Dementia – in all its many forms – will afflict nearly 14 million of us by 2060. Are you ready?
Today, more than 6.2 million people over the age of 65 live with some form of dementia – an umbrella term used to describe at least six forms of memory or brain function decline that impair an individual’s daily life. Considering the country’s aging population, the number will more than double to 14 million by 2060.
According to the Centers for Disease Control and Dementia.org, “dementia” is the umbrella term for nearly a dozen different diseases. Alzheimer’s disease is the most common, accounting for more than 60 percent of all cases. Vascular dementia – dementia linked to stroke or otherwise limited blood flow to the brain – accounts for 10 percent of all cases. The remainder include Parkinson’s, Lewy Body dementia, Huntington’s disease, fronto-temporal dementia, and a host of others, including reversible cause dementia sometimes the result of medication, vitamin deficiency, etc.
Are you prepared for this worst-case scenario?
If you are over 50 yourself, or your parents or other family members are 65 or older, now is the time to discuss how to plan for the future, because but for their dementia, those afflicted may be otherwise healthy and can live with this deteriorating condition for many years. Which raises the issue of who and how will their care be paid for?
The cost of long-term care alone can easily wipe out a lifetime of savings. Who will provide the needed care for and supervision of a family member with dementia? Aging spouses may be too busy addressing their own health issues. Children may not live nearby or are already spread too thin, addressing the demands of their own busy lives and family responsibilities.
How do you plan to pay for long-term care?
Dealing with the prohibitive cost of caring for those with long-term health issues may be one of your biggest challenges. Whether cared for at home or in a nursing facility, the cost of care can easily exceed $150,000 per year. It is common for the elderly to worry about outliving their savings. Imagine how much more anxiety-provoking the issue is for someone trying to care for a spouse or a parent with dementia.
Currently, there are five common strategies to fund this cost:
- Use savings,
- Purchase long-term care insurance,
- Use the equity in the family residence,
- Access the Medicaid program, and
- Ignore the issue – an additional planning technique often referred to as “failing to plan.”
Plan or don’t plan. But decide now.
However a family chooses to attack the issue of long-term care, it is crucial that planning begin many years before care is required. Be realistic. Consider your circumstances, the circumstances of your children or other potential caregivers. Most of us are unable or do not have the discipline to successfully set aside the funds necessary to self-fund for possible long-term health exposures.
Moreover, most of us, including seniors and their children, do not want our hard-earned savings to pay for health care costs – particularly when they could otherwise be used for family vacations, purchasing that second home, etc.
So, what are your alternatives to self-funding for your (a family member’s) long-term care?
- Long-term care insurance. Long-term care insurance has gotten a bad rap in recent years as many insurance companies stopped offering the policies or substantially increased premiums. However, that does not leave you without options. Today, most long-term care policies are frequently modified life insurance policies that permit the insured to utilize the death benefits to pay for the cost of long-term care. One drawback, however, is age. The older the person, the more difficult it is to secure a policy.
Additionally, many pre-existing illnesses may make an individual uninsurable. Cost also can be a factor as the high cost of these policies is frequently a deterrent to becoming insured. However, if you can afford one of these plans, they should certainly be considered as they may provide you with the most flexibility and peace of mind should long-term care become necessary.
- Reverse mortgage. Reverse mortgages can be viable options for the right person. For example: An ailing client had exhausted his savings to pay for healthcare. He had only the equity in his home to pay for the round-the-clock care he required. He could have taken out a conventional mortgage to pay his expenses. But that would require him to make monthly payments to the bank immediately to repay the loan. And at his age, the thought of owing money to the bank was out of the question. Another possibility was to take out a reverse mortgage to use the equity in his home. With a reverse mortgage, unpaid interest accrues through the homeowner’s life, and repayment is not required until the homeowner dies. While some view reverse mortgage products negatively, a reverse mortgage may be the best available alternative for those in a situation like this client.
- Medicaid long-term care can be a viable alternative, provided the applicant meets the program’s asset and income requirements. The rules to qualify are complex and should be planned under the guidance of an attorney experienced in elder care planning – ideally long before care is needed. For example, asset transfers – from an applicant for nursing home coverage to a child – must be made at least five years before the application submission, or there will be significant penalties. It also is important to remember that Medicaid is a government program. Expect the application process to be arduous with no guaranty the care will be sufficient for the applicant’s needs. Just because you request 24-hour home care for your loved one does not guarantee that Medicaid will provide round-the-clock caregivers. Professional assistance will likely be necessary to navigate the process and secure the best possible outcome.
When should you discuss long-term care?
You should begin the conversation about long-term care and other end-of-life decisions long before action is needed. As an eldercare/special needs and trusts and estates attorney, I constantly tell clients how important it is that these issues be discussed openly before the need arises.
Plan now because you want to give family members time to voice their concerns, expectations, and financial/time limitations. If you are a parent, your children need to know what you want and can afford. And you must understand that your children may not be in a position to assume the role of full-time caregivers or care funders.
You do not have to walk this path alone. Ask for help from your trusted advisors. Your accountant, family attorney, and/or financial advisor can work with you as integral members of your team to provide the necessary perspective. They also may be able to refer you to an experienced geriatric care manager or other qualified health care professional to help put appropriate care plans into place. Above all, be patient. Discussing long-term care takes time and often more than one conversation. However, that first conversation may be all that is needed to get the ball rolling.
If you have questions about how to broach the subject of planning for care when you, a parent, or family member/friend are no longer able to care for themselves, or would like to discuss the options available, let’s talk. I’m Stuart Schoenfeld, and you can call me at (212) 661-1144 or email me at email@example.com to schedule a consultation.