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Dementia Is Not Only a Family Matter; It's
Also a Financial Matter
When a close relative or friend starts to display signs of
dementia or related neurological ailments, it is a family
tragedy requiring speedy action and medical care. But in many
cases, the disease comes on gradually, and it becomes evident
with inconsistencies in behavior and sometimes, problems with
money.
It is not uncommon for older people with diminished cognitive
function to be a ready target for scams and ID theft as well as
out-of-character decisions with regards to savings or
investments.
If this were you in five, ten or twenty years, would you have a
plan?
Last July, a Mayo Clinic study reported that men were twice
as likely as women to develop mild cognitive impairment over the
age of 70, a transitional phase between healthy aging and
full-blown dementia, which is a significant loss of intellectual
and memory abilities severe enough to interfere with social or
occupational functioning. Women develop Alzheimer's disease in
greater numbers than men, but that's due largely to the fact
that women live longer than men.
So when does this become a money issue? In the best
circumstances, as part of a full estate planning process before
an individual becomes ill. In the worst, it needs to happen
immediately after a loved one is diagnosed.
Once stricken, older relatives may be unable to understand
questions or express their wishes in proper detail. If there is
no plan, family members grasp at responsibilities — or shirk
them — without any idea of what the older relative would really
want.
So what's the answer? Everyone should make a plan that
includes the worst-case scenario of incapacity in one's
long-term financial plan. Some key points:
Have a discussion with people you trust to make decisions
for you. It's not fun to imagine yourself in the state
dementia brings, but it's important to consider trigger points
where trusted people would step in to do specific functions for
you. It would make sense to pre-select individuals as your
executor as well as your health and financial powers of
attorney, responsible for paying bills and executing your
specific investment wishes under specific circumstances.
Make sure how major assets will be used to pay for care.
If an elderly relative becomes sick and irreversibly
incapacitated, the equity in your home may come under
consideration as a resource to pay uncovered medical or
household maintenance. Since the home is both a major asset and
an emotional focal point, it's best to get good advice and spell
out specifically what you want done with your property and
under what conditions.
Pick the right experts. It would be wise to confer
with a tax professional as well as a trained financial expert
such as a CERTIFIED FINANCIAL PLANNER™ professional. The
professionals and nonprofessionals in this role should have
significant experience working with seniors and be prepared to
interact with other members of your team if they notice anything
particularly out of character in your future actions.
Put it in writing. Once you've established the team
that will carry out your wishes in a variety of situations — not
just in the case you are diagnosed with dementia — then you
should have such instructions written into a formal estate plan
with the necessary powers of attorney as well as your updated
will.
February 2009 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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