A diagnosis of dementia, whether your own or a loved one’s, can turn your world upside down.
While the emotional effects of the condition are significant, it also raises practical questions, including regarding your long-term financial wellbeing.
Taking steps early, with the help of a financial planner, can help ensure your affairs are organised, your choices are respected, and your wealth is used in line with your wishes.
As people live longer, the chances of you or someone you know developing dementia in old age are rising. According to the Alzheimer’s Society, 1 in 3 people born in the UK today are expected to develop it in their lifetime.
So, whether you’re thinking of yourself, your partner, a parent, or another loved one, it’s more important than ever to be financially prepared for dementia before the condition progresses.
Here are four steps you can take to prepare.
1. Simplify your finances
By the time you’ve reached retirement, you may have accumulated multiple accounts over the years, including different pension pots, savings, investments, and income sources. While this may be manageable when you have full capacity and is likely beneficial to your overall financial situation, the complexity can become challenging if you begin to cognitively decline.
Simplifying your finances can help reduce stress in the early stages of dementia when you may still be in control of them, and it can make it easier for others to assist you if needed.
A financial planner can help by reviewing your current arrangements and identifying opportunities to simplify or restructure your finances to make them easier to handle.
This might involve combining pension pots, automating payments, or adjusting your investment portfolio to suit your new circumstances.
2. Understand and prepare for future care costs
Whether delivered at home or in a residential facility, professional care can come with a hefty price tag.
The Alzheimer’s Society reports that the average annual cost for someone with mild dementia is £28,700, but can rise to £80,500 for severe cases.
As such, dementia care can significantly reduce the size of your estate and may mean you have little left to leave to your beneficiaries.
A financial planner can help you map out how potential care costs may affect your future finances. They can use cashflow modelling to look at different scenarios and explore funding options tailored to your needs, such as immediate needs annuities.
They may also suggest estate planning strategies to protect your assets and reduce future Inheritance Tax (IHT) liabilities – such as lifetime gifting or establishing trusts – to ensure your estate is preserved for your loved ones.
3. Put legal protections in place early
A Lasting Power of Attorney (LPA) is a legal document that ensures someone you trust can make financial or health-related decisions on your behalf if you’re no longer able to.
If you have dementia, it’s vital that you have an LPA in place, so you can be sure any decisions are made with your best interests in mind. And remember, LPAs must be set up while you still have the mental capacity to make the decision.
While registering an LPA requires a solicitor, a financial planner can work alongside them to ensure your financial strategy is aligned with your goals. They can also help clarify your intentions in advance, so your appointed LPA is well-informed and able to act in accordance with your wishes.
4. Review and update your estate plan
Dementia can make estate planning very complicated if you don’t have the relevant documents up to date.
As such, it’s important to ensure your will, letter of wishes, and pension nominations reflect your current intentions, and that you keep them all under regular review.
This can help ensure your legacy is passed on as intended and that your beneficiaries are provided for and supported by the wealth you leave behind.
While it’s good to be prepared in advance, you may be able to make changes to your will in the early stages of dementia. However, once you are deemed to have lost capacity, which can be soon after a diagnosis, you will no longer be able to make changes and nor will your LPA.
A financial planner can work with you and your solicitor to ensure your financial legacy reflects your values and intentions, giving you peace of mind that no matter what happens, your loved ones will be looked after.
A financial planner can give you one less thing to worry about after a dementia diagnosis
There’s no easy way to face a dementia diagnosis, but taking early steps can give you greater control, lighten the load for those around you, and allow you to live as comfortably as possible.
If you’re supporting someone with dementia or planning ahead for your own future, a financial planner can help you prepare for the costs and protect your estate. Their help can give you one less thing to worry about and provide a level of stability and support through a challenging time.
To speak to a financial planner, get in touch.
Email hello@solusfinancial.co.uk or call us on 01245 984546.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.