Dementia can wreck family finances

By Robyn Davis Sekula

In our family, one of the first signs that Dad was struggling with mental acuity was when I watched him try to fill out a credit card slip at a restaurant. He absolutely could not figure out how to calculate a tip, something I had seen him do routinely over the years. This was about five years ago.

In subsequent years, he got much tighter with money - and worried about things that simply weren't problems. He worried intensely about my ability to pay for my three daughters' college education. I could not convince him that I make enough money and am saving aggressively for their education in a 529 plan.

Mom finally took over the checkbook at least a year ago, maybe more. That was the last of the financial decisions he was involved in.

Dementia can be incredibly destructive to a family's financial picture, certainly from mismanagement, but also from the perspective of paying for care on a long-term basis. Had my father lived more than a year, my mother would have been forced to go on Medicare because he did not have long-term care insurance.

I ran across an article, albeit two years ago, in Smart Money online about dementia and its affects on family finances. I wanted to share it with you because I thought that you might find it helpful - and as a word of caution to anyone who has elderly parents or relatives that they care for. Keep an eye out for the tale-tell signs, and step in before deep damage is done.

http://www.smartmoney.com/personal-finance/elder-care/dementia-can-wreak-havoc-on-family-finances-23715/

Money tips for the elderly, and their children

We give out a daily financial tip on Twitter @family_finances, and sometimes, concentrate the tips around a theme. Here's our tips on managing money and the elderly, given out during the last two weeks.

- Take some time to sit with elderly parents and go over their finances with them. Make sure you know where all of their money goes.

- Encourage older parents to explore long term care insurance. Those in good health may find it’s not too expensive.

- Review a few rules with elderly parents. No bank or credit card numbers over the phone, ever.

- Rule 2 for elderly parents: Don’t reveal your age or personal situation. No one should know that you live alone.

- Rule 3 for elderly parents: if you aren’t sure about something you’re asked for, ask for help from you. Refuse until you can get help.

- Rule 4 for elderly parents: don’t allow anyone going door-to-door who you don’t know to do work on your home.

- Rule 5 for elderly parents: Create a will. It will save your children from arguing over how the estate is to be divided.

- Rule 6 for elderly parents: Tell your children when you’ve made a major change, such as switching banks or phone companies.

- Rule 7 for elderly parents: If you drive when you shouldn’t, you can end up in a very costly accident and even hurt someone else.

- Rule 8 for elderly parents: Reverse mortgages sound good, but often, the fees are high. Let an expert review before you commit.

- Rule 9 for elderly parents: Keep healthy. Take your medicine, get checkups. It may save you time, money and your life.

- Rule 10 for elderly parents: Stay out of the casinos. Stay away from lottery tickets. It’s the worst use of money possible. Find another hobby.

Giving house to children isn't a wise move

On Mondays, we post a question from a reader and answer in this space. If you have a question you'd like to see us answer, please post it in the comments.

QUESTION: I am in my 70s, and I’d like to put my house in the name of my children so that, if I ever have to go into a nursing home, I won’t be forced to sell it to pay for my care. I have friends who have done this. Does this work? Are there any drawbacks to it?

ANSWER FROM DAN DANFORD: I'm always distrustful about advice from friends in this realm. I hear this stuff all the time and it's the absolute worst place to get information. The times I've tried to confirm this type of stuff have always ended with disappointing results.

Here's the thing. The "nursing home" payment plan is Medicaid, a state-operated plan that provides medical services to indigent people. It kicks in and pays when you've "depleted" your other assets. There are rules about what qualifies as an asset and when the program starts paying. There are "look back" periods for precisely this reason; Medicaid wants to be sure you are really indigent before starting to pay. And they want to be sure that you didn't give everything away just to qualify. So they look at your financial history and may demand assets that were given away to family and friends (or delay paying).

Medicaid is administered on a state-by-state basis, so there are slight variations depending on where you live. Also, amounts allowed to a spouse or the length of look back periods might differ also. Last, and this is a huge factor in my experience, the Medicaid caseworker has some "interpretive" leeway for each situation. So, even within a state, the answers may be different when the circumstances are different.

So, the best thing to do is to establish a "regular pattern of giving" to your family. That way, there are no one-oime massive gifts to raise a red flag for the caseworker. Also, remember that the reason you worked hard and saved all these years is precisely to take care of you when you need it. Another way of saying this is that you likely need the money (or house) more then you children.

Which brings up one last caution. What if you give the house to your kids and they become embroiled in a lawsuit or - heaven forbid - a nasty divorce? Under this "worst case scenario" the house or other asset could end up being unavailable to either you or your children! Careful, careful, careful.

Really, don't listen to your friends for this. Consult a reputable estate planning attorney in your city. A few hundred dollars in fees could accomplish what you want without the guesswork.

Twenty questions to ask the elderly

Robyn Davis Sekula is a public relations and marketing consultant who assists us with many things here at the Family Investment Center. She offered to write about her own experience gathering information from her elderly parents and her thoughts are posted below. Tell us about your own experiences with managing the finances of elderly parents in the comments section.

By Robyn Davis Sekula

During December 2005, I was home in Virginia visiting my parents when my Uncle Bob died unexpectedly. Bob was only a year older than my father, and it sent a bit of a chill through the house. Dad looked at me that afternoon and gave me a wonderful gift. He said, “Let’s go downstairs.” We went into an area that he had used as an office, and he began to tell me everything.

Having spent most of my life as a reporter, I took notes. I’m an only child, and my parents are in their 70s and live nine hours away. My mother knew very little about the finances of the home at that time, and I’m very much the practical soul of the family, so I knew I would have to be the one to have the information. He started with the basics: where the original of his will was located, who has power of attorney (mom) and life insurance. Then, I worked my way into a series of questions on everything I could think of since he seemed receptive to answering questions.

I’ve accumulated this list here for you to use with your own elderly relatives. If you live far away, all of these questions are especially crucial and things you need to know. They may sound small, but every piece of information that you have handy will save you a step or two in the future.

Don’t assume that you know everything, either. Your parents may have inherited something that they never mentioned to you or have purchased something that they’ve never discussed. Ask it all. You will no doubt find a surprise or two.

Here’s the list of questions I’d use in such a conversation:

1. Where is your will? Not a copy, but the original. My grandfather's estate could not be settled until his original will could be located. Guess who had it? His ex-wife, who could have easily destroyed it, since it was not in her favor and she was not friendly with the rest of the family. That could have been a disaster.
2. Who prepared your will? Be sure to get contact information, too.

3. Who is your life insurance policy with? What is the payout? Is it term or whole life? Where is the policy paperwork?

4. Do you have a financial advisor who you work with?

5. Where do you have money? Need names of banks, credit unions and investments.

6. Where are your safe deposit boxes? Need names of banks, address of branch and location of keys.

7. Do you have a safe? Where is it? What is the combination?

8. Are there any other secure places where you store important paperwork and documents?

9. Where do you receive income from? Cover both retirement and investments.

10. What do you own? Go over house, car, land, and location of titles and paperwork of each.

11. What debt do you have and who owns that debt? Cover mortgage (first, second, reverse, lines of credit), car loans, credit cards, consumer goods, old student loans.

12. What do you believe are your most valuable assets and what do you believe these items are worth? Use this question for significant antiques, works of art, and other items not covered anywhere else on this list.

13. What bills do you pay each month? Get the names of each utility paid and how much the bills typically are so you’ll know if there is a sudden jump.

14. Are there any issues with your home or any property that you own that need to be addressed? Does the roof or basement leak? Are there plumbing problems or electrical issues?

15. Who holds the policy for your homeowners and car insurance?

16. Do you own a burial plot or have thoughts on where you would like to be buried?

17. Do you feel you have adequate income for your situation?

18. Does anything financial keep you up at night? Are you worried about anything that I can help you with?

19. Who has power of attorney in the event you are incapacitated? What about the spouse?

20. What else do I need to know? What did I forget to ask you?

Believe me, these aren’t easy questions to ask. But turn your mind off of the emotional part of this conversation, if you can, and just put yourself in the mindset of someone who needs information. Take good notes. Store them where you know you can find them. Make a copy and place it in your safe deposit box. Even leave a copy at your relatives' home should you be called there in an emergency. And whatever you do, don’t put this off. Time sometimes steals someone far ahead of when you anticipate, and the more information you have on hand, the better off you’ll be.

Find a way to talk finances with elderly parents

This week on Twitter, we're posting financial tips on how to handle finances concerning elderly parents @family_finances. We got a question from Matt_SF about how to start the conversation on finances. This is a terrific question, and I'm happy to answer it here. Twitter doesn't provide quite enough space. If you have thoughts on this, please share in the comments section.

One of the toughest conversations you'll ever have with your parents will likely be about finances. Most of us value our independence, and that's a real issue with aging parents. The taboo isn't money so much as it is death or disability. Those are the great big elephant in the room that no one wants to acknowledge! But he can't be ignored forever and - like it or not - children are left dealing with a crisis when it comes along. So, truthfully, it's in everybody's best interest to have this conversation.
The key issues, as I see it, are information and preferences. First, where can we find the things we'll need when something happens? Checkbook, bank accounts, insurance policies (health and life), and deeds to property or investments? These are things we'll need to take care of you. Also, your estate plans, trust documents, powers of attorney, or living will documents. If we are to help you, we need to know in advance what you have and what you want. Take notes, and put them in a safe place. You can't rely on memory in times of crisis.
If you just can't bring it up out of the blue and it doesn't seem critical, let something else raise the issue. When they mention a friend or relative who is sick or having trouble, ask what they'd want you to do in similar circumstances. Bring them an article or send them a link to this post. It doesn't have to be heavy or sad, just an acknowledgement that you need information to help them when the time comes. Hopefully, many years from now!