Dementia Action Week: your top 10 money questions answered
Understanding the financial implications of dementia is particularly important, as 15% of people with dementia have been victims of financial abuse, according to The Alzheimer’s Society.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, points to the huge financial issues that dementia can create for loved ones. These range from how to protect them from making mistakes with their money to paying for expensive care.
“If you have plans in place, it can help enormously. Your family will know what to do, and have the right paperwork in place to ensure they can do it. Perhaps more importantly it brings the luxury of choice, so your family can make the best possible decisions for your care without having to worry how they will pay for it,” she says.
To mark the start of Dementia Action Week, Hargreaves Lansdown has tackled the 10 most common money-related questions an individual is likely to face if they are helping a loved one with dementia.
Your questions answered
1. Can I manage their finances for them?
If they’re at the stage where they need help, check if they have drawn up a Lasting Power of Attorney (LPA).
This is a legal document which allows an individual to appoint one or multiple ‘attorneys’ to make decisions on their behalf, should they lose mental capacity.
If they are happy to name you as a ‘financial attorney’, you can register the Power of Attorney with the Office of the Public Guardian and take over the day-to-day running of their finances. If they don’t have one, you can apply to the Court of Protection to become a deputy. This can be more complicated and expensive, but means you can make important decisions on their behalf.
2. How can I stop them from making poor spending decisions?
Once you have an LPA or have been appointed deputy, you can cancel credit cards and any overdraft facility. This reduces the risk of the sufferer getting confused or misled into running up debts. You can also set up a separate bank account to limit the funds they have access to, lowering the stakes so you can give them the control they want over small spending decisions.
3. Is it safe for them to carry cash?
There are risks associated with this because they can lose track of where they put it, or forget spending it and worry that someone has taken it. If you can persuade them to use a debit card instead, ask the bank for a chip and signature card, so they don’t have to remember a PIN.
If only cash will do, it’s best for someone with dementia to take the same amount of money out of the bank on the same day each week, then bring it home and only take a small sum with them each day. It’s also worth them keeping a cash book, where they note what they spend. That will make it easier to keep track.
4. How can I protect them from scammers?
Sufferers can be a target for scammers, so put a chain on the door, and make a sign for the back of the door advising them not to open it to anyone who doesn’t have an appointment.
You can also get a call blocker for their phone, which will either block incoming calls that are not from recognised numbers, or forward them to a relative or friend. Another option is to sign them up to the telephone preference service and the mailing preference service to cut down the junk mail and nuisance calls they receive.
5. How much will their care cost?
The Alzheimer’s Society estimates that 69% of people in care homes suffer from dementia – costing sufferers and their families £5.8 billion a year. As a very rough rule of thumb, the Laing & Buisson Care of Older People Market report last year found that the average residential home costs £32,344 a year – rising to £44,512 a year if nursing care is needed.
However, costs will vary depending on the kind of home you use, where it is in the country, and the care your loved one needs, which means that in some cases costs can hit £80,000 or more.
If you’re caring for a loved one at home, much will depend on their care needs, the number of carers and the frequency of their visits. In some instances it can cost a fraction of the price of a nursing home, but in some it can cost even more.
6. How long will I be paying for care?
This is the great ‘unknowable’. The average person with dementia lives with it for around five years, and the average stay in a care home is two and a half years. However, there are plenty of people who develop dementia at the same time as other complex conditions and live a matter of days or weeks, and others who live with it for a decade or longer. This makes it incredibly difficult to plan for financially.
7. Can I get any help paying for it?
If the dementia sufferer lives in England and has less than £14,250, the local authority will pay for their care. If they have assets between this lower threshold and the upper threshold of £23,250, they’ll need to contribute towards their fees. If they have more than £23,250 (or less than this but considerable income), they’ll have to pay for care themselves.
Their home is included in this calculation, unless specific people continue to live there. These include a spouse, close relative over the age of 60 or incapacitated, or a close relative under the age of 16 who is dependent on them.
The individual may also be entitled to the ‘attendance allowance’ if they need help with personal care, which can be used to fund part of the cost – although it’s likely to be a very small fraction of it.
8. What if their health needs are more extreme?
Around 92% of people with dementia have at least one other condition too. If they have complex and difficult health needs, the NHS may pay for care. You will need to have their health assessed and considered by a panel.
However, it’s worth knowing that the bar for this is very high: unless their dementia creates significant risks for their safety and the safety of others, or is accompanied by a number of other extremely severe health problems, the NHS will not pay.
Even if the NHS pays, it may not be for the care you want, so you may need to make up the shortfall. If the care they receive helps improve any aspect of their condition, the NHS may decide to assess them again, and can withdraw financial assistance.
9. How can I best use their savings to pay for care?
You can buy an ‘immediate needs annuity’ and pay a lump sum in return for a guaranteed income for life. This is based on life expectancy, so offers a relatively high level of income. It also has the advantage of capping the cost of care, so there’s no risk that the money runs out. Of course, if they don’t live as long as expected, you won’t get the full value of the annuity.
Alternatively, if they have significant assets, it’s worth looking at whether it’s possible to structure them to produce an income. This could be done by switching investments into income-producing assets – although you would need to have plans in place in case investment performance does not produce enough income to cover the cost of care.
10. How can I use their home to pay for care without selling it
You could use the family home to produce an income by renting it out – although you’d need to factor in the risk of periods when you couldn’t find a tenant, and the associated costs of renting a property out.
Alternatively, you could use equity release, although interest would roll up and need to be repaid on death, significantly eroding the value that could be passed onto family members.
Many homeowners end up selling the property to produce a lump sum to pay for care. If you’re paying for someone to go into a care home you could also consider a deferred payment agreement, which means care home costs roll up, and when they pass away you agree to sell the property and pay the costs from the proceeds.