“It is estimated that by 2040, the number of Americans living with Alzheimer’s, dementia or other cognitive disorders is expected to double to close to 12 million due to the aging population, according to a recent study by RBC Wealth Management and Aon.”
The impact of these diseases will not just be on the individuals, but on their spouses and families. Surveying 1,000 mass affluent and high net worth families currently caring for relatives with cognitive decline, the study found that the lifetime direct and indirect costs can be more than $750,000. A recent article from Think Advisor, “4 Things Advisors Should Know About Cognitive Disorder Caregiving“, explains how families can prepare for this challenge.
- Expect expenses to grow over time. Most people with cognitive decline problems live for five to fifteen years, with an average cost of $750 per month early on. However, as the disease progresses, those expenses increase, to as much as $1,200 per month. Families need to work with an experienced estate planning attorney to apply for Medicaid as soon as the individual is diagnosed, or as soon as possible. Failing to plan may mean spending down all assets to qualify.
- Cognitively impaired adults mismanage finances. This is often the first symptom that something is wrong. The study found that 80% of people with dementia experience financial mismanagement. Bills go unpaid, spending patterns change dramatically and they are often victims of elder financial abuse. If multiple calls concerning the same question are made to a family member, that should be treated as a warning signal that something is wrong.
- Women continue to carry most of the caregiving responsibilities. Women make up about 66% of family caregivers. The impact on their ability to earn wages, from leaving the workplace for a time period, retiring early or leaving the workforce permanently, takes a huge toll on their income and savings. This also hurts future income, with losses to 401(k) plans, pensions and Social Security benefits.
- Estate planning attorneys, CPAs and financial advisors are important resources for caregivers. The financial and emotional stress on caregivers, loss of income and pressure to avoid their own problems means that caregivers need support from family, friends and professionals. Planning for the legal and financial impacts of caregiving needs to happen proactively. Professionals are also in a position to help through their networks of colleagues, like geriatric social workers, nursing homes, etc.
Most people are happy to plan for college, retirement and vacations. No one likes to plan for difficult events, like disability and death. However, planning as early as possible allows the family to have more control during a difficult period of time. Allowing trusted professionals to become part of the support network can lessen some of the burden.
Reference: Think Advisor (Oct. 13, 2020) “4 Things Advisors Should Know About Cognitive Disorder Caregiving”
For more information on elder law and estate planning, please visit my estate planning website.
