More on caring for an elder’s finances

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Thanks for all your feedback since my first post on my financial lessons learned from caring for an elderly parent.  Frankly, writing about it helps me make sense of the situation. I also appreciate your backup!

My Alzheimer’s research led me to a number of websites covering all aspects of the syndrome. Unfortunately no single site covers it all, but I’d highly recommend searching for local Alzheimer’s groups. Local groups can be a great help in finding a good care facility and navigating your local system. I can’t overemphasize the education & support I’ve received from geriatric care managers and elder law experts. Like investing for retirement, we’re all capable of figuring this out for ourselves. Unlike retirement planning, however, this situation is usually precipitated by an emergency that turns into a care crisis. It’s almost impossible to learn the necessary information fast enough, and during the crisis you’ll need all the help you can find.

I’ve also found two great Alzheimer’s websites with the technical details that I’ve been seeking. Don’t get me wrong– there are plenty of wonderfully supportive sites out there with information and coping advice. However, these two helped me answer specific financial questions: (1) What’s next and when should I expect it?  and (2) What tax issues should I watch out for?  The second link is seven years old, so learn the vocabulary and then update its info from IRS Publication 524 (Credit For the Elderly or the Disabled) and a tax software program like TaxAct or TurboTax.

According to the first website my father is at the end of stage 5 (of 7) and entering stage 6. Paradoxically, he managed to live independently well into stage 5– although I’d probably be horrified to learn of the inevitable near misses.

The long-term care insurance company has approved my Dad’s claim, but I’ll still be involved in the process. I pay the care facility’s bill a month in advance, and then I file a claim on that bill with the insurance company. At the end of the month (in arrears), the insurance company reimburses Dad with a check for last month’s payment. The tax advantage of this delayed payment is that the long-term care benefits are compensation and not subject to income tax. This is a cumbersome 19th-century process that I hope to turn into an electronic fund transfer, but at least the claim is being paid. This will go on for at least three years.

I’ve also changed my Dad’s mailing addresses. The first step was to eliminate as much snail mail as possible. I’ve put a lot of care and effort into moving his financial correspondence and account statements online. His mail from the IRS, Social Security/Medicare, and the state will now go to my brother (who lives a few blocks away from Dad’s care facility). All other mail (especially insurance paperwork) goes to my address. No snail mail goes to his care facility.

In no particular order, here are other suggestions:

Get the assistance of an attorney who’s been trained in elder law. This means an attorney that understands Medicare, Medicaid, long-term care insurance, estate planning, and advance directives. There are shysters who claim to be able to help “get around” the five-year look-back provision for Medicaid. Don’t buy into this. The experts at the state Department of Social Services (DSS) know exactly how and where to look for transfers of an elder’s assets to a trust, a corporation, or offshore. (Medicaid is a federal program but application and administration is done through a state agency such as DSS.) Fraudulent acts will be noted. I’ve heard about at least two families who made improper state filings and are now working it out with their state attorney. By the way, they were denied admission to a care facility.

If there are problems with the long-term care insurance claim, contact the state’s insurance department as well as an elder lawyer. The state insurance department has the power to impose sanctions and fines, but more importantly they’ll call public attention to the issue.

The most important wording in a long-term care insurance policy is where the benefit will be paid. Some policies still say “nursing home”, which may rule out an assisted living facility or at home.

Keep track of your elder’s net worth and insurance. When net worth declines to $50K, it’s time to begin the Medicaid application process with the state Department of Social Services. (This is a good time to use the services of an eldercare attorney.) The application & approval process can take up to six months.

Medicaid requires a care facility to hold the resident’s bed for fifteen days when a Medicaid recipient is hospitalized. Generally, this is more than sufficient as hospitals rarely keep people more than a few days. This is the standard although some states permit an extra five days on appeal.

If your elder has a conventional IRA then make sure their required minimum distribution is made on time each year. IRS Publication 590 can help with the basics but if there’s confusion then seek a tax expert’s help immediately.  Your elder may not have been taking care of their finances for a while, and the IRS imposes significant penalties on missed RMDs.

An elder with dementia shouldn’t get snail mail directly— only from a visiting family member. Dementia leaves elders prone to mail fraud and they may pay anything that looks like a bill.

A progressive care facility is a great solution to the transition from independent living to full care. Unless an elder is desperately unhappy in their current facility, a change of location can be very disturbing. A care facility that includes skilled nursing will greatly ease the transition back from a hospital stay.

Don’t plan for dementia to progress to death in five years. Some dementia patients (and even a rare Alzheimer’s patient) may survive for up to two decades. There are many forms of dementia with greatly different survival rates. Although several promising Alzheimer’s diagnostic tools are being tested, currently the syndrome can only be confirmed after death.

(A big thanks to the posters on Early-Retirement.org and other readers who contributed to this post’s suggestions!)

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Financial lessons learned from caring for an elderly parent

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WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

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