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When a loved one receives a dementia diagnosis, you'll likely experience a cascade of difficult emotions. Processing these complicated feelings can take time. Unfortunately, a dementia diagnosis is also a ticking clock that necessitates some important decisions concerning health care, finances and the estate plans of the individual and their spouse.
These decisions may not have to be made instantly, but, depending on the status of the disease and its rate of progress, they should probably be made as quickly as possible, while the individual is still able to take part in choices that will affect them for the rest of their lives.
Here are some options to consider when thinking through the options for your loved one and the rest of your family.
What Are the Estate Planning Needs for Someone With Dementia?
A dementia diagnosis is typically made in response to some impairment, such as short-term memory loss, as noted by the individual or a loved one. The extent to which the disease has progressed by the time it's identified can vary, but many individuals with confirmed dementia diagnoses are able (and legally competent) to make important life decisions. The progressive nature of the disease means eventually that will no longer be the case, so if no will or other estate planning documents have been prepared for the individual at the time of diagnosis, it's important to complete the process as soon as possible.s
Setting aside the need for speed, the estate planning needs for most dementia individuals may be much the same as they would have been if the estate plan had been set up before the diagnosis. These include:
- A will: A last will and testament is a legal document that spells out who you want to receive your money and property when you die.
- Beneficiary designations: Life insurance policies, annuities and investment accounts such as IRAs all name beneficiaries. Beneficiary designations are typically made when accounts and policies are opened, and may require updating later in life, even in cases where dementia isn't a concern.
- Advance directives: Advance directives empower representatives of the individual to make decisions on their behalf when they're no longer capable of doing so. As with other estate planning documents, it's wise to have them reviewed by an attorney to ensure they are legally binding in the location where the individual resides. Advance directive documents include durable power of attorney, medical power of attorney and living wills.
- A living trust: Estate plans often incorporate legal entities called trusts for purposes of receiving and distributing assets to an individual's heirs, with a goal of minimizing taxes on the estate.
When developing an estate plan post-diagnosis, it's wise to consult the individual's doctors, an estate planning attorney and, depending on the complexity of the estate, a financial planner so that the individual's likely long-term medical needs can be factored into strategies for distributing their assets.
What Financial Considerations Should Be Made for Dementia and End-of-Life Care?
Setting up a trust might become more attractive in light of a dementia diagnosis because it will take ownership of the individual's home and other assets, with instructions for distributing those assets upon the death of the individual (or their surviving spouse). Placing assets in trust can shield them from being seized to cover the costs of assisted living or long-term care services when the individual eventually needs them.
Long-term health care concerns for the dementia individual may also affect the estate planning requirements of the individual's spouse. It's common for wills and trusts to leave all (or the bulk of) joint assets to a surviving spouse. But if that survivor is a dementia individual or they are incapacitated when their spouse dies, their property could be seized and sold, or used to delay the use of Medicaid benefits to cover medical expenses. Creating a trust (or modifying an existing one), to provide instructions and funds for the individual's long-term care can provide more control over the process and ensure specific gifts go to loved ones instead of being sold off by a managed-care company.
Working with an attorney to set up or modify a trust and to adjust beneficiary designations to provide for the individual's care and/or redistribution of assets to other surviving heirs instead of the individual could ultimately uphold both spouses' wishes as parents and grandparents.
Other Financial Concerns for Families of Dementia Individuals
Along with concerns about estate planning, there are typically a host of other concerns to address. The following is a brief outline of some of them:
- Medical care: It's important to confirm any dementia diagnosis with a memory-care specialist, and to pursue any appropriate treatment options. As symptoms advance, it's likely the individual will need assistance from caregivers, such as family members or visiting nurses. Eventually, around-the-clock care may be needed. Medicare and Medicaid may help but won't cover assisted-living costs unrelated to medical needs—help with housekeeping and meal preparation, for example. If possible, it may be best to dedicate resources in the individual's estate (and those of their spouse) to supplement government benefits.
- Accounts and household finances: Transferring bank accounts and bills with phone companies, utilities and other service providers to joint ownership between individual and caregiver can allow the individual to continue managing finances as long as they are able and enable a smooth transition to caregiver management when the time comes.
- Mental health: For the individual and their loved ones alike, the emotional and psychological tolls of a dementia diagnosis can be overwhelming. The "new normal" is ever-changing, and responses may encompass grief, frustration and depression. Seeking help from a therapist or counselor, particularly one with experience navigating the challenges of dementia, can be helpful for everyone involved.
The Bottom Line
A dementia diagnosis of a loved one is difficult for everyone involved, and sadly may require planning and financial decisions at a time when the natural focus is on caregiving and making the most of time together. While it may not be anyone's preference, addressing estate planning and other financial concerns sooner rather than later can help assure the individual's wishes are upheld, and that they get the long-term care they need.