It is overwhelming caring for a loved one with dementia. It can be as or more challenging tackling their finances. Often, parents are uncomfortable sharing and discussing their finances with their adult children and adult children are often hesitant to broach the topic. However, not discussing the finances can cause more stress and turmoil in the long run. It is a lot of work and time-consuming to manage someone’s finances including paying bills, organizing, managing investments, selling real estate or other assets, and this does not include the emotional toll of managing health and other care needs. It’s even harder when the person does not live nearby.
As a financial planner, my guidance depends on what stage of dementia a person is in, how prepared the caregiver is and the complexity of the finances. In this blog, I offer suggestions on financial actions to take as dementia progresses, based on my professional and personal experiences. Depending on the stage, the caregiver may just need to start helping or in other situations, completely manage the finances.
If you’re a caregiver, the person you are helping has passed the preventative stage. However, it is not too late for yourself and your family. The preventative stage sets your family up for future success or failure. This is the time to get your finances, insurance and estate planning documents in order. To create a structure to safeguard your family and provide guidance regarding your wishes, start with the following:
- Obtain appropriate amounts of insurance (life, disability, long-term care).
- Obtain or update estate planning documents, including beneficiary designations.
- Are you on target for retirement and other future financial needs?
- Are your investments managed properly?
- Will a surviving spouse have the financial resources for their own needs and will they handle the finances on their own or need guidance?
- Spouses and partners do not need to manage the finances equally, but both should understand the overall financial situation. This includes having access/passwords to all financial accounts and information for a professional point of contact, such as an accountant or financial advisor.
- Review your finances, insurance and estate planning documents regularly, especially at certain life events (i.e. marriage, birth of child, divorce, death of a spouse, etc.).
This stage should start when you are healthy. No one wants to think about the future when they are in good health, but this is the best time to plan for the unexpected. You can never start the preventative stage too early, but there can come a time when it’s too late.
The proactive stage begins when dementia is suspected or there is a diagnosis of an early stage of dementia. Even with a diagnosis of an early stage of dementia, often the person can still make health, financial, legal, and other decisions. In an ideal situation, this is when the future caregiver works with the person to learn and understand their unique financial situation and needs, and start the transition of helping and managing the finances.
Getting started is the hard part. No one wants to have these discussions, but they are necessary. Start the conversation slowly as coming on strongly can cause worry, resentment and shut down the conversation. Before you start, have a plan about what you specifically want to discuss. However, there are situations where the person is in denial about their health, unwilling to get help, or work with their family to plan ahead.
If possible, the following should be addressed:
- PROFESSIONAL HELP: Does the person have professionals who you should be connected to such as a financial advisor, accountant, estate planning/elder law attorney, insurance agent, etc.? They should be aware of the situation so they can best help now and as the symptoms progress.
- ASSETS, LIABILITIES AND EXPENSES: First, get a broad sense of all assets, liabilities and expenses; then, get more details.
- Review all assets and income sources. Should any accounts be consolidated?
- Are there sufficient assets and income for their current lifestyle or possible future care needs? Don’t forget about a healthy spouse or partner and their current and future needs.
- Does the person need help with paying bills, filing tax returns and/or managing investments?
- Are there any specific valuables that you should know about (i.e. jewelry, art work, coins, etc.)?
- INSURANCE: Review insurance coverages.
- If the person has long-term care insurance, find out the details including covered benefits and the amount and duration of coverage.
- Certain life insurance policies and annuities have a long-term care insurance component that provides a certain amount of coverage. Review all policies with an insurance agent.
- Make sure there is a proper amount of auto and umbrella insurance coverage. This is especially important for individuals who still drive, even though they shouldn’t.
- ESTATE PLANNING: Consult with an estate planning attorney/elder law attorney.
- Have estate planning documents been reviewed recently and do they accurately reflect the person’s wishes?
- Are documents up to date with current law?
- Are the best people in the right roles, and do they understand their role and know where documents are located?
- Are beneficiaries correctly designated on accounts, annuities and life insurance?
- END-OF-LIFE DISCUSSIONS: This is the time for the individual to make wishes known for living arrangements, medical treatment and after-death. For more information, read the following article about starting end-of-life conversations.
- If there is a safety box and/or home safe, know the location and where to find the keys.
- Get copies or know the location of any keys that may be needed (i.e. house, automobiles, etc.).
- Where are online passwords located?
- LOG: Keep a log of what you are helping with financially. Depending on the person’s condition, they could give you permission to do something one day, and forget the next day.
For many people, this is where the journey starts. You may realize that mom or dad is in a much worse condition than you thought or an emergency brings everything to a screeching halt. This can be overwhelming if you are thrown into the situation without warning. You’re constantly reacting to the changing circumstances. It’s important to try to stay calm and take care of yourself too.
If you’re taking over the finances for someone and they cannot help you, then start with financial statements and prior year tax returns to get a general idea of what you’re dealing with. This is time-consuming but must be done. Your goal is to focus on the more important financial items first and protect their assets.
- FINANCIAL DOCUMENTS: Sort different accounts, bills, credit cards, loans, medical, legal, etc. to get a big picture of the finances.
- The most recent tax return is a good source of information for taxable income sources and accounts. Be aware that the tax return will not include information on non-taxable income (i.e. certain disability payments, etc.) or accounts that did not produce taxable income/distributions.
- Find all physical checkbooks, credit cards, debit cards, health insurance cards, etc.
- Are bills being paid? If not, prioritize them and cancel any unneeded services.
- Check banking and credit card statements to determine if certain bills are paid automatically. Turn off unneeded automatic payments and cancel unnecessary credit cards.
- Keep an eye out for uncashed checks, unpaid bills, delinquent accounts or accounts about to be closed by the financial institution.
- Have prior year’s tax returns been filed?
- POWER OF ATTORNEY/TRUST DOCUMENTS: Contact each financial institution to find out their procedure for you to gain access as the Agent of a Financial Power of Attorney or as Trustee of a Trust. This is a time-consuming process, as each financial institution has its own specific requirements. Never send your original documents before speaking with an estate planning attorney. An attorney can provide a notarized copy of the original estate planning documents, if needed.
- SOCIAL SECURITY: Unfortunately, Social Security does not recognize Power of Attorney documents. If you need to contact Social Security or change the payment information on behalf of another person, you will need to become a Representative Payee.
- MAIL: Open all mail. Look everywhere. I once found unopened mail in a family member’s refrigerator! USPS will only forward mail for one year, so change the address on all accounts, utilities, property taxes, credit cards, etc. to your own address. If you are managing the finances for someone who lives in a different state, be mindful to only change their mailing address and not the physical address for any income source that is withholding state taxes (i.e. pensions, annuities, IRAs and other retirement accounts, etc.).
- PROFESSIONAL HELP: In addition to financial advisors, accountants, estate planning/elder law attorneys and insurance agents, there are many other services that focus on seniors, such as Aging Life Care Managers, Senior Living Consultants, and a variety of in-home services. Read the following article on senior services to know about.
In this stage, you have a grasp of the financial situation, even if there are ups and downs on the health side. As you transition from the reactive stage to the managing stage it is time to address the finer nuances. Here are some things to work on:
- SENIOR ABUSE/FRAUD: Be sure to note if anything seems odd, as someone could be taking financial advantage of the situation. Unfortunately, not only do strangers take advantage of seniors, family, friends and neighbors often do as well.
- REAL ESTATE: Clearing out the house, preparing to sell, and selling a house. Make sure your realtor and the title company know if you are selling a house as the Agent of a Financial Power of Attorney or as a Trustee of a Trust, as they generally require additional documentation.
- BUDGETING: Creating income and expense projections are a key part of determining if there are sufficient assets and income to support current and future needs.
- ACCOUNTS: Consolidate accounts as much as possible, but be careful not to close any accounts that receive monthly deposits from Social Security, pensions, annuities or other income sources.
- INVESTMENT MANAGEMENT: Managing investments can be manageable or very complex and overwhelming depending on the types of investments. Consider the following if you decide to self-manage the investments:
- Are there any red flags that should be addressed immediately, such as a very aggressive portfolio?
- Determine how much support the investments will need to provide. This is typically the amount needed in addition to income sources such as Social Security, pensions, etc. This is a key factor in how to structure the investment allocation.
- Do you understand the tax rules, considerations and strategies of the various types of investments and accounts?
- Passwords/Keys: Change online passwords and locks, as needed. This is important if you’re not sure who else has access or if you suspect senior abuse/fraud.
- Credit Report: To look for additional credit card accounts and other liabilities, request a credit report from one of the main credit agencies.
- Unclaimed Property: If an account is dormant for too long (five years in most states), the account can be transferred to the state treasury under what is called escheatment. Look for unclaimed property here: Unclaimed.org or MissingMoney.com.
DON’T FORGET TO TAKE CARE OF YOURSELF!
No matter what stage you’re in, know when to reach out for help and support. Don’t be shy about asking for help from other family, friends or utilize support groups or respite care.
WHAT CAN YOU DO TO HELP OTHERS?
Use your experience, good and bad, to encourage others to act and plan when they are young and healthy. It is important to develop a good support system, health care team and a financial/legal team who are there when you need it.
A key take-away is that you do not have to do everything on your own. There are many professionals and services in the financial, legal and health areas who specialize in helping seniors and their families/caregivers. Decide which tasks you can handle and hire professionals to help you with the others.
Stay safe and healthy,
Michael Fuhr, CFP®
Evergreen Wealth Services