Edited by: Stephen Taylor, JD, CFP®
May 7th, 2023
A dementia diagnosis can be overwhelming for both the individual affected and their family members. In addition to the emotional toll, it's crucial to consider the legal and financial implications of the diagnosis. This comprehensive checklist provides guidance on essential legal and financial planning steps to ensure you or an affected loved one’s best interests are protected and their care needs are met.
1. Complete General Legal and Financial Documents
The first step in legal and financial planning for someone with dementia is to complete general legal and financial documents. These documents help ensure that an individual's wishes are respected and their assets are protected as their cognitive abilities decline.
- Power of Attorney:
A power of attorney (POA) is a legal document that grants a designated person (the agent) the authority to make decisions on behalf of the individual with dementia (the principal) when they are no longer able to do so themselves. There are two primary types of POAs: financial and healthcare. A financial POA grants the agent authority to manage the principal's financial affairs, while a healthcare POA grants the agent authority to make medical decisions on the principal's behalf (National Institute on Aging).
It's crucial to establish a POA early in the dementia diagnosis to ensure that you or your loved one is still able to understand and participate in the process. Additionally, it's essential to select an agent who is trustworthy, knowledgeable about your family’s preferences, and capable of making difficult decisions (Alzheimer's Association).
2. Living Will:
A living will is a legal document that outlines an individual's preferences for medical care in the event they become incapacitated and unable to communicate their wishes. This may include preferences regarding life-sustaining treatments, such as resuscitation, mechanical ventilation, and artificial nutrition and hydration (National Institute on Aging).
Completing a living will ensure that you or your relative’s healthcare team and family members understand their wishes and can honor them in the event of a medical crisis. It also provides guidance to the healthcare POA agent when making decisions on you or your loved one’s behalf.
3. Wills and Trusts:
A will is a legal document that outlines how an individual's assets should be distributed upon their death. A trust is a legal arrangement that allows the individual to transfer their assets to a trustee, who then manages the assets for the benefit of designated beneficiaries (National Institute on Aging).
Both wills and trusts serve to protect an individual's assets and ensure that their final wishes are carried out. It's essential to consult with an attorney to determine which option is best for you or your loved one’s unique circumstances and to update these documents as needed.
4. Beneficiary Designations:
Beneficiary designations are an essential part of financial planning. These designations dictate who will inherit you or a loved one’s assets, such as life insurance policies, retirement accounts, and investment accounts, upon their death. It's crucial to review and update these designations regularly to ensure that they accurately reflect you or your loved one’s wishes (Alzheimer's Association).
2. Complete Your Advance Directive Dementia Forms
As dementia progresses, individuals may lose the ability to make decisions about their care and express their preferences. Advance directive dementia forms are a way for individuals to outline their specific wishes for care as their dementia progresses, ensuring that their desires are respected even when they are no longer able to communicate them.
One aspect of the advance directive forms you will need to complete as someone with dementia is a dementia directive. A dementia directive is a document that outlines the individual's preferences for care in various stages of dementia, including their desires for medical interventions, assistance with activities of daily living, and end-of-life care (Alzheimer's Association). This document can provide valuable guidance for you or your loved one’s healthcare team, family members, and healthcare POA agent.
Another form you will need to complete is a Physician Orders for Life-Sustaining Treatment or POLST. A POLST is a medical order that outlines an individual's preferences for life-sustaining treatments, such as cardiopulmonary resuscitation (CPR), intubation, and artificial nutrition and hydration. This document is typically completed in consultation with an individual’s healthcare provider and is designed to ensure that the individual's wishes are followed across various healthcare settings (National Institute on Aging).
Completing these advance directive dementia forms can provide peace of mind for you and your family, knowing that you or a loved one’s preferences for care will be respected and followed as their dementia progresses.
3. Complete Your Advance Directive Forms for Financial Management
As dementia progresses, individuals may lose the ability to manage their financial affairs effectively. Advance directive forms for financial management can help ensure that the individual's financial resources are protected and used to support their care needs.
- Financial Power of Attorney:
As mentioned earlier, a financial POA is a legal document that grants a designated agent the authority to manage an individual's financial affairs when they are no longer able to do so themselves. This may include managing bank accounts, paying bills, filing taxes, and making investment decisions on an individual’s behalf (National Institute on Aging).
Establishing a financial POA early in the dementia diagnosis is crucial, as you or your loved one must still be able to understand and participate in the process. It's essential to select an agent who is trustworthy, financially savvy, and capable of making prudent decisions in you or a loved one’s best interest.
2. Trusts:
Trusts can be a valuable tool for financial management, particularly for individuals with significant assets. By transferring assets to a trust, the individual can ensure that their financial resources are managed by a designated trustee who is legally obligated to act in the best interests of the trust beneficiaries (National Institute on Aging).
There are various types of trusts, each with specific benefits and considerations. Consultation with an attorney experienced in trust and estate planning is essential to determine which trust structure is best suited for the individual's unique circumstances.
4. Plan for Care Costs
Dementia care can be costly, and it's essential to plan for these expenses to ensure that you or your loved one’s care needs are met throughout the progression of your illness.
One option you have for covering care costs is long term care insurance. Long-term care insurance can help cover the costs of care services, such as in-home care, assisted living, and nursing home care. These policies can be customized to meet you or a loved one’s specific needs and preferences, providing a valuable source of financial support as their care needs change over time (Alzheimer's Association).
It's important to note that long-term care insurance policies can be expensive, and premiums may increase over time. Additionally, some policies may have restrictions on coverage for individuals with pre-existing conditions, including dementia. Careful research and consultation with an insurance professional are crucial to determine if long-term care insurance is a suitable option for you or your affected loved one.
Another option you will have is government programs. Government programs, such as Medicare and Medicaid, can provide financial assistance for dementia care services. Medicare may cover some costs of care, such as skilled nursing care, therapy services, and prescription medications, but generally does not cover long-term care services (Alzheimer's Association).
Medicaid, on the other hand, can cover long-term care services for individuals who meet specific financial and medical eligibility criteria. The availability and scope of Medicaid-funded dementia care services vary by state, and it's essential to research the options available in your state of residence (Alzheimer's Association).
5. Explore Insurance Options
In addition to long-term care insurance, there are other insurance options that can provide financial support for individuals with dementia and their families.
- Life Insurance
Some life insurance policies offer riders or options that allow the policyholder to access a portion of their death benefit to pay for long-term care expenses. These options, often referred to as accelerated death benefits or living benefits, can provide valuable financial resources to cover care costs while preserving an individual's assets (Alzheimer's Association).
It's essential to review you or your loved one’s life insurance policy and consult with an insurance professional to determine if this option is available and appropriate for their situation.
6. Explore Additional Payment Options
Additional options for paying for care include self insuring and hybrid insurance. Both come with unique benefits and understanding how you may use them will be vital to effectively paying for your care.
Self-insuring for long-term care involves setting aside funds to cover the costs of long-term care services if they become necessary, rather than purchasing a long-term care insurance policy. This approach can provide more flexibility in how the funds are used and may be more cost-effective for your aging parent, if they have significant savings or investments.
Hybrid long-term care insurance policies combine “a life insurance policy with a long-term care policy” (Forbes). These policies allow policyholders to access the policy's death benefit or annuity income stream to cover long-term care expenses if needed. If the policyholder never requires long-term care services, the policy's death benefit will be paid to the designated beneficiaries, or the annuity will continue to provide income.
7. Seek Professional Guidance
Navigating the complex legal and financial landscape of dementia care can be challenging. Seeking professional guidance from experienced professionals can help ensure that you or your loved one’s best interests are protected and their care needs are met.
- Elder Law Attorneys
Elder law attorneys specialize in legal issues related to aging and can provide valuable guidance on matters such as estate planning, power of attorney, guardianship, and long-term care planning (Alzheimer's Association). Consultation with an elder law attorney can help your family navigate the legal complexities associated with dementia care and ensure that their wishes are respected and protected.
2. Financial Advisors
Financial advisors can help individuals with dementia and their families develop a comprehensive financial plan to cover care costs and protect assets. They can provide guidance on investment strategies, insurance options, and tax implications related to dementia care (Alzheimer's Association).
Working with a financial advisor can provide peace of mind, knowing that you or your loved one’s financial resources are being managed effectively and in your best interest.
3. Geriatric Care Managers:
Geriatric care managers are professionals who specialize in assessing and coordinating care for older adults. They can help individuals with dementia and their families develop a care plan, identify appropriate care services, and navigate the complex healthcare system (Alzheimer's Association).
By seeking the guidance of geriatric care managers, individuals with dementia and their families can ensure that the individual's care needs are met throughout the progression of their illness, while also alleviating some of the caregiving burden on family members.
Conclusion
Remember, this legal and financial planning checklist is a starting point for individuals and families facing a dementia diagnosis. Each person's situation is unique, and plans should be tailored to their specific needs and preferences. Regularly reviewing and updating these plans is crucial to ensure that they remain relevant and effective as the individual's circumstances change over time.
Taking a proactive approach to legal and financial planning for someone with dementia can alleviate stress, minimize financial burdens, and provide a sense of security for the individual and their family. The peace of mind that comes from knowing that plans are in place and resources are available to support the person's care needs is invaluable as they navigate the challenges of dementia.
In conclusion, creating a comprehensive legal and financial plan for someone with dementia is a critical component of ensuring their well-being and peace of mind. By addressing essential documents, planning for care costs, exploring insurance options, and seeking professional guidance, families can navigate the challenges of dementia care with confidence and provide the best possible support for their loved one.
