What to Do When a Loved One is Diagnosed with Dementia

May 31, 2019

We have seen an increase in the number of our clients or their parents suffering from dementia.  According to the Alzheimer’s Association, there are just under 6 million Americans living with Alzheimer’s and this figure is expected to grow to nearly 14 million in the next 30 years.  As we continue to live longer, the odds of being impacted by dementia are rising.  There are actions that people can take, preferably before diagnosis, to help make living with the disease more manageable for loved ones.

Often, an early sign of cognitive impairment is the inability to keep up with personal finances. Paying bills can be challenging and even dealing with daily mail can be overwhelming.  A plan to manage day-to-day finances should be in place.  Often, a family member can assist, or the family’s financial advisor may make such services available to the client.

It is essential for family members and trusted contacts to have as much access as possible to financial and legal information.  Here is a worksheet provided by the Alzheimer’s Association that can be useful to record important information in one place.

In most households, there is one person who serves as the designated family CFO. This person typically manages household finances on their own, without sharing their procedures and practices.  The family CFO needs to retain login websites and credentials in a secure location that a trusted friend or contact can gain access to as necessary.  Verbal security codes for alarm companies and other vendors should also be retained in this secure location.  If the family CFO is the person afflicted with the diagnosis, it becomes critical to make alternative arrangements as soon as possible.

We recommend that our clients have a financial power of attorney (POA) in place so that the POA can handle financial matters on behalf of the client.  Because so many financial transactions are electronic, it is important to have a trusted contact who can manage the accounts online.

When we assist our clients, we attempt to set up as many bill payments for auto-draft to reduce the number of checks that need to be written.  This generally means contacting the service provider to provide bank account information.   When we are involved assisting clients, we review invoices prior to the date of the auto-draft so that we can alert the provider in advance of payment in the event of a billing error.  We regularly monitor financial accounts to make sure that all transactions are approved.  Elder fraud is a big problem for those in cognitive decline, so continual review of financial accounts is a necessity.

Financial accounts should be consolidated to the extent possible.  It is much easier to monitor account activity when the number of accounts is minimal.  There is the need for only one checking, savings, investment and retirement account so duplicate accounts should be consolidated.  Any 401k accounts that are still left with an employer should be rolled over to an IRA account.

An essential document for someone in a state of cognitive decline is the Advanced Medical Directive.  This document will outline the type of healthcare treatment the signer desires and names someone to serve as their healthcare power of attorney.  Many people assume that their Living Will suffices for these purposes, but the Living Will only takes effect when someone is terminally ill.  The Living Will does not apply for dementia patients since dementia is not a terminal diagnosis.

With the frequency of dementia diagnosis on the rise, it is incumbent upon people to take steps in advance that will make financial caregiving less burdensome on loved ones.  It is particularly important for a trusted contact to have electronic access to financial accounts.  In the past, valuables might have been held in a safe deposit box with key only access. If the key was misplaced, the box could be drilled open.  In the digital age, valuables are mostly available only through electronic means with passwords that can be irretrievably lost. Read this story about investors who lost $190M for this exact reason. Take precautions to avoid this calamity.

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