In the last column we discussed how financial planning involves so much more than just managing an investment portfolio. We explored several aspects of cognitive changes associated with Alzheimer’s and the concerns this evokes relative to financial planning.
As promised, today we’ll cover five distinct financial management issues related to conversations with caregivers and family members dealing with Alzheimer’s and other cognitive ability changes.
Researchers at the Massachusetts Institute for Technology (MIT) AgeLab developed a five-element framework to discuss financial planning in the context of dealing with Alzheimer’s disease. I was invited to visit MIT’s AgeLab in Boston and am eager to share their findings with you.
The first two elements represent sources of revenue, the third category helps to articulate someone’s wishes and plans, while the final two topics address how resources will be managed and disbursed.
Understanding the source and destination of funds allows you to honor someone’s wishes when they may no longer be able to communicate for themselves.
This includes real estate and home ownership a well as retirement and investment accounts. Be sure know how assets and accounts are titled, if they should be used to fund any necessary care and if the assets should be kept in the family or sold.
2. Income and Insurance
Once assets have been identified and reviewed, the focus can shift to income sources, including any disability benefits. Finding out how payments from all sources could be affected by changes in family circumstances such as the death of a spouse. Also determine if insurance plans fit current and future needs. Identifying and understanding income sources is necessary.
It’s difficult to think about the progressive nature of cognitive impairment, but talking about this can help family members learn about someone’s wishes and reduce stress later. Knowing and honoring someone’s intentions for their future will better prepare everyone and help in designing an effective plan.
As diseases progress, one may lose the ability to appreciate the consequences of one’s actions and to make rational decisions. Consult with an attorney to discuss drafting a durable power of attorney if appropriate.
Financial skills may erode as a result of Alzheimer’s and the individual will need help managing day-to-day financial affairs such as bill paying and tracking expenses. Having thought about this ahead of time can prevent headaches in the future.
For many, a joint account is the logical solution. Keep in mind that in most states, the money in a joint account automatically goes to the person whose name is on the account upon the death of a joint owner. This could have unintended consequences and cause friction in the family. There are other options that avoid this outcome. Again, consult with an attorney before making decisions.
5. Care Management
A discussion of how care would be financed and facilitated is a must for families. Theoretically talking about caregiving preferences and how it would be paid for is not a pleasant conversation starter, but for those you care about, it’s a must.
Staying at home may require modifications and renovations to make the home more accessible. Knowing how these will be financed is an important piece of the overall plan. Community care solutions and care- management options are available and we have information on this if you’re interested.
There may be a long-term care policy in place to review and determine if it covers dementia and Alzheimer’s. Life insurance and annuity policies may also have similar provisions. You won’t know what is available until you ask the questions.
Many people incorrectly believe that Medicare will cover any long-term care expenses. In reality, Medicare covers care in a skilled nursing facility only for the first 100 days. Before making any decisions on gifting, transferring or retitling assets, consult with your attorney and examine each situation on its own merits.
According to research from MIT, these are the facts regardless of what you may have heard.
• Not everyone experiences memory loss as they age.
• Memory loss isn’t “normal.”
• Alzheimer’s is a physical condition that eventually kills, there are no survivors.
• Younger-onset Alzheimer’s is a reality affecting those as young as thirty.
• The disease isn’t caused by aluminum pots, pans or soda cans.
• At this time there is no treatment or cure for this heartbreaking disease although research continues.
The Center for Disease Control and Prevention lists Alzheimer’s as the sixth-leading cause of death in the U.S. Meanwhile, Rush University reports up to 500,000 deaths in the county each year attributed to Alzheimer’s, making it the number three cause of death behind heart disease (597,000 deaths), and cancer (577,000).
In 2015 the Alzheimer’s Association® reported that Medicaid spending for people living with the disease is expected to reach $41 billion. At the same time, individuals will pay $44 billion out-of-pocket for their treatment.
Although it may be uncomfortable and perhaps awkward, have the discussion with family members and those you care about; talk about your intentions and resources available if faced with difficulties. It’s a big step towards peace of mind. Stay focused and plan accordingly.
Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. As federal and state tax rules are subject to frequent changes, you should consult with a qualified tax advisor prior to making any investment decision. There is no assurance that any investment strategy will be successful. The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time.
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This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at (239)389-1041, email firstname.lastname@example.org Website: www.raymondjames.com/Darcie