Looking For Dementia In The Checkbook?

The very thought of interfering with the financial matters of aging parents or other relations is daunting. The same goes for health and other personal matters. When those we love have lived solid, independent lives, it’s scary to confront the possibility of decline. Nonetheless, more and more evidence points to the importance of helping our elders keep an eye on their money, decisions and overall wellbeing, ahead of obvious problems. Read on for advice and action steps that can make all the difference.

Get A Head Start on Quiet Declines

Most grown ups are accustomed to keeping their financial and other decisions to themselves, so the idea of sharing statements and plans with even our closest relations may seem odd. Yet, a growing body of evidence shows that starting to involve those we trust in our affairs before we actually show noticeable signs of decline is an important way to safeguard our hard saved assets. For example, recent research from the National Bureau of Economic Research (NBER) finds that “Dementia may be detectable from an individual’s checkbook up to six years before an official diagnosis.” Specifically, the study found that financial wealth “decreased in the four to six years before dementia onset, by an average of $16,800.” 

Reporting for Plan Adviser, Emily Boyle shares these further highlights from the NBER research, which was co-authored by Lauren Hersch Nicholas, a professor of medicine and geriatrics at the University of Colorado Anschutz School of Medicine, and Jing Li, associate professor of health economics at the University of Washington School of Pharmacy: 

• About half of the losses in the six-to-eight years leading up to an individual’s diagnosis stemmed from financial wealth, which included liquid assets such as stocks, bonds, checking and savings accounts, CDs, individual retirement accounts and Keogh accounts—things that “involve more complex financial decisionmaking…”
• Dementia should be treated as a “universal risk,” says Li. “Everybody has a non-zero probability [of developing it]. You should be actively thinking about preventing the financial consequences of it while you’re in perfect health.”
• “A major challenge is that as we are losing the skills that help us manage money, it is common to also lose the ability to assess ourselves accurately—promoting overconfidence at the same time skills deteriorate,” wrote Nicholas. “Thus, we basically need insurance against our future selves.”
• The paper encouraged individuals to implement structural safeguards against wealth loss, such as designating trusted financial contacts and allocating parts of retirement wealth to products with guaranteed payouts….

The Starting Point: Durable Power of Attorney

Every dollar on the path to a safe and sound older adulthood counts–and that is doubly so in the face of dementia, given the costs of caregiving and other essential services. Toward safeguarding assets, it’s wise for families to lean in proactively, respectfully putting some guard rails in place ahead of declines. For starters, consider for example, the various ways in which a durable power of attorney can be beneficial: 

Power of attorney is a powerful yet versatile estate planning tool that allows seniors (or anyone else, for that matter) to appoint another person (the “attorney-in-fact”) to handle their affairs in the event that they become incapacitated. A power of attorney is referred to as “durable” because the authority granted by it continues in effect even if the principal becomes incapacitated. Durable power of attorney can be an effective tool for preventing scams against seniors because it allows the principal to authorize another person to handle — or at least monitor — their financial affairs. For example, a power of attorney could authorize an attorney-in-fact to monitor a senior’s accounts, pay their bills, and step in if necessary to stop unusual transactions. While there’s nothing stopping a senior from voluntarily giving someone else access to their accounts, a durable power of attorney makes it official and ensures that the authority granted survives the senior’s incapacity. 

As useful as a power of attorney can be, keep in mind that it mind that, like a health care proxy, it must be authorized before capacity declines impact judgment, as attorneys at the National Law Review further explain: 

A power of attorney is a written instrument pursuant to which the principal authorizes another individual to undertake actions on their behalf which typically involves their finances, real estate, or other real property….People may also execute a health care power of attorney which allows another to make decisions concerning their health care….At the time the power of attorney is executed, the principal must be competent in order to enter into the arrangement whereby they grant a third party the discretion which is set forth in the instrument. The…discretion allowed in a power of attorney, can vary greatly and is entirely dependent upon what the person issuing the power of attorney is willing to grant….. Once the power of attorney is executed, it can be utilized while the individual remains competent, or it can take effect should the principal become incompetent.

Estate Plans and Last Resorts

How do you know when it’s time to intervene in the lives of aging loved ones, including parents? Though it is important not too step in too hard or fast, vigilance is essential.  Attorneys at Weinstein & Randisi Law remind us that “Taking steps early can reduce confusion and allow your parent to stay involved in the decision-making process for as long as possible,” and suggest looking for warning signs such as:

• Unpaid bills or unusual purchases
• Missed medical appointments
• Trouble understanding important mail
• Expressions of fear or confusion around decision-making…..

Beyond setting up powers of attorney, many families also find it useful to establish a trust which can both protect assets and set out the conditions for their use, as LifeGen Law Group explains:

• A trust is an arrangement whereby one person (the grantor) transfers ownership of money, property, and assets to another person (the trustee) to hold for the benefit of a third person (the beneficiary). There are two major types of trusts — revocable trusts, which allow the grantor to make changes to the trust’s terms during their lifetime, and irrevocable trusts, which generally do not. 
• Both revocable trusts and irrevocable trusts can be effective tools for scam prevention because they allow the grantor (i.e., a senior) to entrust their assets to a trusted person (typically a child), who is then legally obligated to manage the trust’s assets only in the interests of the beneficiary. 

Ideally, through proactive attention to the needs of elders in decline, families can avoid resorting to court intervention in the form of establishing a guardianship or conservatorship, since these protections essentially take away individual decision making rights. Attorneys at Hendershot Cowart P.C. explain that if a guardianship becomes necessary for financial management, the first step is typically to file a petition in court, which is generally followed by a “hearing where the court will evaluate whether guardianship is necessary. If approved, the judge will appoint a competent individual to take on the responsibility of guardianship.” 

Note that states have their own protocols related to establishing guardianship, which is basically “a legal relationship in which a person (the “guardian”) is appointed by a court to make decisions on behalf of another adult (the “ward”).” Based on the situation, courts can consider a full or partial guardianship, as well as these four types of guardianship:

• Guardian of the person (makes decisions about personal and medical affairs)
• Guardian of the estate (makes decisions about financial affairs)
• Guardian of the person and the estate (makes decisions about all affairs)
• Temporary guardianship

Given the seriousness of the role and responsibilities involved, courts frequently require guardians to secure a guardianship bond. Essentially, a guardianship bond is a type of fiduciary bond, which protects the interests and affairs of the ward. The requirements of guardianship bonds vary, but as a national, direct writer, Colonial Surety Company provides bonds to meet the specific requirements in every state. All types of fiduciary bonds, including guardianship bonds, are available directly and digitally from Colonial Surety Company. The steps to obtaining a guardianship bonds are easy: get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere—even while at court. 

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