You or your aging parents have worked hard to create financial independence. The last thing you want is to see it slip away because you have put off planning for critical long-term care needs. Here are three essential steps you can take in 2016 to prepare for your long-term care.
1. Hold family conversations.
Unfortunately, most families put off talking about long-term care until there is an emergency. Dr. Peter Lichtenberg, director of gerontology at Wayne State University, explains that people facing long-term care needs often feel insecure. Here are a few ways he suggests you can make the conversation easier:
- Recognize the feelings and emotions involved.
- Discuss how you can help everyone involved remain as independent as possible by exploring each other’s values and preferences.
- Whether planning for your parents or as a couple, recognize that your role is to help one another and not to be judgmental.
Don’t shy away from discussing the logistics too: What is important to each of you, and how would you like to be helped if you need it? Who should be your primary caregiver? Who will help with finances? In our experience, families who communicate openly about long-term care feel a greater sense of independence and better manage potential conflicts.
2. Organize your personal finances and plan for the costs.
Medical research tells us that one of the first things people have trouble with in the early stages of dementia is managing personal finances.
Consider the case of “Bill and Susan.” Susan came to us shortly after Bill had been diagnosed with Alzheimer’s. She realized they needed help after Bill had made an expensive mistake. He had withdrawn all of the money out of one of their IRAs, because he hadn’t understood that the tax bill for doing so would be $100,000. This is a mistake most people cannot afford to make.
Medical research tells us that one of the first things people have trouble with in the early stages of dementia is managing personal finances. This means a person can make these sorts of expensive mistakes before family and friends recognize there is a problem.
Having your financial house in proper order before such problems arise may not prevent them entirely, but it should go a long way toward minimizing the stress involved and the damage done.
For example, over the course of our lives, most of us collect many accounts at several banks, investment, and insurance companies. It can be confusing and nerve-wracking to keep track of everything, especially if cognitive impairment enters the mix. As you approach or enter retirement, you may want to move your accounts to one bank and one brokerage firm so it will be easier to keep track of everything and avoid costly mistakes.
Beyond account management, budgeting is important too. Long-term care costs can add up fast, so it is important to consider different scenarios and how you will pay for it. A coordinated financial plan can allow you to accomplish more while you are healthy, and protect you and your family if you face additional care costs in the future.
3. Update your legal plans.
We recommend you make it reasonably easy for someone to help you if you need it. These days, that requires making the proper legal arrangements, including:
- A will
- A power of attorney that names someone to help with your financial affairs
- A healthcare proxy that names someone to help with medical decisions
For many people, a revocable living trust is a good idea as well. Without these documents, a court may need to appoint someone to help. This can not only be costly, frustrating and time-consuming, it may not reflect the choices you would have made.
The Advantages of Preparing for Your Long-Term Care
Revisiting Bill and Susan, after they talked with their family about care preferences, planned for the cost of care, and updated their legal documents so others could help Bill make decisions, Susan was in a much better position to remain financially secure, come what may. This helped the entire family better cope with Bill’s Alzheimer’s as it progressed.
While diligent financial and long-term care planning cannot cure dementia, it can at least help families better manage the challenges that arise. If you’ve not yet done so, we encourage you to think about how you would like to be helped if you needed it, and share your thoughts with your family. In fact, why not make that the first resolution you cross off of this year’s list?
For additional insights into preparing for long-term care and similar planning issues, we invite you to tune into this 12-minute interview between WGVU host Shelly Irwin and Grand Wealth’s senior financial advisor Steve Starnes.