July 24, 2024
A Day in the Life of a Financial Advisor
July 24, 2024
You’re looking for a new financial advisor, someone you will give access to your life savings. Don’t you want to know how they spend their time?
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Alzheimer’s and dementia create serious obstacles when it comes to financial stability post-retirement, but they are becoming increasingly common.
By 2060, the amount of people living with Alzheimer’s is set to more than double.
Preparing for a life with Alzheimer’s, however, can make it easier for yourself or your family members—even if you never have to deal with dementia. The fact is that this disease places an incredible emotional and financial burden on everyone touched by it.
In this article, I’d like to review some of the main questions around planning for dementia—from the financial perspective—and what steps you can take to prepare for this worst-case scenario.
Generally speaking, individuals with Alzheimer's begin to require assistance in the middle stage of the disease. As a chronic disease, the amount of care they need grows over time. Still, since each person experiences Alzheimer’s and dementia differently, how much assistance should be given at a certain time depends on each case.
And since patients can live up to twenty years post-diagnosis, planning for the future care costs is essential. Not only do you need to set aside the financial resources for long-term care, but it can be helpful to create documentation for the family caregiver.
That’s why it’s important to take steps early to ensure you are secure financially. Ideally, you’ll want to plan for getting dementia as a worst-case scenario.
In a perfect world, your parents have written or discussed a plan highlighting their wishes in case they develop dementia. They may even have trust to make managing money easier.
But this isn’t the norm, unfortunately. The sooner you take action in these cases, the better. At least, if you want to reduce emotional and financial stress down the road.
You’ll want to compile a list of information, including:
In some cases, you may discover that your parent has given a durable power of attorney to their financial advisor, lawyer, or bank. This means that this individual can make transactions for your parent— including buying or selling property, managing bills, filing taxes, and more.
In some cases, you may want to hire someone to assist you with this task. Instead of managing money, you may want to focus on providing care. If that’s the case, it’s important that if you select someone to manage your parent’s finances, they are trustworthy. Fiduciaries, who are legally obligated to adhere to your best interest, are ideal. In the finance world, they are called registered investment advisors (RIA). An RIA is not dual-licensed or a broker.
Generally, third parties tend to charge 1% of assets under management as their fee.
In this scenario, there are three things to consider:
In the first or second case, you must have access to all financial information. You will want to have all of your assets transferred into your name as the primary caregiver. Many couples, especially unmarried partners, would benefit from creating a trust.
A trust that ensures that your spouse is taken care of, even if you pass away. Your spouse will not have to deal with the probate court, asset information will be kept private, and their financial security will be legally protected.
During this process, you will likely appoint your financial advisor or another caregiver with power of attorney. Doing so will make sure that your spouse has proper money management in case you are no longer able to take care of them. Again, trustworthiness is key, as you don’t want someone who would engage in financial abuse. At the same time, choosing an institution or writing very strict rules can result in limited payouts.
If your spouse passes away before you, it may be better to have a trust in advance and as many assets in your name as possible. This will lessen the paperwork and reduce potential emotional turmoil for your family.
A trust may also help regarding health insurance. Medicaid may subsidize the cost of expensive treatments. A third-party trustee, whether a family member or institution, can reduce the likelihood that your spouse would be disqualified from Medicaid eligibility.
Yes, you can change your will if you have dementia. It is better to do so as soon as possible. Waiting too long can give heirs reasons to debate the will after your passing.
If your spouse has dementia, it’s essential to review and change your will to accommodate the condition. For example, you don’t want to leave everything directly to your spouse. If you do so, they are vulnerable to financial exploitation.
In a living trust, a trustee will ensure that your loved one is taken care of. The key here is to consider who your trustee will be carefully.
There are several professionals who can help you to organize your finances and hash out legal options. This is great because you’ll want a dependable team to help guide you through the process. Your “support team” should be made up of fiduciaries, namely:
These people can work together to help you navigate wills, trusts, power of attorney options, investments, financial planning, affordable treatments, and more.
Legally, a trustee should be over the legal age, be mentally competent, and should live in the United States. They cannot be wards of the state.
The ideal trustee should be organized, business-oriented, and honest. But the perfect scenario is to have cotrustees. Multiple trustees can check in on each other to ensure transparency and accountability.
The first step to preparing your finances is to collect every financial record you have, from bank statements to investments. It also includes usernames and passwords for accounts needed to access documentation.
Common examples of information you’ll want to collect are:
You’ll also want to sort government documents, such as birth certificates, marriage certificates, and your social security card.
Collecting this information isn't just useful for dementia planning. You will also need them for general legacy planning.
The cost of living with Alzheimer's is bound to grow over the years. Account for more than current treatments. You’ll want to factor in the cost of:
These will differ from person to person. It’s best to talk to your doctor and review current price ranges. Even if you aren't sure how to put all this information together yet, your financial advisor will likely help you draft a plan.
Next, you’ll want to communicate with family members who will likely be involved in your care. This could be children, grandchildren, siblings, trusted friends, or your advisors.
Regardless, you’ll want to explain your diagnosis, the steps you are taking to protect your legacy, and how they can help. If you plan to leave certain relatives or advisors in charge or a trust, it’s better to discuss why you made this decision with your family and how it will benefit everyone.
For those directly involved in your care or will, you should ensure they know what to do once you become incapacitated or pass away.
Once you create a financial plan, you’ll want to update or create your will or trust, establish ownership of assets to your spouse, and sign power of attorney documents with your financial advisor, healthcare provider, or another fiduciary.
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