There are many unknowns when it comes to planning for health care. Unfortunately, one of the possible health care concerns—dementia—comes with a high financial price, making it important for families to include in their health care planning.
Today, more than five million Americans are living with Alzheimer’s, according to the Alzheimer’s Association. That number is anticipated to double by 2040 because of the large cohort of aging baby boomers. Age is a primary risk factor for dementia.
From the outset, a dementia diagnosis necessitates services and care that bring about a mountain of expenses. Early on, families tend to step in as caregivers and coordinators, helping with everything from routine activities, like shopping and medical appointments, to daily tasks, like bathing and dressing. This can add to the financial burden in the form of lost wages, career disruptions and out-ofpocket expenses.
Following a dementia diagnosis, people generally live an average of 4.5 years. As the disease advances, the patient needs more care than most family members can handle, eventually requiring professional home and transition care and generally culminating in the need for a residential skilled memory care facility. In fact, most people with dementia spend 40% of their time after diagnosis in such a facility. This kind of care is expensive, and in 2019, was $90,155 a year, according to Genworth’s Cost of Care Survey.
Covering expenses
Most of the nonmedical care costs associated with dementia are not covered by Medicare or traditional health insurance. Even for those with supplemental long-term care insurance, these care costs can be significant. For many, they can be so great that they lead to significant financial hardship.
Planning ahead can make all the difference between effectively managing the financial burden of a cognitive decline diagnosis and sustaining severe financial hardship. This is especially important if there is increased risk of dementia in your family, including hereditary factors and prior injuries.
Plan early
Families can take steps to mitigate the risk of the costs associated with a dementia diagnosis. Hybrid insurance policies that include a long-term care component as well as some life insurance policies may provide financial relief. But the key is to have the insurance in place before the diagnosis, particularly if there is a family history of dementia, so planning ahead is crucial.
The four warning signs of dementia include:
- Changing routines
- Repeating requests
- Unexpected relationships
- A change in risk profile
Upon diagnosis, it is important to act swiftly to protect the patient and family from financial missteps, abuse and liability. Planning should include having key legal documents and arrangements— like powers of attorney, health care directives and wills—in good order, as well as making sure assets are properly titled and beneficiary designations are current. Also set up a trusted contact for all accounts. This trusted family member or close friend is there to review financial statements and transactions on a regular basis and can act as a fail-safe when your financial professional suspects fraud or detects a decline in the client’s judgment.
Consider the benefits of trust and professional executor services, especially in the absence of a trusted and competent personal executor (generally a family member). Your financial professional can help you navigate these tough waters and help you.
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The information contained herein is based on sources believed to be reliable, but its accuracy cannot be guaranteed. Our firm does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in connection with your independent tax or legal advisor. The articles and opinions in this advertisement are for general information only and are not intended to provide specific advice or recommendations for any individual. All information as of 01/01/2021.
RBC Clearing & Custody, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC, provides clearing and execution services and/or custody services for accounts managed by your financial professional. The referenced product or service is available through that relationship.