taken care of properly. Trusteed IRAs aren’t necessary for low-balance IRAs, but once balances reach $2 million or more they become an option. Ask a financial planner or estate attorney about this.

Also think through how to manage any other assets, including providing from a spouse or other family members who may depend on the patient. (For more, see Asset Protection Trusts: Help for Seniors.) Make sure that the whoever will be financially responsible for the patient has the necessary papers and documents to step in when it's time.

Step 5: Consider Caregiver Implications

As the individual becomes less able to live independently, someone else will have to assume primary care. That may eventually require a nursing home, but if friends or family members will take the individual into their home, they need to plan for what that looks like. It might include retrofitting the home for safety reasons, modifying a career and making adjustments for childcare. The person taking on this responsibility will have an increasingly difficult job. Support systems should be identified early.

Step 6: Investigate In-Advance Funeral Arrangements

Early in the Alzheimer's process, an individual may be able to assist family in friends in looking ahead to dying, if this kind of planning feels comfortable to them. Because the progression of Alzheimer's is so exhausting, this can be truly beneficial down the line. The first decision will be burial, cremation or donation – something the patient should choose if possible. After that decide on a service, find a cemetery if applicable and prepay some or all of the expenses.

Step 7: Keep the Patient Safe

Once everything is in place, communicate with family members, caregivers and professionals. Tell them to watch for any behavior that could alert observers that the individual's condition is worsening. Some examples are trying to purchase large items or donate money to questionable sources. Remember that documents may have to be adjusted as the disease progresses. Figure out in advance how you will transition to the next stages as needed.

The Bottom Line

The key, according to experts, is to make as many arrangements as possible while the patient is early in the disease. That allows him or her to be a part of the decision-making process. Second, assemble the team of experts who will help as the state of the patient changes. Finally, don’t forget care for the caregivers. They need support too. (For more, see Advisors Should Consider a ‘Dementia Protocol’.)

 

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