August 6, 2009 

It’s not a certainty but odds are high that Alzheimer’s disease could affect you or a loved one at some point in the future. And should that happen, a recent study shows that the cost of long-term care associated with that disease could be staggering.

The amount of medical expenses that a 65-year-old couple retiring this year will bear in their lifetimes if one spouse develops a cognitive health disease like Alzheimer’s would be $495,000, assuming life expectancies of 17 years for a male and 20 years for a female, according to Fidelity Investments.

By contrast, a couple retiring this year at age 65 without such a debilitating disease would need $240,000 to pay for health care expenses in retirement. Alzheimer’s disease, for the record, affects as many as 5 million Americans today, and that number could soar to more than 11 million by 2040 as the baby boomers age, according to published reports.

Joel A. Larsen, of Navion Financial Advisors, LLC, says planning for Alzheimer’s disease is just a subset of long-term care planning. Long-term care planning involves addressing the following questions:

• Who will provide care?

• What care will be provided?

• Where will the care be provided?

• How will care be paid for? Personal assets? Family? Government, such as Medicaid or Aid and Attendant benefits from the Veteran’s Administration?

• When will the care be provided?

• Is there a relationship with a care manager?

With respect to Alzheimer’s disease, Larsen says it’s important to consider at least two things in particular: One, is there a family history of dementia? If so, you should consider that in your planning. And two, dementia is a long-term illness, one for which in-home care is usually not the best option.

He recommends the use of adult-day care during the early stages of the disease and, as the disease progresses, moving full-time into what he described as a memory care unit.

“Without prior planning, however, it gets tough,” he said. Far too often, Larsen said families tend to deal with illnesses and health care shocks as they occur. And that’s precisely the wrong approach to take. “It really pays to be proactive early.”

According to Larsen, long-term care planning is not just purchasing a long-term care insurance policy, though that is often one method of providing for the expenses of custodial care. He typically recommends the use of long-term insurance in cases where there is a family history of Alzheimer’s disease. If possible, he recommends purchasing a policy that would provide coverage for your lifetime if you can afford it, or at least 10 years if not.

Besides long term care insurance, Larsen strongly suggests having in place the proper estate-planning documents if you have a family history of Alzheimer’s disease.

Those include a will, a durable power of attorney, a living will, a medical power of attorney, and a trust. If by chance you have, or a loved one has Alzheimer’s disease, it’s quite likely a guardian of the person will be named according to your legal documents in place or by the court.

This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Percy E. Bolton, CFP, a local member of FPA. Bolton can be reached at office@percybolton.com.