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Financial and Legal Planning Following a Diagnosis of Alzheimer’s or Dementia

Today, there are an estimated 5.5 million Americans living with Alzheimer’s disease, which accounts for up to 70 percent of all dementia cases in the U.S. Other dementias include vascular dementia, the second most common type of dementia, Lewy body dementia, frontotemporal dementia and mixed dementia. Each of these dementias worsens over time, and none of them are reversible. However, unlike other chronic diseases, those with dementia have a period in which they can participate in their care decisions. This affords a person diagnosed with a progressive form of dementia the opportunity to discuss their goals and values in order to inform future decisions about their care and estate. In the first of a three-part series looking at handling the progression of dementia, we examine financial and legal considerations to make following a dementia diagnosis.

When to Start Planning

Once the shock of a dementia or Alzheimer’s diagnosis subsides, it is time to turn one’s attention to examining the patient’s financial health and begin making plans for their care and estate. There are a number of legal and financial tools available to ensure an individual’s wishes are carried out when they are no longer able to make their own decisions. The National Institute on Aging recommends advance planning should take place as soon as possible after a diagnosis. For these documents to be honored by a court, the individual must be “capable of understanding many aspects and consequences of legal decision making” at the time the documents were drafted and signed.

Advance planning isn’t just important to the individual who has been diagnosed with dementia—it’s also important to their family. Dr. Karen Hirschman led a team of researchers who visited with families to understand better the factors that facilitated or hindered advance planning. Commonly, families want to ensure their loved one’s wishes for his or her care are being honored during the late stages of dementia and at the end of life; however, over half of the families Hirschman’s team interviewed said they didn’t think to have the discussion until it was too late and important decisions had to be made without the input of their loved one. Of those who had advance planning conversations, a common theme was wishing they could go back to have the conversation sooner and discuss more specifics about care treatments or living situations.

Communicating Financial Management and Estate Plan Wishes

Advance planning documents fall into one of two categories: the documents that express care wishes and documents that communicate financial and estate management wishes. These documents can be legally binding or can serve as guidance to family members once the individual is no longer able to make decisions for himself or herself. In next month’s Life Navigator, we’ll take an in-depth look at health planning following a diagnosis of dementia. If you don’t get our monthly newsletter, Life Navigator, you can subscribe here.

Documents for Financial and Estate Management

Documents that direct financial and estate management must be created while the person has legal capacity. Typically, the legal documents that address financial and estate management include a Will, a Durable Power of Attorney for Finances and a Living Trust. Requirements for these documents vary from state to state, especially when it comes to Power of Attorney, so it is important to work with a legal expert when creating these documents. It is also important to update the documents as living arrangements change. Should a move across state lines happen, states generally accept wills and living trusts from other states; however, it is a good idea to check with a legal professional to make sure the documents meet the new state’s requirements.

Will

A will directs how a person’s estate and assets will be distributed after they have passed away. If there are minors in the care of the individual who has been diagnosed with dementia, the will typically spells out arrangements for the care of the minors after the person’s death. Both medical and legal professionals agree that once a diagnosis of dementia has been made, the person with dementia or their family should make updating or creating a will their first priority.

Durable Power of Attorney for Finances

This document grants the authority to make financial decisions on behalf of the person with dementia once the disease has made it impossible for them to make sound financial decisions on their own. This is an important document to have in place as it will help families avoid court actions which could take financial control from the family.

Living Trust

A living trust takes effect once dementia has stripped a person of their ability to manage their affairs. This document will appoint a person, who is called a trustee, to hold property and funds for the beneficiaries. A living trust can help avoid the delay and expense of the courts determining the validity of a will.

An Action Plan

The journey through dementia places an enormous amount of stress on families and robs the person with dementia of their ability to make decisions about how they want to live the final chapter of their life. While it is impossible to avoid the challenges that will arise as dementia progresses, appropriate planning can relieve some of the burdens and ensure the individual with dementia can live out their life with dignity.

As soon as possible, the following steps should be taken:

  1. Speak with a legal expert to create the necessary legal documents.
  2. Gather all important documents and records and store them in a safe place.
  3. Write down account logins and passwords and store them in a safe place.
  4. Inform a trusted individual about these documents and where you have them stored.
  5. Review and update legal documents as necessary.

Financial and legal considerations are just part of the planning an individual who has been diagnosed with dementia should undertake. Next month, our feature article will examine the medical planning that should be done following a diagnosis of dementia.