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Preparing financially for Alzheimer’s 

By Richard Vessey, Chartered Financial Planner

Alzheimer’s disease is the most common type of dementia in the UK today, affecting 1 in 14 people over age 65, and 1 in 6 people over 80. By 2025, it’s estimated there will be 1 million sufferers, which will rise to 2 million by 2051. [1]
 
This progressive neurological disease affects memory, language, and thought, and can strike at any time. World Alzheimer’s Day was last month, so I thought it would be useful to discuss ways in which families can get on the front foot with financial planning, ensuring the older generation are as prepared as they can be for whatever old age happens to throw at them.

Be brave and confront it

One big change I’ve seen in recent years is that my clients are as concerned about ensuring their parents are financially secure, as they are about themselves and their children. Ensuring that their parents can afford the appropriate level and standard of care, should they need it, is a key concern. 
 
But this isn’t an easy conversation to have. Often it takes an unwelcome trigger, such as ill health, to start the conversation, by which time it can be too late to take effective action.  At the very least, it will require difficult financial discussions at a time when everyone’s mind should be on other things.
 
In my experience, parents can be far more willing to discuss their circumstances than you might think. Of course, there are always exceptions, but most of my older clients are aware of their own mortality, want to ensure they are properly looked after if their health deteriorates, and are keen that their assets should go to the right people, with as little loss to the tax man as possible. Having a third-party financial professional facilitating the discussion can help.

Make sure financial arrangements are appropriate

It’s not unusual for individuals to have built up investments over the years that may no longer be suitable for their needs. A financial audit with a qualified professional is a great place to start. They can help you, and your parents, consider important questions such as:

  • How would a market downturn affect their financial future?
  • Do they need an ongoing income, or a safety net for care needs?
  • Have they tracked down old policies, and do they have a record of them in a known location? This is much easier to do whilst parents are still able to cast their minds back to past events.
  • Do they have a will? Is it up to date? Without a will, a surviving spouse does not necessarily inherit the full estate.
  • What is their inheritance tax (IHT) liability? IHT deserves an article in its own right. It’s a complex area of financial planning, and it’s best to seek the advice of a professional to ensure all bases are covered as the potential liability could be significant. A longer term perspective is important in this area. 

Appoint a Power of Attorney now, not later

The Power of Attorney allows an individual to nominate one or more attorneys to act on their behalf, should that individual become unable to make their own decisions. Losing one’s ability to make decisions can occur over time or overnight, so the sooner your parents sort it, the better. While you’re at it, you should set up your own Power of Attorney as well.
 
If a Power of Attorney is not established, The Court of Protection appoints a Deputy who is responsible for overseeing the financial and welfare requirements of the individual in question. The Deputy then has to report annually to the Court, explaining the decisions they have made. This route can be time consuming and drawn out, placing unnecessary financial burden on you, and other family members, if assets become frozen for several months.

Downsize as early as possible

It’s not unusual for people to continue with the status quo until change is forced upon them; “I’ll downsize when the house becomes too much for me to manage”. Unfortunately, by this point, the ideal time may have passed. It should not be underestimated how much energy and will it takes to sift through a lifetime’s possessions, pack up a small selection, dispose of the rest, sell one property, buy a new one, move and settle in. Don’t wait until this process becomes too daunting. If your parents don’t do it, you may have to deal with this on their behalf later on. 

Plan for care

Of course, your parents may never need care, but you should all be prepared in the event it becomes a necessity. Care is not just in the form of entering a nursing home. Many older people receive additional assistance at home. One of the difficulties of planning for funding care is that circumstances usually dictate the availability of local authority or NHS support, based on assets and need. Certain care needs will be funded irrespective of an individual’s asset base, whilst other needs will only be covered if assets are below approximately £23,000 (this varies between the home nations). Because of this uncertainty, it is usually a good idea to make plans based on the assumption that care needs must be met personally. In any event, most people would be prepared to pay more for a better level of care, compared to the Local Authority–funded standard.

In summary

As we reflect on the pain and difficulty Alzheimer’s can bring to sufferers and their families, let’s remember that none of us are immune to this disease.  A robust financial plan, that contains no surprises for anyone, can help to make the future about as certain as it possibly can be. All of this must start with that first, potentially awkward, conversation. But it will be worth the effort.

[1] https://www.alzheimers.org.uk/info/20027/news_and_media/541/facts_for_the_media
 

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