September 15th, 2020
Did you know that in 2018, Medicaid spent $445 million for the care of people with Alzheimer’s? In fact, this year’s total projected cost for caring for these individuals is an alarming $305 billion. As we honor World Alzheimer’s month this September, we want to take a moment to reflect on the importance of fighting Alzheimer’s here in West Virginia and around the world, and also the impact an Alzheimer’s diagnosis has on estate planning.
While the cost of care to Medicaid is alarming, the total projected cost this year indicates the financial burden to our society as a whole, especially for those families who pay out-of-pocket for care. Planning in advance is critical in preventing some of the financial burden on our families. As adults, we should have an estate plan now, but the diagnosis of Alzheimer’s or dementia adds even more of a sense of urgency to planning. Having your foundational documents in place while you have good mental capacity enables you to maintain control by naming someone you trust to manage your assets.
The controlling document for non-medical decisions during a period of incapacity is a durable financial power of attorney. This document must be signed while you have the mental capacity to make decisions for yourself. In your durable power of attorney, you appoint an agent to manage your financial affairs on your behalf and you determine how much flexibility you will permit them to have.
Once a person loses capacity, they can no longer sign documents such as a durable power of attorney. At this point, if they have an inadequate document or none at all, the family is tasked with the added burden of petitioning the court for a conservatorship. In addition, if you do not have a medical power of attorney, the court may also need to establish a guardian for your medical decisions.
Unfortunately, even when it is not adversarial, the conservatorship process can be very stressful for your loved ones and somewhat expensive. Families often express that they don’t understand why their loved one would have left such a mess for them. The process to obtain a guardianship and conservatorship takes more time and costs more money than obtaining a durable power of attorney while you have the capacity to sign documents for yourself. Plus, the delays of going through the court process mean that planning opportunities to save assets is also delayed.
Ideally, you will also be planning your estate at least five years in advance to a major health crisis. In this pre-planning scenario, we have more options to protect your assets from some of the medical expenses. The five years is important due to Medicaid rules that prevent the transfer of assets for less than fair market value within a five-year window of applying for benefits.
If you have not planned ahead, there may still be some options to help protect assets. This scenario is usually referred to as crisis planning, but the effectiveness usually relies on the durable power of attorney or obtaining a conservatorship as quickly as possible.
We encourage you to reach out to an estate planning professional for an estate planning checkup and to learn more about resources in your area by contacting your local Alzheimer’s Association chapter. And finally, we encourage you to donate or participate in this years’ virtual Walk to End Alzheimer’s events to raise awareness and funds to end Alzheimer’s for the more than 5 million Americans living with this disease.