Two topics most people want to avoid discussing are money and mental health. Yet both are crucial if you suspect you may be experiencing the start of cognitive decline, or if you notice such symptoms in a loved one.
Mismanaging money and poor judgment are two of the early warning signs of dementia. If someone who has always been in charge of the family budget begins experiencing memory loss, you may subsequently discover unpaid bills, large donations to scam charities, impulse online purchases, and numerous other financial disasters. It’s much better to be prepared.
It might be wise to engage the services of an elder law attorney to help you navigate the financial landscape as it pertains to dementia, interpret state laws, understand all your options, and help preserve your assets as much as possible while your wishes are carried out.
Here are 12 important steps to take now. The first half-dozen put the necessary planning tools and resources in place for a dementia diagnosis; the latter six outline financial resources to help pay for care.
- Durable power of attorney for finances. Name someone who will be authorized to make financial decisions when the person with Alzheimer’s is no longer capable of doing so. A durable POA for finances can help your family avoid court action that could wrest control of your financial affairs.
- Advance directive for financial and estate management. Much like an advance directive for health care, a financial advance directive instructs the durable POA for finances in the management of your estate. You should also update your will, trust, or other legal documents to reflect these changes.
- Dementia Directive. This is a newer type of advance directive that is specifically focused on a senior’s wishes in the event he or she develops dementia. Even with an advance directive for health care (also known as a living will) someone is unlikely to be appropriately covered if they develop Alzheimer’s disease. A dementia directive focuses on the types of care choices you (or someone you love) will want if you or they are diagnosed with Alzheimer’s or another form of cognitive decline.
- Retirement and insurance accounts. Someone who suspects dementia in themselves or a loved one needs to update their beneficiary forms ASAP. This is critical, because contrary to what most people believe, in 99 percent of cases beneficiary forms override a will. In some instances, the courts will overrule an incomplete beneficiary form and award resources to people other than the intended heirs.
- Cancel credit cards. One easy way to prevent a senior with dementia from misspending or overspending is to cancel all credit cards, and/or arrange a separate bank account with limited funds that they can use for discretionary purchases.
- Bank accounts. Add the Durable POA for Finance or another trusted family member to the senior’s bank accounts. This is known as locum tenens, and will enable the second signatory to write checks for the senior, pay bills and in general oversee the accounts.
Covering Dementia Care
- Medicare. Medicare will pay for cognitive assessment and care planning services for individuals diagnosed with Alzheimer’s disease, other dementias, or mild cognitive impairment (MCI). There are Medicare Special Needs Plans (SNPs) available for individuals with dementia, including Alzheimer’s disease. SNPs are Medicare Advantage plans that specialize in care and coverage for beneficiaries with dementia. Only Medicare beneficiaries with dementia can enroll in these plans.
- Social Security Disability. The Social Security Administration has added Early Onset Alzheimer’s Disease, which affects people younger than 65 years of age, to its list of covered conditions. This gives those with dementia expedited access to Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
- Veterans’ Administration benefits. If you’re a veteran, you may be entitled to a full range of health services for Alzheimer’s care as part of your VA benefits, including home-based primary care, respite care, nursing home care and hospice care. Contact your local Veterans Affairs office to learn whether you qualify.
- Long-term Care Insurance. Long-term care insurance (LTCI) can be a good financial preventive measure against a future possibility of dementia, but only if the policy is active before the condition is diagnosed. And it’s not necessarily an ideal financial solution, because LTCI premiums can be as steep as the cost of care itself.
In addition, coverage varies widely. As an example, a “facility-only” policy would cover care in a licensed assisted living home or skilled nursing facility, but not in your own home. Also, some LTCI insurers may ask for a physician evaluation (of the insurance company’s choice) to see if someone’s condition qualifies for coverage.
- Retirement benefits. Benefits from retirement plans can provide critical financial resources for someone diagnosed with Alzheimer’s or another form of dementia, even if the person with dementia hasn’t reached retirement age. Retirement plans include Individual retirement accounts (IRAs) and annuities.
Pension plans typically pay benefits before retirement age to an employee who is defined as disabled under the plan’s guidelines. The person with dementia also may be able to withdraw money from his or her IRA or employee-funded retirement plan before age 59 1/2 without incurring the typical 10 percent early withdrawal penalty.
- Personal assets. Finally, home equity may be one of the best resources you can tap to help pay dementia care costs. If you have significant home equity, you may be able to convert some of it to cash with a reverse mortgage, a type of property loan available to those aged 62+ who have sufficient home equity.
While a reverse mortgage will not affect your Social Security or Medicare benefits, the reverse mortgage loan itself is complex, and someone with dementia symptoms would need assistance to understand and execute it. Also, the loan becomes due and payable if the homeowner vacates the residence for one year or longer. Consult with an elder law attorney or your financial advisor to determine if this is a prudent option for you.
While thinking about money and memory may be distasteful, the sooner you begin planning, the smoother the transition will be in your later years, because you’ll be well prepared.