The cost of caring for an individual with Alzheimer’s disease or related dementia is significant, and expenses ramp up as the disease progresses. Fortunately, the ramp is gradual—dementia changes the brain slowly, in stages, so families have time to develop a financial plan to pay for the cost of care and to protect the income and assets of a spouse or other family member providing care.
These factors make getting professional assistance for financial planning a smart approach:
– Financial planning is complicated.
– Care requirements and costs are difficult to predict.
– The rules for financial assistance are always changing.
There are several types of professionals who can provide assistance, some free of charge and others fee-based. On this page, we will help you determine what type of financial planner is best for your situation.
When you consider all the services, treatments, upgrades, equipment, etc., that someone needs after a diagnosis of Alzheimer’s disease or related dementia, it’s no wonder the price tag often exceeds $400,000 over the entire course of the illness. A list of things you’ll need to pay for to manage life with dementia includes (but is not limited to):
– Appointments with doctors, including specialists, who diagnose, monitor, and treat the disease as it advances from early to late stages
– Upgrades to make the home safe for a person with dementia, including ramps, locks, surveillance, and much more
– Supplies and tools to make living with symptoms manageable, like special utensils for eating, dementia-friendly clocks and speakers, automated pill dispensers, and more
– Respite care, including adult day care
– In-home care
– Residential care like assisted living with memory care
There are several reasons why creating a long-term financial plan for a loved one with Alzheimer’s Disease is of critical importance.
Inaccurate Assumptions – Medicare and long-term care insurance, the two options that most people consider for long term care, are not options at all. Medicare does not pay for ongoing care, and long-term care insurance is only an option if one has purchased the insurance prior to receiving an Alzheimer’s or dementia diagnosis.
Medicaid and Social Security, however, have programs specifically to help people with dementia, but knowing them all and navigating eligibility requirements takes time, research, and possibly a professional assistance (see below).
Good Living Situation – Having a financial plan in place will increase the likelihood that as your loved one’s condition progresses, they can continue to reside in a living environment that is most comfortable for them.
Peace of Mind – Having a plan will help reduce the stress the family has about their loved one’s condition because many unknowns will be resolved with a plan.
Spouse’s Quality of Life – Financial planning also protects a spouse from becoming impoverished while providing care. It protects them from losing their home because of expenses. Having a plan ensures the spouse can continue to live independently and at the same financial level as before the disease.
Tax Deductions – Caregivers who cover the costs of care with their own money are often eligible for tax credits and deductions. Certain states even have tax-savings programs specifically for caregivers of elderly people. Ask your financial planner (see below) which savings you can get come tax time.
Prior to exploring \financial planning assistance, it is important to understand what Medicaid is (as opposed to Medicare) and the role that Medicaid plays in most financial plans for Alzheimer’s/-dementia care.
The cost of caring for someone with Alzheimer’s Disease in the U.S. over their lifetime is estimated between $350,000 and $750,000. Very few families have anticipated and planned for this level of financial burden in their later years. Medicaid is very, very likely to play a role in paying for a loved one’s Alzheimer’s care. In fact, nearly 80% of persons with Alzheimer’s will eventually require nursing home care, which is approaching $100,000 per year in many parts of the country. Well over half of persons with Alzheimer’s or other dementia will eventually rely on financial assistance from the Medicaid program.
Unfortunately, Medicaid eligibility is complicated, especially with a spouse involved. Medicaid has a 5-year look-back period in which they examine an applicant’s and their spouse’s financial transactions for 5 years preceding their Medicaid application date. Medicaid does this to ensure a family has not simply given away money to family members to become Medicaid-eligible.
Given Medicaid’s rules, complexity, and the high usage of Medicaid as a payment source for Alzheimer’s care, it is important that most if not all financial plans for Alzheimer’s at a minimum consider the option of Medicaid and do not do anything to violate Medicaid rules.
The Social Security Administration has programs to help qualified Americans cover some of the costs of dementia, including medical and personal care but also some costs from caregiving and assisted living. If you receive Social Security, in other words, more money may be available.
Whether working with a financial planner (see below), or researching options yourself, remember to factor Social Security into your financial plan if these funds are available:
Social Security Disability Insurance is for people who may not be 65 yet but are eligible because of a medical condition. Among the disabilities covered under SSDI are early-onset Alzheimer’s, frontotemporal dementia, and Lewy body dementia.
Supplemental Security Income is for lower-income people whose Social Security is not enough to cover medical expenses. SSI fills the gap between what they can afford and what they need.
State Supplementary Payments are available in most states, for people whose Social Security and SSI are still not enough to cover all the bills. SSP are also called Optional State Supplements in some states.
Compassionate Allowance Initiative makes the process of filing for the benefits listed above move faster for people with disabilities including several kinds of dementia.
There are several different types of financial planners proficient in developing long-term plans for paying for Alzheimer’s or dementia care. Your best option depends on your level of financial resources and the complexity of marital or family situations.
Area Agencies on Aging (AAA) are local non-profit organizations that help families know all their options. AAAs are not professionally trained financial advisors, but they are familiar with their state’s Medicaid eligibility requirements and as such they can:
– tell if one is Medicaid-eligible
– help with the preparation of the complicated application paperwork.
To be clear, AAAs are not financial advisors or planners. But for people looking to pay for Alzheimer’s care strictly using public assistance from Medicaid, this is a good place to start.
The ideal candidate to seek assistance from an AAA is unmarried and has less than $2,000 in financial assets and less than $2,000 monthly in income. Married couples and persons seeking Medicaid assistance with incomes or assets exceeding those amounts might want to consult with a Medicaid planner (read more below) instead of with an Area Agency on Aging.
Contrary to their name, Medicaid Planners do not help plan to use Medicaid benefits. Instead, Medicaid Planners focus on helping individuals or families become Medicaid-eligible. Because Medicaid plays a large role in helping families pay for Alzheimer’s and dementia care, financial planning to become Medicaid-qualified (and prevent a spouse from going broke) is a large part of financial planning for Alzheimer’s.
Medicaid’s eligibility rules are complicated. The rules vary by state and by marital status and with the value of the home in which one resides. The health of the applicant and the type of residence in which one receives care also make a difference. Furthermore, should one violate Medicaid’s arcane rules, it is possible they could be penalized by Medicaid and receive no assistance at all for a period of months or even years. For these reasons, people consult with Medicaid planning professionals, paying out-of-pocket to help become Medicaid eligible.
Very few Medicaid candidates automatically meet all of Medicaid’s strict requirements. Typically, a financial tool such as a trust is required to help a loved one gain eligibility. Further financial tools are used to help a spouse maintain enough income and assets to live independently. Still other strategies protect a home, should the individual with Alzheimer’s pass away.
Medicaid planners are best suited for persons with some income and saving (more than $2,000 per month in income or more than $2,000 in savings), homeowners and married couples. One can learn more about Medicaid planning here. Learn about more Medicaid eligibility here or take a quick, non-binding Medicaid eligibility test.
Eldercare or Life Resource Planners occupy a niche in the financial planning space between Medicaid planning and using a full-blown attorney. Planners are best suited for families or couples who, had they not otherwise received a diagnosis of Alzheimer’s, would have been financially prepared for retirement.
An Eldercare Resource Planner develops a financial plan that takes into account the eventual need for Medicaid. However, they also take into account how much of a couple’s savings can or should be put toward the cost of paying for care and what other financial assistance options might be available. For example, there are programs from Social Security and the Veterans’ Administration that might be used to pay for care, and there are non-Medicaid state assistance programs. Combining different forms of financial assistance is complex (the programs often have interacting or conflicting eligibility criteria). Being eligible for one program automatically makes one ineligible for another.
Eldercare Resource Planners are experts at resolving these conflicts and choosing and qualifying applicants for the programs that best suit their situation. To learn more, do an Internet search for “Eldercare Resource Planning.”
Elder law attorneys can provide a comprehensive solution to financial planning for Alzheimer’s care. They can draw up legal documents, establish trusts, create powers of attorneys, advanced directives, wills, etc. A well-versed elder law attorney will also be familiar with Medicaid planning. While deeply knowledgeable about the legal side of financial planning, attorneys can also be expensive when it comes to creating a financial plan.
Attorneys are best suited for couples with significant financial assets and complex familial situations, such as those who have a special-needs child or couples where both spouses have been diagnosed with a progressive dementia.
|Types of Financial Planners for Alzheimer’s / Dementia|
|Type of Planner||Services Provided||Best Option For…|
|Area Agency on Aging||– Determine if you’re eligible for Medicaid
– Know which documents you need
|– Low-income individuals who are unwed, with less than $2,000 in assets and less than $2,000 monthly income|
|Medicaid Planners||– Help you know /follow rules to be Medicaid-eligible
– Protect the spouse and the home
|– People with more than $2,000 in savings and assets
– Married couples
|Eldercare / Life Resource Planners||– Develop financial plan that combines savings, Medicaid, and other available programs||– Families with significant savings and resources|
|Elder Law Attorneys||-Some Medicaid planning
-Legal work associated Alzheimer’s including:
– powers of attorney
– advanced directives
|– Families with significant savings and resources, with complicated family situations like a special-needs child|