Retirement Planning and Declining Abilities

Navigating Cognitive Decline in Retirement Planning

“When a loved one is experiencing cognitive decline, emotional and medical considerations often overshadow the financial planning that needs to happen. This is a potentially costly mistake.”

Importance of Early Financial Planning

Whether the reason is Alzheimer’s, Parkinson’s or any of a number of illnesses that lead to dementia, it’s hard for families to think about legal or financial concerns, when a diagnosis is first made. This can lead to serious problems in the near future, warns the article “Cognitive Decline Shouldn’t Derail Retirement Planning. Here are Some Tips to Prepare Your Finances” from Barron’s. The time to act is as soon as the family realizes their loved one is having a problem—even before the diagnosis is official.

Taking Inventory of Assets and Liabilities

Here are some useful tips for navigating cognitive decline:

Take an inventory. Families should create a detailed list of assets and liabilities, including information on who has access to each of the accounts.

Identifying All Assets

Don’t leave out assets that have gone paperless, like online checking, savings, credit card and investment accounts. Without a paper trail, it may be impossible to identify assets. Try to do this while the person still has some ability to be actively involved.

Involving Family Members in Financial Discussions

This can be difficult, especially when adult children have not been involved with their parent’s finances. Ask about insurance policies, veterans’ benefits, retirement accounts and other assets. One person in the family should be the point person.

Estimating Future Care Costs

Understanding the Range of Care Options

Get an idea of what future costs will be. This is the one that everyone wants to avoid but knowing what care costs will be is critical. Will the person need adult day care or in-home care at first, then full-time medical care or admission to a nursing facility? Costs vary widely, and many families are completely in the dark about the numbers.

Reviewing Insurance Policies for Adequate Coverage

Out-of-pocket medications or uncovered expenses are often a surprise. The family needs to review any insurance policy documents and find out if there are options to add or amend coverage to suit the person’s current and future needs.

Seeking Professional Assistance

Consult with an Elder Law Estate Planning Attorney

Consider bringing in a professional to help. An elder law estate planning attorney, financial planner, or both, may be needed to help put the person’s legal and financial affairs in order. There are many details that must be considered, from how assets are titled, trusts, financial powers of attorney, advance health care directives and more.

Exploring Medicaid Planning Options

If Medicaid planning was not done previously, there may be some tools available to protect the spouse, but this must be done with an experienced attorney.

Automating Finances for Convenience

Utilizing Online Banking and Bill Pay

Automate any finances if possible. Even if the person might be able to stay in their own home, advancing decline may make tasks, like bill paying, increasingly difficult. If the person can sign up for online banking, with an adult child granted permission to access the account, it may be easier as time goes by. Some monthly bills, such as insurance premiums, can be set up for automatic payment to minimize the chances of their being unpaid and coverage being lost. Social Security or Supplemental Security Income benefits are now required to be sent via direct deposit or prepaid debit card.

Setting up Direct Deposit for Benefits and Pensions

If a family member is still receiving a paper check, then now is the time to sign up for direct deposit, so that checks are not lost. Pension checks, if any, should also be made direct deposit.

Ensuring Proper Estate Planning Documents

Creating a Health Care Representative and Durable Power of Attorney

Have the correct estate planning documents been prepared? A health care representative and a general durable power of attorney should be created, if they don’t already exist.

Preparing for Medicaid and Digital Asset Management

The durable power of attorney needs to include the ability to take action in “what if” cases, such as the need to enroll in Medicaid, access digital assets and set up any trusts. A durable power of attorney should be prepared before the person loses cognitive capacity. Once that occurs, they are not legally able to sign any documents, and the family will have to go through the guardianship process to become a legal guardian of the family member.

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