The cost of caring for an individual with Alzheimer’s or other dementia is significant and costs ramp up as the disease progresses. Fortunately, the ramp is gradual and that allows families time to develop a financial plan to help pay for the cost of Alzheimer’s / dementia care and to plan to protect the income and assets of a spouse or other family member providing care.
Financial planning is complicated, care requirements and costs are difficult to predict and the rules for financial assistance programs are ever-changing. These factors combined, make getting professional assistance for financial planning a smart approach. There are several different types of professionals who can provide assistance, some free of charge and others fee-based. This article will help the reader determine what type of financial planner is best for their situation.
There are several reasons why creating a long-term financial plan for a loved one with Alzheimer’s Disease is of critical importance. 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 a Alzheimer’s or dementia diagnosis. 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. Furthermore, having a plan will help to the reduce the stress the family has about their loved one’s condition as many unknowns will be resolved with a plan.
Of equal importance, having a financial plan protects a spouse from becoming impoverished while providing care. It protects them from losing their home to pay for care. Having a plan ensures the spouse can continue to live independently and at a financial level on par with how they lived prior to learning of their loved one’s disease.
Prior to exploring the financial planning assistance options that are available, 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 to be between $350,000 – $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 and nursing home care alone 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 very complicated especially when a spouse is in the picture. 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.
There are several different types of financial planners proficient in developing a long-term plan for paying for Alzheimer’s or dementia care. The financial planning professional from which one should seek assistance depends on their level of financial resources and the complexity of their marital or family situation.
Area Agencies on Aging (AAA) are local non-profit organizations that help families in obtaining the assistance they require (among many other services they provide). AAAs are not professionally trained financial advisors, but they are familiar with their state’s Medicaid eligibility requirements and as such they can 1) tell if one is Medicaid-eligible and 2) if they are Medicaid eligible, the AAA can help with the preparation of the complicated application paperwork. To be clear, AAAs are not financial advisors or planners, but for those persons who are 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 a AAA is unmarried and has less than $2,000 in financial assets and less than $2,000 monthly in income. Persons seeking Medicaid assistance with incomes or assets exceeding those amounts and married couples 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 persons on how to plan to use Medicaid benefits, instead Medicaid Planners focus on helping individuals or families become Medicaid-eligible. Since, as discussed earlier, Medicaid plays such 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 at best. As an example, the rules vary by state, by marital status, with the health of the applicant, by the location in which one receives care, with homeownership and based on old financial transactions conducted by the applicant and / or their spouse. 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. It is for these reasons, people consult with Medicaid planning professionals, paying money out-of-pocket to help them become Medicaid eligibility.
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 so that they can 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. These 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 saving 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 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 as often the programs have interacting or conflicting eligibility criteria. Being eligible for one program automatically makes one ineligible for another program. Eldercare Resource Planners are expert 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 in that they can draw up legal documents, establish trusts, creates Powers of Attorneys, Advanced Directives, Wills etc. A well-versed elder law attorney will also be familiar with Medicaid planning. While very knowledgeable about the legal side of financial planning, attorneys can also be a very expensive option 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.