John J. Diak, CFP®
Planning for the Costs of Alzheimer's and Dementia Care
It's likely that you may have some exposure to Alzheimer's disease or dementia in the future, even if it hasn't impacted your family or a loved one's family yet. According to the U.S. Department of Health & Human Services Administration on Aging, the typical 65-year-old today has a nearly 70% chance of requiring some type of long-term care at some point in their lifetime, and roughly 20% will need some level of support for more than five years. Dementia is a leading cause of seeking care.  It's crucial to plan well in advance for long-term care to ensure you're adequately prepared.
What are Alzheimer's and Dementia?
Both Alzheimer’s disease and dementia are neurological disorders that affect cognitive function, particularly memory, language, and reasoning. Dementia is a general term that refers to a group of conditions that cause cognitive decline and behavioral changes among sufferers. Alzheimer's disease is a specific form of dementia characterized by the accumulation of abnormal protein deposits in the brain that lead to the death of brain cells and the gradual deterioration of cognitive abilities.
All types of dementia are progressive and can be debilitating, unfortunately affecting not only the individual but also their loved ones. The care costs, such as assisted living or nursing home expenses, add up quickly and can wreak havoc on household finances.
Challenges of Caring for Alzheimer's and Dementia Patients
Caring for dementia patients presents unique challenges that can be overwhelming for both the patient and caregiver. Advanced planning promotes open communication among family members to establish roles, responsibilities, and expectations while preventing the need to make rushed decisions under pressure or during a crisis. It also allows family members to gather information, resources, and support to manage their caregiving responsibilities effectively.
One of the biggest issues faced is caregiver burnout. Because caregiving is physically and emotionally demanding, loved ones often experience stress, exhaustion, and feelings of isolation, impacting their health and well-being and affecting the quality of care they provide.
Behavioral and Psychological Challenges
Another challenge is managing the behavioral and psychological symptoms of dementia (BPSD), including aggression, anxiety, depression, and hallucinations, among others. BPSD can be difficult to manage, so caregivers may require specialized training and support to provide effective care.
Communication challenges also occur in Alzheimer's and dementia patients. Patients often have difficulty expressing themselves, asking for what they need, or understanding others as the condition progresses. This makes it hard to provide care, leading to frustration for the patient and caregiver.
Alzheimer's and dementia patients are prone to safety concerns as well. Patients become disoriented and wander away from home or care facilities, putting themselves at risk. Caregivers will need to take steps to see to their loved one's protection, such as installing locks on doors or using tracking devices.
By planning ahead, individuals and their families can better prepare for the physical and emotional challenges that are likely to arise when caring for someone with these disabling conditions.
Long-Term Care Options for Alzheimer's and Dementia Patients
When people with dementia can no longer perform daily activities independently, it’s time to seek long-term care. Long-term care refers to a range of services designed to help people with disabilities and declining health when they need assistance with activities we often take for granted, such as bathing, dressing, and eating, while also providing the convenience of medical and social support. Advanced planning allows individuals to express their preferences regarding the type of care they would like to receive and gives everyone involved time to research and evaluate various care providers. But how do you know which direction to take? Here are a few main options to consider.
Many people wish to stay in their own homes for comfort and convenience. Moving into a new space can be especially frightening for someone in cognitive decline, and in-home care allows for more independence and familiarity with surroundings. But providing around-the-clock care is taxing for caregivers and significantly disrupts their daily life and the lives of other family members. Although caregiving duties are often unpaid labor, it’s important to consider caregiving a job and respect the commitment required.
Assisted Living Facility
Assisted living facilities provide a more structured environment, ongoing access to support, and assistance with daily activities as needed. This option also allows patients to socialize more, become part of a community, and get specialized services for dementia patients. But these accommodations are expensive and often do not offer the same level of medical care as other options.
Memory Care Facility
Going a step beyond general assisted living, memory care facilities are specialized care centers for individuals with dementia. They offer a secure environment and programs designed to meet their unique needs. However, these centers can be costly and might not be available in areas that are close by and convenient for families.
Nursing Home Care
Nursing homes provide 24-hour medical care and support for dementia patients with complex medical needs. They offer specialized care and attention for those in severe cognitive decline and other problems. The biggest obstacle to choosing nursing home care is the high cost, but some patients tend to find the environment cold, clinical, and depressing.
Making the right long-term care choice for dementia patients requires careful consideration of individual needs, preferences, and financial resources. We recommend doing your research and visiting different facilities to determine the best fit for the patient and their family.
Paying for Long-Term Care
Financially planning for long-term care is one of the most important steps for ensuring you or your loved one receives the best care possible while maintaining financial stability and confidence. Long-term care can be expensive, and planning in advance allows individuals and families to allocate resources, explore financial assistance options, and invest in insurance policies to cover the costs.
One of the biggest factors in considering long-term care options is the cost, which varies greatly depending on the type of care and location. Nursing homes are generally the most expensive option, with costs on average ranging from $7,500 to over $9,000 per month. Assisted living facilities are typically less expensive but vary widely depending on location, amenities, and services, with base prices ranging from $3,000 to over $6,000 per month. Home healthcare services are generally more affordable, starting at around $2,300 per month for part-time help. Still, costs vary significantly depending on the number of hours needed and the level of care required. 
Medicare and Medicaid
While Medicare does pay for medical expenses, it doesn’t cover custodial care, the term used for care that meets personal needs like dressing, bathing, and other activities of daily living. Medicaid may provide coverage for long-term care, but most people do not qualify for it due to its income limits. However, with significant advanced planning, it may be possible to structure finances to qualify for Medicaid benefits. This process may include transferring assets to family members, establishing trusts, or spending down assets to meet Medicaid eligibility requirements. Because of the complexity, it should be done with the assistance of a qualified financial planner or elder law attorney.
Long-Term Care Insurance
Securing adequate care is prohibitively expensive for many hardworking families and may limit your choices. Long-term care insurance can help cover service costs, including in-home care, assisted living, and nursing home care. This insurance provides financial security and relief for individuals and their families. However, pre-existing conditions will disqualify people from obtaining coverage, and policies tend to be costly and may only cover some expenses. Once a diagnosis of dementia or Alzheimer’s disease is received, it will no longer be possible to acquire long-term care insurance, so planning in advance is the only way this strategy can work.
Self-paying for long-term care involves using one's financial resources to cover the costs of various care options. The help of a financial planner in structuring finances and weighing your options will be invaluable. It may be possible to use funds from a health savings account (HSA), or you could set aside a portion of your investments specifically for these expenses.
With any choice, bills add up quickly, and many individuals with dementia require long-term care for several years, making it crucial to plan for these expenses in advance.
Getting Legal Documents in Order
Preparing legal documents in advance for dementia care is crucial, as it ensures that the individual's wishes are respected and followed when they may no longer be able to communicate or make decisions for themselves. Following are some of the documents you will want to have completed: Durable Power of Attorney (POA) for Finances: This allows a designated person to manage the individual's financial affairs when they are no longer able to do so themselves.
Durable Power of Attorney for Health Care: This document appoints a trusted person to make medical decisions on behalf of the individual when they are unable to make or communicate their own choices.
Advance Health Care Directive (Living Will): This document outlines the individual's preferences regarding medical treatments, life-sustaining measures, and end-of-life care.
Last Will and Testament: This document specifies how the individual's assets and property should be distributed upon their death. It also allows them to appoint an executor to manage their estate and a guardian for any minor children.
Trusts: Trusts can be established to manage and distribute assets according to the individual's wishes, both during their lifetime and after their death. Trusts can also help protect assets from being depleted by long-term care costs.
You can learn more about estate planning documents in this Checklist for Estate Planning.
It’s crucial to have legal documents finalized before dementia becomes an issue. Legal documents created when the individual is still mentally competent are less likely to be contested or challenged by family members or other parties. When documents are created after dementia has set in, there may be suspicions of undue influence, fraud, or coercion, leading to potential legal disputes and causing emotional strain among family members.
Plan Ahead to Work Towards the Best Possible Outcome
Supporting Alzheimer's and dementia patients is a significant undertaking. Proper planning is the best way to get the best care possible and alleviate some of the burdens that come along with it. The earlier the planning begins, the more options and flexibility you’ll have.
If you're seeking further information and support, there are many resources available. Local support groups, nonprofit organizations such as the Alzheimer’s Association, and government agencies are just a few examples. And, of course, we’re here to help answer any questions you have regarding long-term care and estate planning while developing a financial plan that considers these needs.
John J. Diak, CFP® is the Principal & Client Wealth Manager at Oatley & Diak, LLC in Parker, Colorado. He assists clients through many difficult lifestyle changes such as business downturns, retirement planning, divorce, the death of a spouse, and family estate issues among others. Oatley & Diak, LLC is a family-run registered investment advisory (RIA) firm that provides clients with investment management and financial planning services in a hands-on, intimate environment. Learn more about them at oatleydiak.com.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This should not be considered legal or tax advice. Consult an attorney, tax professional, or advisor regarding your specific legal or tax situation.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.