Financial Perspectives: Elder care planning

When things are going well, it is very easy to take things for granted.  Many of us are optimistic by nature or we simply do not want to face reality.  In the past few weeks, I have had two friends of mine learn that one of their parents had developed early onset dementia.  Both are in their early 70s and were otherwise in good health, but in what seemed like a very short time, things changed markedly.

Both friends are now dealing with the myriad issues that result when diagnoses like these are received, such as:

• What are the treatment options?
• Who is going to be the primary caregiver?
• Will they have to move in with someone or vice versa?
• Do we have to consider a nursing home?
• How are we going to afford to take care of her/him?

The First Steps

So what do you do to prepare for something like this?  First, you need to initiate conversations with your parents or loved one to find out all you can long before the first sign of an issue.  Identifying all their important information like financial accounts, insurance policies, tax returns, legal documents, etc. can prove invaluable if you ever have to deal with the administrators at an assisted living or nursing care facility.

Next, ask if you can review their legal documents (at least the Power of Attorney and Living Will) to see what the provisions are, and identify who is responsible for decision-making.  When critical issues arise, you want to be ready to respond as quickly as possible.  If your loved one happens to have long-term care insurance, review the policy for critical issues surrounding the waiting period, coverage per day and inflation riders, among other things.

If your parents/loved one were wise enough to purchase long-term care insurance, they may be able to avoid or minimize what could be a significant cost.   The results of a survey conducted by Genworth Financial, published in April 2010, regarding elder care costs, revealed that in Pennsylvania a year-long stay in a nursing home would cost in excess of $90,300 – substantially greater than the national average of $75,193.  Assisted living (a step down from full nursing care) was $34,920 while home care was $44,616.

These costs are very high, and elderly patients can take advantage of the very limited nursing coverage provided by Medicare.  If their income and asset levels fall within Pennsylvania guidelines your loved ones may even qualify for care at a Medicaid-approved facility.  The downside with using Medicaid is that they can direct you as to where you can go to receive care.  This may mean needing to move to another part of the city, or in a worst case scenario, to another part of the state.

Know What You’re Dealing With

The next step after (or simultaneously) the financial and legal review is to have your parent/loved one evaluated.  Should they be permitted to drive any longer, can they take walks on their own, cook for themselves, clean or do laundry, etc.?

This evaluation is critical, since it can be used to help the loved one face the reality of their situation and in some cases can be used as a scapegoat, especially in the instance when someone loses their driver’s license or is told they will need a companion any time they leave the house.  Such a sudden change in someone’s life can be traumatic.  As a caregiver, it is very important that you seek out some training to understand how best to manage these types of issues as they come.

Fortunately, there are many places to turn for help in the Northeast.  There is a wide range of profit and non-profit agencies, support groups, and medical and legal specialists that are available to provide assistance.  The yellow pages or a simple search online will help you find the services closest to you.  Please do not try to shoulder the burden on your own.

Start Early

Finally, if you have not done so, take this opportunity to make sure you own situation is in order – get the wills done with powers of attorney and advance health care directives.  Also consider the purchase of a long-term care insurance policy.  The premiums are much cheaper if you buy the policies at a younger age – particularly in your 40s.  If you wait until your 60s, the cost is significantly higher and by then you may develop some health issues of your own that could make you uninsurable.  Coming from a family with a number of relatives who developed dementia, I plan to purchase my own policy in the next couple of years – I am 41 now.

Jim Heisler is a Certified Financial Planner with Family Wealth Services in Holmesburg. You can read all his Financial Perspective columns here. Registered Representative, Securities offered through Cambridge Investment Research, Inc., A Broker/Dealer, Member FINRA/SIPC and Investment Advisor Representative, Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor.  Family Wealth Services, LLC and Cambridge are not affiliated.

Jim Heisler, CFP®, CDFA™, CASL™ Family Wealth Services, LLC 8725 Frankford Avenue Philadelphia, PA 19136 jim@familywealthservices.net 215-332-4968