Financial Issues

The financial issues you will face will change depending upon what stage of dementia the person is in as well as how their overall health is. In the early stages, you just might need to provide a little oversight. You should make sure that Powers of Attorney, Wills and Trusts are in place and double-check that everything is in order and is attended to. As dementia advances, there are many more considerations which may include many options as far as their care and paying for it. At some point, issues of stepping in to handle their finances may become necessary, whether there is a Power of Attorney, Trust or not.

Financial issues for those with dementia are as varied as they are for people without dementia, so it is not something that can be extensively covered in one article. What we will try to do is note some things that you will need to consider.

1. Are they still capable of handling their finances?

If an elderly parent is no longer capable of handling their finances, what one needs to do depends on whether they have executed certain documents. They may have executed a Power of Attorney or have a Trust with a provision that controls what happens in case of incapacity. If they do not, one can petition a court to become or have an appointed a guardian which can be solely for financial matters. How to go about this differs in each state and it would be smart to retain an attorney. 

No matter what, it would be wise to have their physician(s) write a letter regarding their incapacity. Many trusts are set up where it will require one or two physician letters. Applications to a court generally will also require such letters. Realize that many banks will not accept Powers of Attorney. While a Trust may or may not be appropriate for your loved one, in our case the Trust did make things easier when dealing with banks and financial institutions.

2. If they are no longer capable of handling their finances and the position falls to you, recognize that you are in a position of trust legally and must act accordingly.

If actual Trust documents and/or a Power of Attorney exists, you will most likely be bound by the laws of a specific state. Be sure to familiarize yourself with them! Be sure to understand the Trust terms. A Trust may or may not require a detailed accounting.  It is important to keep records, including receipts and the like. Try to limit the number of bank accounts that charges are made from as well as credit cards used. Do not get into messy situations where you have personal charges and pay them back to their account. Try not to pay for things for them out of your own account unless it is an absolute emergency. Simply keep things as clean and neat as possible to prevent any allegations of wrongdoing.

3. Understanding their assets and liabilities.

One of the first things you need to do is get a real handle on your loved one’s finances. Depending on their situation, you may expect perfect little folders and spreadsheets, or it may be a guessing game. Take the time to carefully gather the information you need. While they are still able, get a full list of passwords for any online accounts.

4. Understanding their budget.

Regarding my mom, I was able to obtain the prior 6 months of spending information. I then made a whole detailed summary by category and was pretty shocked by how much money was spent by an 85-year-old woman who had been quite frugal for most of her life! Again, we had a situation where although she was “handling” her own accounts, to a great degree she really wasn’t. Her companion would pay for or charge most of their expenses and would then make a detailed list and have her write out a check to reimburse what had been spent. 

Numbers really do tell the truth though. Again, figure out what is being spent and whether it is proper considering their assets, life expectancy, lifestyle, desires to leave money to others or not, etc.

One problem with dealing with the finances of the elderly, let alone a loved one with dementia, is that you never know how much longer they will live. I used to study all sorts of actuarial tables trying to get a grasp on how long I needed my mom’s money to last. We didn’t care if there was money left over for us or not, just that there be enough money for her. Early on, we just assumed she would live well into her nineties. She had longevity in her family and although her mind was clearly going, she physically had no issues at all! You end up being over cautious because of this, let alone trying to have funds for an "emergency.”

5. Understand what insurances they have and what will be covered.

With all elderly parents, you should try to really assess the healthcare coverages your parents have. Medicare is there to cover a lot, but not all. My mom had Medicare, a Part G plan that covered much of what Medicare did not and a drug plan through AARP. With these coverages, most of her heath needs were covered. She paid a couple hundred a month in prescription co-pays and occasional co-pays on some doctor visits. She also paid for items like her incontinence items out of her own funds, but the rest was pretty much covered.

What is not covered was assisted living facility fees and the cost of home health aides. Again, for some, Medicaid will come in to play. You certainly should get all your answers as far as anything to be covered by Medicaid  or Medicaid before you make any decisions.

6. Understand what the tax implications are regarding financial decisions.

Taxes must be paid regardless of your loved one’s condition. So first make sure tax returns are being prepared and filed. Do not expect your tax preparer to make any assumptions! Fully advise your tax preparer of all funds being spent regarding their care including home health aides, medical costs and assisted facility fees as some or all of these things may be deductible. If things weren’t properly deducted in prior years, you may be able to file an amended return.

I think many people do not really understand finances when it comes to the elderly and it is sad because things often are more complicated when people are less likely to fully understand them. For example, Social Security is not “free” money, you must pay taxes on that money. When you cash in stocks and bonds for their care, there may be taxes payable. There are so many issues to consider . We are not accountants or financial planners here, but here are some things you need to be aware of and should consider and talk to a professional about before you simply pay for things out of your loved one’s accounts:

a. The tax laws require that at a certain age a minimum amount be taken from an IRA or there is a substantial penalty. Usually, if your money is in a brokerage account, they will tell and remind you what this amount is and whether it has been taken.

b. This minimum distribution, known as a RMD, must be taken for the year your loved one dies or there are tax ramifications.

c. It might seem logical to spend out of your loved one’s savings accounts first, but that is not necessarily the case!

d. Deductions for assisted living facilities are only for the portion which basically relates to medical care. 

e. Your loved one may have set up different beneficiaries for different accounts. This might impact which accounts it would be your loved one’s desire to liquidate first.

f. There is always the concern regarding an “emergency” and having funds easily accessible. Decisions should consider the fact that some funds may take more time to become accessible in an emergency.

g. If there is a Trust or Power of Attorney, generally there will be laws regarding how things should be invested and reinvested. You must be familiar with these.

h. Before you close accounts, make sure there are no automatic payments coming out of those accounts!

Again, the list could be endless and in time we will try to add different links and resources to help people here!

7. Housing and Care

As your loved one’s condition worsens, you will quickly realize that their largest budget item will be their housing and care.

We separately address housing decisions, but briefly your options are the following: for them to live on their own, with home health aides needed as required, to move in with a family member, to go to an assisted living facility that may be entirely a “memory care” facility or have a memory care floor or section, to enter a nursing home and various hospice care options. 

At the beginning,  having them stay in their home with home health aides as needed is clearly ideal. However, there often comes a time when a home environment is no longer safe for them. I cringe when I hear jingles for a company called No Place Like Home Care because it lacks the understanding that home may not be a safe place for your loved one and their safety is paramount. The guilt you feel when putting a loved one into a facility is overwhelming and honestly never fully goes away, but you must honestly assess the situation.

I often considered the thought of having my mom either live with us at my apartment complex or getting her own apartment with round the clock care. While national rates for care are on average about $25 an hour, that means, for 24-hour care, you’re talking $600 dollars a day, $4200 a week, or over $200,000 a year. You start figuring "well, I don’t really need 24 hours a day." You then need to add in the costs of the home itself. While funds may be available, you have no certainty how long the funds need to last or how much more their care costs may increase in the future.

Most assisted living facilities price according to room size and level of care needed. Some have a flat fee for both. Ignore published statistics about national and state averages. We found the statistics to have little bearing on what was actually being charged for decent places in the area. We paid on average, in the northern New Jersey area about $9000 a month. Like an all-in-one resort, this paid for generally everything, except for doctors, the salon, incontinence items and a few odds and ends. Some will charge an extra fee if your loved one takes a number of medications above a certain number. Again, each place is different, and it depends on the level of care needed. An assisted living facility for someone with minor impairment may also charge for all sorts of extras, including outings, dry cleaning, and the like.

As far as level of care, the facility generally will have their own professional assess your loved one and will determine what level they are deemed to be. A higher level meant more money, so I always was a little jaded on this. I originally felt that my mother was placed with others who were much worse off than she was and should have been placed on the floor with those less impaired. I was told because she was not capable of talking at that time that she needed to be put on that floor and she always could be reassigned. Yet, my mom had been talking until a short visit at a psychiatric facility (a story for another time). With very few people on her floor talking at all, most in wheelchairs and some that were in very advanced stages, it was no surprise she barely talked after that.

I also experienced what felt like the facilities were constantly trying to increase their rates. When you’re paying over $9000 a month for a small room with a bedroom and bath, you assume the money is going for something. At her first facility where she kept trying to run away, their answer was that I pay more or get a home health aide to watch her. At the second facility as her condition worsened, they seemed more concerned with increasing her monthly bill, claiming it took two people to get her out of bed and the like when in many other areas she was causing less care – she stopped having to be taken to activities, etc.

Keep in mind, that this is a very emotional time for the caregiver/financial decision maker as well. You may see what you think are problems and are looking for them to be addressed, yet the facilities seem to only be interested in money. It will not sit well.

I tried to be very even handed and take emotion out of the equation. Yes, they have a business to run. Yes, today even the administrator has people she must answer to. Try to be objective about your loved ones needs and whether you believe a raise in monthly payment is appropriate. Do not be afraid to stick up for your loved one. Remember you are their voice!

As far as picking facilitates, we also go into that separately, but I do want to mention, that it is difficult to know what will make your loved one the happiest and what will be best for them. Thus, you should be prepared to move them if necessary. Do not be afraid to. Our first facility was brand new with only nine residents on the memory floor when she left after a couple of months. It was beautiful and reminded me of a classy cruise boat. Her room was huge. The dining room was beautiful, and meals looked like those you would get at a chic café. Their activities were real activities, art lessons that even I enjoyed, and in general they took almost all the residents on that floor from activity to activity. None of this sitting them most of the day by the television. They took them outside often. The staff was wonderful, especially their activity director who had a special relationship with my mom and had her talking quite a bit. Yet, she was not happy there and kept trying to escape. One time she even cleverly pulled the fire alarm then tried to make her getaway.  This facility was obviously not secure enough for my mom. A centrally located elevator, even with a double doored entry proved too simple for her and one time she even walked out of the facility and was caught outside the front of the building not far from the highway.

At the second facility, it really appeared she and most others on her floor spent much of their time sitting in front of the television in a common room off the dining room. Activities were minimal. I saw much worse food, but at one point I did make a big deal that my mom was used to wholesome healthy quality food and fine dining and that they really needed to start giving her healthy food instead of sausages, fries, mashed potatoes, and a lot of fried fatty junk. Notwithstanding any of this, she appeared to love it there! We did not have any real attempts to run away. Yes, once in a while she would try one of the doors, but the place was just too secure. She also was much happier. At one point she was part of a small girl group of friends!

What this all means is even if you have the funds for the fanciest place and your loved one is used to the fanciest things, that does not necessarily mean that the fanciest place is the best place for your loved one. Also realize that both places I describe cost about the same. We even visited one place that was a horrible dump and it cost even more!