Dementia and Cognitive Problems: 5 Important Ideas for Managing Your Money
Recent small declines aside, human beings are now living longer than at almost any time in history,1 and many enjoy greater physical health and vigor during this time than our grandparents (or perhaps even our parents) might have imagined.
Still, our longer lifespan makes declining cognition all the more common, and whatever the cause, it’s never a welcome experience. Sometimes, this can be from a serious condition like dementia or Alzheimer’s Disease, while other times, the problem is as simple as not being as on top of things as you used to be.
While it’s an unpleasant subject, we can take action to minimize at least some of the upset and difficulty that can accompany a change in our ability to look after our own affairs. Here are five things to remember about dealing with cognitive difficulty, whether it’s your own or that of a loved one.
1: Problems with money may be the first to appear
A committee formed by the Alliance of Comprehensive Planners notes that:
Difficulties handling money and making sound financial decisions are often the first signs of decline, even as the individual continues to do well in most other areas. Signs of a decline in financial functioning may occur years before other problems become evident.2
If a family member or professional financial planner is assisting with your finances, they may be the first to observe changes in your behavior (even before you do) that could signal a possible issue with cognitive decline.
2: Have estate planning documents in place
Of course, you should set up proper legal documents well ahead of when you think you may need them. In most cases, this means signing:
- a Will, to designate what happens to your property after your passing, and to appoint an executor and guardians for your minor children.
- a Durable Power of Attorney, to designate a trusted person (usually a close relative) to look after your financial affairs in case you are incapacitated (or merely unavailable) before your passing, and to designate who would be appointed your guardian should you need one.
- Advance Directives for health care, identifying who can make medical decisions for you if you cannot, and giving instructions on matters like access to your medical records and what steps to take in the case of a terminal condition.
- Beneficiary designations on accounts like IRAs, pensions, and annuities. Increasingly, people are setting up Transfer-on-Death beneficiaries for bank and investment accounts, real estate, and cars.
- In some cases, a Trust may be needed to handle more complex or sensitive financial matters. A well-drafted trust can ensure a smooth transition to having another person handle your finances if you are incapacitated and, if properly drafted, may help to protect assets should you need to qualify for Medicaid.
Don’t cheap out on these documents—it’s worth the money to use a qualified, experienced lawyer. Estate planning often seems simple, but it’s actually more complicated than just about anyone imagines, and inexpensive, do-it-yourself options frequently don’t really do what they promise. Ken has seen documents promoted as “valid in all 50 states” that were mistakenly set up to do something the signer didn’t intend.
If you are experiencing cognitive issues and do not have Long Term Care insurance, you may want to speak with your advisor about whether it would be beneficial to find an elder law attorney to assist you with qualifying for Medicaid.
3. Make sure your financial planner knows your intentions
Again, your financial planner may be the first to notice uncharacteristic decisions. Maybe the client isn’t grasping ideas that used to come easily or is talking about giving money away in a manner they’d never have considered before.
This can make the financial planner the early-warning system, helping you to take action to counteract the problems causing the cognitive issue. Some advisors offer an Advance Financial Directive for Cognitive Decline, a document that records your own intentions regarding who the planner might notify and whether you want them to discuss any issues they’re noticing with you first.
4. Understand that some cognitive problems are reversible
Professionals like lawyers and financial planners, and most family members, won’t have the training to diagnose an aging person’s actual medical condition. Of course, that’s a matter for their doctor. And very often, what may appear to be a cognitive issue like dementia may, in fact, be treatable and reversible.
For example, dehydration or dealing with an infection may cause confused thinking. Or a change in medication may alter behavior. A consultation with your physician can often resolve such problems, restoring decision-making ability to its prior condition. Of course, this is not always the case, as when organic changes cause a decline in cognition. But investigating the medical circumstances does sometimes bring good news.
5. Remember that planning keeps you in control
Just as having a Will gives you control over the distribution of your property after your passing, planning for the possibility of cognitive decline allows you to make the decisions about your own future instead of leaving others to hazard their best guess about your intentions. And if a trusted professional or family member talks with you about their concern with your thinking or decision-making, they’re probably trying to help you do what you’d want to do for yourself.
Just as there’s no substitute for proper estate planning documentation, nothing can replace the medical attention you may need if you’re noticing changes in your cognitive ability. Have a qualified physician evaluate your concerns as soon as possible to maximize the chance that you’ll be able to continue to make your own decisions about your finances—and your life—for the longest possible time.
Be sure to check out our most recent video, Advice for First Time Home Buyers with Wendy Davis.
1 https://ourworldindata.org/grapher/life-expectancy-at-birth-oecd
2 Alliance of Comprehensive Planners, “Advance Financial Directive for Cognitive Decline,” copyright © 2017.