By Grace S. Yung, CFP
Caring for someone with dementia—regardless of whether it is a parent, a partner, a spouse, or another loved one—involves a number of difficult challenges. In addition to the health-related aspects of dementia, you may encounter other hurdles that are more specific to the LGBT community. It is important for you and your loved one to prepare as best as you can for the healthcare and financial issues that you are likely to come across.
Getting the Proper Legal Forms in Place
While your loved one is still able, it is extremely important to get the proper legal forms put into place. These can include advance directives that specify his or her preferences in terms of medical treatment and care. These may include the following:
• Living Will
A living will states a person’s desires regarding various artificial life-prolonging measures at the end of life. A living will can also list specific treatment and/or pain-relief options that the individual would like to have administered in certain cases.
• Power of Attorney
A power of attorney will provide another individual with the authority to act in certain—or all—legal and/or financial matters.
• Durable Power of Attorney for Healthcare
A durable power of attorney for healthcare can specify the treatments an individual who is either physically or mentally incapacitated would like to have in certain situations. This can also include his or her decision regarding the use of artificial life-support.
During the process of getting any of these forms in place, it is always a good idea to have a family meeting to discuss these and other important issues. That way, everyone will be on the same page and there will be less risk of misunderstandings later on.
Planning Ahead Financially
While those who care for loved ones usually have the best of intentions, the reality is that doing so may not be possible from a physical or financial standpoint. According to the National Center on Caregiving, providing long-term care can have tremendous financial consequences. “Informal” caregivers who are still of working age run the risk of losing income, employer-sponsored medical benefits, retirement savings, pensions, and Social Security benefits down the road. Studies have shown that these lost earnings can total around $659,000 over a lifetime.
Long-term care insurance can often help with a significant portion of the cost of care. But if your loved one does not have this type of coverage, there may be other financial options for funding their care-related needs, including:
An annuity could be used to convert a lump sum of cash into a guaranteed series of regular income payments for life—payments that could be used to fund the care that is needed.
• Life Insurance (Living Benefits)
Some life insurance policies offer “living” or “accelerated” benefits. This is not the cash value, but rather a policy option that allows the insured to access a certain percentage of the death benefit while they are living in order to pay for medical expenses, long-term care, or other needs. (In this case, though, the amount of money taken from the policy would be deducted from the amount of benefit paid out at the insured’s death.)
While it isn’t the option that most people would ideally choose, Medicaid does pay for long-term care needs. However, an individual must be considered destitute in terms of assets and income. For example, in 2015, a single person could have no more than $2,000 in countable resources, and a married couple could have no more than $3,000. In addition, you cannot transfer income or assets to others in order to qualify for Medicaid without incurring a penalty—nor can you have transferred any resources within the five-year period prior to your application.
Therefore, if Medicaid is your only option for funding long-term care services, this may be a reason why a couple should not get married, as the transfer of assets may make qualifying for this program much more difficult. Medicaid qualification can also have a negative effect on the healthy spouse, as there are income and asset resource restrictions on the spouse who remains in the couple’s home. For example, that individual will only be allowed to keep half of the couple’s assets, up to a maximum of $119,220 (in 2016), as well as a monthly allowance of up to $2,980.50.
Also, even if you have a long-term care insurance policy, it will be important to ensure that the policy is “partnership qualified.” This means that the policy will essentially work in conjunction with Medicaid spend-down requirements. For example, if you have a “partnership” policy that pays out $100,000 in long-term care insurance benefits, you can retain this $100,000 in addition to the asset level you need to be at in order to be eligible for Medicaid coverage. In any case, going the Medicaid route nearly always requires the advice of a legal professional.
Taking the Next Step
Because all situations are different, there is no such thing as a one-size-fits-all solution. That is why it is important to meet with an advisor who is not only well-versed in the planning process, but someone who also focuses on the needs of the LGBT community. That way, you can be assured that the advice you are getting is targeted to your needs. Also, being more comfortable with your advisor can allow you to present your long-term financial goals more openly.
Personal finance-related questions may be emailed to [email protected].
Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the 2014 September issue of Texas Monthly.