A diagnosis of dementia, a category of diseases affecting memory and thinking that includes Alzheimer’s disease, can feel overwhelming and upsetting. You might worry that you will lose control over your life and ability to make your own decisions. Fortunately, receiving a diagnosis of dementia or Alzheimer’s does not mean that you cannot execute legal documents or make decisions about plans for your future finances and health care.
People with dementia can execute legal documents to plan for their futures when they have the mental state — or capacity — to do so. Capacity refers to your ability to understand the contents of a legal document, such as a will, and know the consequences of executing it. If you know who your family is, understand your assets, and comprehend your will, you can execute a valid will and plan for the distribution of your estate after your death, provided you understand what you are signing and its effect on your life.
The following can help you in planning where you wish to live, what kind of care you receive, and what happens to your assets if you get severely ill or pass away.
Health Care Power of Attorney
Consider appointing a health care agent to make medical decisions if you become incapacitated. You can name a health care agent using a health care power of attorney, sometimes called a medical power of attorney or a durable power of attorney for health care. Your health care agent can make medical choices if you can no longer do so.
Picking someone you trust, such as a responsible child or spouse, or another family member, can give you peace of mind that they will have your best interests and desires in mind when they make decisions. For instance, dementia patients who prefer receiving in-home care can express this wish to their agent.
In the power of attorney document, you can also state your intentions regarding health care and limit your agent’s capabilities if you wish.
For an added layer of protection, you can also draft an advance directive or living will that states your desires regarding medical treatment if you are unable to communicate with your physician. Your living will can express whether you want treatment to prolong your life.
Financial Power of Attorney
Using a financial power of attorney, known as a power of attorney for property, you can select a trusted individual to handle your financial affairs if your disease progresses such that you can no longer make financial decisions. Your financial agent can manage your money and pay bills on your behalf, but they cannot use your money for themselves.
In the power of attorney for property document, you can restrict your agent’s powers. For instance, a person might specify that the agent can manage personal accounts, but not sell the family home.
Long-Term Care Planning
After a dementia diagnosis, consider whether you would like to receive long-term care at home or in a facility, and whether you intend to apply for Medicaid or long-term care insurance. If you want to apply for Medicaid, you might need to prepare your finances to become eligible.
Last Will and Testament
Making a last will and testament, also known as a will, can help ensure your assets go to your family and friends when you pass away. You can determine how much of your money each beneficiary will receive and make bequests to individuals. For example, if you have items of sentimental value, you can leave them to specific people. Without a will, your assets will transfer to your heirs according to the law in your state.
An annuity can be a useful tool for long-term care planning, but annuities are also complex financial products that are hard to understand. If purchasing an annuity, you need to consider your options carefully.
An annuity is a contract with an insurance company under which the consumer pays the company a certain amount of money and the company sends the consumer a monthly check for the rest of his or her life, or for a certain term. Annuities come in many flavors. They can be deferred (begin paying out at a later date) or immediate (begin paying out right away). They can pay a fixed amount each month or pay out a variable amount based on how the money is invested. While a fixed immediate annuity can be a good Medicaid planning option for a married couple, other annuity products can be quite complex and confusing and are not right for everyone.
If you have decided an annuity is the right choice for your long-term care or retirement plan, you need to shop around to find the right product. The following are some purchasing tips:
Check the terms. Be sure to read the annuity contract carefully. Annuities often have surrender charges that penalize you for withdrawing your money too early. You need to understand for how long you won’t be able to access your money and when payouts begin. There may also be other fees associated with the annuity as well as optional riders. Understanding the fees will allow you to shop around to find the best product.
Choose your salesperson. Insurance companies often pay generous commissions to the brokers who sell their particular annuities, payments that many of the brokers don't disclose. They also generally don't disclose whether they are paid more or less by one insurance company than another or whether the annuity being sold is the best option for the consumer. Ask your broker questions to determine how they are paid. You may want to seek a second opinion to make sure your salesperson isn't steering you into a product that isn't right for you.
Select a sound insurance company. Annuity payments are often supposed to last a lifetime, so you want an insurance company that will stick around. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moody’s, Standard & Poor’s or Weiss.
“It is no surprise that dealing with the emotional impact of the death of a spouse is overwhelming. For many widows, handling the financial implications of her husband’s death may be too much to bear. However, that is what most widows must do.”
A recent study from Merrill Lynch and Age Wave on widowhood shows that a mere 14% of 3,300 respondents said they were making financial decisions on their own, before their spouses passed away. That is a very low number of women in charge of their financial lives as married women, says Press & Guide in the article “Financial planning can help ease impact, stress of widowhood, study shows.”
Widows are tackling major challenges in the days and weeks after the loss of a loved one. That includes everything from funeral costs, mortgage or rent payments, other costs of running a household and for many, medical costs. With nearly half of those in the study reporting a household income drop of 50% or more after the death of a spouse, that is an enormous burden to take on during a time of great grief and upheaval.
The women are also facing the tasks of juggling Social Security, pensions, life insurance and making sure that their late spouse’s retirement accounts are all correctly transferred into their names.
There is often a lack of preparation for this situation. Many are simply not prepared for how complicated it is to deal with the loss of a spouse.
The study reports that couples who plan for this situation, have their level of worry cut in half. Only 38% of the widows in the study who had conducted financial planning, worried about not being able to support themselves immediately after the death of their spouse. That compares to 64% of widows who had not planned at all.
Widowers (men whose wives have passed) face unique challenges. If their wives pass first, they may be faced with taking on their own caregiving. Statistically, women outlive men, so the widowers have to adjust to losing a caregiver. There may be new financial costs they would not have had to bear, if their wives were still alive.
The first step: meet with an estate planning attorney. Make sure that a will and power of attorney are created, along with any other necessary planning documents. Both spouses should be familiar with all accounts, and both names should be on the accounts and all deeds. Don’t forget to organize all important papers in a file drawer at home or in a safe deposit box. Know where everything is and how to access it.
Having long-term care insurance in place and making sure there are assets available for caregiving, should be a part of everyone’s plan for longevity. Even if you don’t need home health care or to live in an assisted living facility, someone will eventually need to provide some level of care.