After receiving an Alzheimer’s disease or dementia diagnosis, families face some of the most significant decisions they’ll have to make in their lifetime, whether for their own future or that of a loved one. Financial planning can feel the most daunting because it plays perhaps the most considerable role in planning for long-term care. That’s why it’s the most important aspect to deal with following a diagnosis.
Lindsay Graves, elder law attorney and founding partner of The Graves Law Firm in Canton, Ohio, encourages all families facing this reality to be proactive in planning for the life they want.
“The earlier you get started, the greater the options available. Put in place trusted advisors and lean on them to get you through,” she says, “My overall number one tip is to lead all decisions with the care of the loved one with Alzheimer’s at the center and let your trusted experts sort out how to support those decisions on the legal and financial side.”
Graves answers some common questions families have about financial planning for the future after receiving an Alzheimer’s disease or dementia diagnosis.
Q: Why is seeking help from well-qualified financial and legal advisers important? What kinds of things can these advisers help with?
A: “Some families find themselves paralyzed by an Alzheimer’s diagnosis, but that is the most important time to take action. There are legal, medical, and ethical ramifications to planning after a diagnosis, and the longer you wait to address them, the fewer options you will be left with.
“A team of qualified professionals is essential to helping patch that hole and get your ship into safe harbor. The diagnosis itself does not mean that the individual is automatically prohibited from making decisions or signing legal documents, but it does make it trickier. Many assume an Alzheimer’s diagnosis calls into question a person’s legal capacity to sign, but only professionals can properly navigate whether capacity exists. Specifically, attorneys who specialize in elder law have expertise in determining whether a person has the legal ability to sign paperwork.”
Q: What important documents should be gathered and/or prepared immediately following an Alzheimer’s diagnosis?
A: “Attorneys who specialize in elder law can protect the voice of the individual with Alzheimer’s through powers of attorney, wills, and trusts. Without validly executed POAs, the alternative is a guardianship or conservatorship, where the court appoints an individual to make decisions on behalf of an incapacitated individual. This process is cumbersome, invasive at best, and easily avoided using well-crafted POAs. Wills and trusts ensure the proper distribution of assets (under the individual’s wishes) after they pass.”
Q: How can families estimate possible costs for the entire disease process? What might some of these costs include?
A: “Long-term care costs, on average, upward of $90,000 per year, depending upon the level of care and, of course, geography. The continuum of care ranges from independent (care in the home) to assisted living, skilled nursing, and memory care, which is typically a locked unit for those considered at risk for wandering and getting hurt.
“Medicare only pays for the first 20 days of a stay in skilled nursing care, after a qualifying three-day hospital stay. They will also cover part of days 21-100, but the patient will be out of pocket for a daily co-pay, which is as high as $200 per day. After day 100, patients must pay privately out of pocket for their care. Most families end up paying for the care until they are nearly broke and then seek Medicaid to pay the difference. Through proper planning, most states have tools available to protect around half of the at-risk assets, or more, with the help of the proper professionals.
Q: What other financial planning should be considered? (Paying bills, tax returns, investment decisions, etc.)
A: “It is essential to speak to an attorney in your state who thoroughly understands the Medicaid rules. Medicaid is a joint federal and state program, so the foundation of the program is the same across all states, but the parts that are different can be wildly different. The information you need in order to make decisions includes: what are the spend-down limits in your state? What assets are considered countable in determining what must be spent down? How are tools such as trusts treated by Medicaid? Understanding the answers to those questions will allow you to plan for the costs associated with the care that an Alzheimer’s patient is likely to need at some point.
“In addition to looking toward Medicaid planning for the cost of care, families should also look at any existing life insurance or annuities they own to see if those policies carry riders that will help pay for the cost of care. Additionally, veterans and their spouses may be eligible for a program referred to as “Aid and Attendance,” which can pay veterans as much as $2,500 per month and spouses up to $1,500 per month to help offset the cost of care.
“Families should take care to assess what assets the individual with Alzheimer’s has titled in their name so steps can be taken to avoid those assets being subject to probate court after their death. Additionally, protecting those assets during the individual’s lifetime is paramount to avoid spending all of their net worth on long-term care costs.
“Asset protection is best achieved through a team approach that involves, at a minimum, an attorney, a financial planner, and a tax professional. Additional experts that can be helpful include those with real estate and healthcare specialties. Such a team has the ability to advise on the best way to position assets so that there is a bright line in the sand beyond which the family will not have to pay for care out of pocket. Other payment sources that can be attained through diligent planning include VA Aid and Attendance, Medicaid, long-term care insurance, and life insurance, just to name a few.
Q: What kind of resources should families consider for financial support when considering how they’ll pay for care? (Insurance, government programs, tax breaks, etc.)
A: “If facility-based care becomes necessary, choosing a facility that either accepts Medicaid or has a benevolence fund can be useful in ensuring that the individual will be covered long-term. Benevolence funds are often found in Christian-based or nonprofit facilities that make a promise never to kick out residents for lack of funds.
“Finally, I recommend families seek out their local Agency on Aging to learn more about additional services and benefits that may be available in their area. The Alzheimer’s Association is a tremendous resource for caregivers and families navigating the complex world of life with Alzheimer’s.”