Welcome to our guide on estate planning for cognitive decline, where we examine dementia and estate planning’s role in protecting our aging loved ones from financial exploitation. The National Institute on Aging (NIH) article, “Managing Money Problems for People With Dementia,” sparked our discussion on estate plans and cognitive decline. As an elder law attorney, I’ve witnessed firsthand the challenges families encounter when safeguarding their loved one’s assets from fraud and exploitation. This article examines the financial risks of cognitive decline and how practical estate planning strategies can protect individuals experiencing dementia.
What are the Risks? Understanding Risk Factors for Financial Exploitation
Cognitive decline, particularly associated with conditions like Alzheimer’s disease, poses risks for financial exploitation. Individuals with dementia may struggle to manage bills, discern trustworthy individuals, and understand financial transactions. This vulnerability makes them prime targets for fraud and abuse. Here’s a closer look at common forms of financial risks and exploitation:
- Multiple Payments: Individuals with cognitive decline may inadvertently make multiple payments for the same service, leading to financial losses.
- Unauthorized Transactions: Friends or family members might withdraw money, transfer cash, or mismanage assets.
- Undervalued Property Sales: Homeowners may be misled about the value of their property, resulting in sales below market value to the detriment of their estate.
Cognitive Decline: Legal Safeguards and Capacity Assessment
Understanding the legal safeguards available for financial exploitation and assessing the individual’s capacity to enter into agreements is essential. Here are key considerations:
Legal Capacity: Contracts and agreements are enforceable only if both parties have the legal capacity to enter into them. Individuals with Alzheimer’s or cognitive impairment may lack this capacity, rendering contracts voidable.
Capacity Assessment: Assessing mental capacity is crucial in determining the validity of agreements. Physicians, family members, and legal experts play a vital role in providing testimony and evidence of cognitive decline, aiding in capacity assessment.
What Is Estate Planning’s Role in Protecting Our Aging Loved Ones?
Signs of dementia are sometimes slow to appear or hard to detect. The National Institute of Aging pointed out that financial management is one of the first signs of cognitive decline affecting a loved one.
Estate planning tools help prevent loved ones with dementia from losing money or property to unscrupulous people. Establishing financial powers of attorney before signs of dementia enables a trusted family member to oversee bank accounts and bill payments on behalf of a loved one.
Living trusts are another tool for protecting an aging loved one experiencing cognitive decline from financial loss. The creator of a trust appoints a trustee to manage the assets and outlines how funds are distributed, thereby preventing misuse of an individual’s finances. Individuals can be the grantor and beneficiary of a living trust, providing access to their assets and protection from financial exploitation.
Estate Planning and Cognitive Decline Key Takeaways:
- Proactive Planning: Plan early and take proactive steps to safeguard assets before signs of cognitive decline.
- Preventative Estate Planning Tools: Consider financial powers of attorney or living trusts to protect an aging loved one from financial risks.
- Experienced Estate Planning Guidance: To navigate complex estate planning issues, seek guidance from an experienced estate planning and elder law attorney.
Conclusion
Estate planning for cognitive decline requires careful consideration and proactive measures to protect vulnerable individuals from financial loss. Ready to safeguard your loved one’s future? Please schedule a consultation with our experienced estate planning and elder law team today and take the first step towards comprehensive estate planning.
Reference: National Institute on Aging (NIH) (Oct. 3, 2023) Managing Money Problems for People With Dementia
