When a loved one is experiencing cognitive decline, emotional and medical considerations often overshadow the financial planning that needs to happen. This is a potentially costly mistake.
Stephanie Rohlfs-Young, director of volunteer programs at the Alzheimer’s Association, says that families shouldn’t let a diagnosis derail proper planning; rather, she says, there are a number of proactive and tactical steps people can take to remedy or prepare for issues related to cognitive decline.
Here are some tips on navigating the financial aspects of cognitive decline:
For budgeting and estate-planning purposes, families should take a detailed inventory of the person’s assets and liabilities, and create a list of who has access to each account. Be sure to inquire about and include online checking, savings, credit-card, and investment accounts, which can be overlooked if they aren’t in paper form.
“Trying to work with the person in cognitive decline to get your arms around it when they can still be helpful is important because you don’t want to lose all those assets,” says Jody King, director of financial planning at Fiduciary Trust in Boston.
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This process can be challenging when children aren’t privy to their parents’ financials, which can include savings, insurance, retirement benefits, government assistance such as veterans’ benefits, and more.
Families should also pick a point person or people for taking care of financial or legal matters.
Estimate future costs
A diagnosis is also the time to get a handle on, and plan for, care costs that may include adult day care, in-home care, and full-time medical care. The costs vary widely, and many times families underestimate how much they’ll spend on care, Rohlfs-Young says. Often, they don’t factor in certain out-of-pocket expenses that can add up, such as medications that aren’t covered by insurance or incontinence products, she says.
When budgeting, families should be sure to consider what insurance may be available, and whether options may exist to add or amend coverage.
Consider hiring expert help
It can be a good idea to work with an elder-law attorney, financial planner, or both, to help get the family’s financial and legal affairs in order, Rohlfs-Young says. And there are many considerations: titling of assets, trusts, financial powers of attorney, advance health care directives (which name a health-care representative and may include a living will), and more.
For some families, there’s also Medicaid planning, which has many rules and can be complicated to navigate.
Families can visit the website of the National Academy of Elder Law Attorneys to search for an attorney by practice area or location. The Alzheimer’s Association and AARP also offer an online community resource finder.
For help in finding fee-only financial advisors, families can ask friends for referrals or visit these professional databases: Certified Financial Planners, Financial Planning Association, and National Association of Personal Financial Advisors.
Automate the finances
Families need to develop a plan for handling routine financial tasks such as bill paying that will eventually become too hard for the loved one. It may be helpful to sign up for online banking, so a trusted third party such as an adult child, has easy access to monitor the parent’s account.
Monthly bills, including insurance premiums, can be set up for automatic payment to help minimize the possibility of mistakes, says Patrick Simasko, financial advisor and elder law attorney at Simasko Law in Mount Clemens, Mich.
Most recipients of Social Security or Supplemental Security Income benefits are now required to receive their benefits through direct deposit or prepaid debit card, but if a family member is still receiving a paper check, it’s advisable to sign up for direct deposit so there’s no chance the money will be misplaced or lost. In addition, it can be a good idea to have pension checks, if applicable, directly deposited instead of having to worry about the location of a physical check, Simasko says.
Get the right documents in place
It’s important after a diagnosis to name a health-care representative to allow for health-care decisions to be made by someone of the person’s choosing.
Another crucial document to obtain is a general durable power of attorney for finances, if it’s not already in place. The document generally allows the appointed agent or agents to make financial and legal decisions on the person’s behalf. Families shouldn’t confuse a durable power of attorney with a springing power of attorney, which doesn’t take effect until incapacity sets in, and can make handling the loved one’s affairs more complicated.
Families should make sure this durable power of attorney includes the ability to act in “what-if-scenarios” such as the need to enroll in Medicaid, access digital assets, and set up trusts, says Rekha Rao, founder of Rao Legal Group in Princeton, N.J. Simply naming a child on a parent’s bank account is a poor substitute for a durable power of attorney and can create complications, she says.
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In most states, a durable power of attorney can become effective as soon as it is properly signed, but be aware: Time is of the essence because once the family member loses cognitive capacity, then he or she can’t name the appropriate fiduciaries, and the only resort that loved ones have at that time is to go through an expensive and time-consuming guardianship process to become the guardian of that family member, Rao says.
An attorney drafting the document usually determines competency, but generally the person signing must be lucid and understand his or her actions at the time the document is signed. It’s also important to ensure that the person’s will, living will, beneficiary designations on IRAs, life insurance, annuities and other accounts are up-to-date as well, experts say.
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