Dementia and Estate Planning: What you need to Know !
The topic for today is working with family members that are approaching or have dementia or incapacity.
We’re discussing the financial side and managing assets, rather than the medical side. First, we need to determine who will be managing the property of the incapacitated person. There are several tools in the estate planning toolbox to handle a person with dementia, one of which is a durable power of attorney for Asset Management. This power of attorney is durable because it lasts beyond someone having a diagnosis of dementia, and it allows another person (an agent) to manage finances for the incapacitated person.
Some of the disadvantages of this document include the need for an extremely honest agent, as a dishonest one may commit Elder Financial abuse. Another document used for someone with dementia is a living trust. If someone created their own living trust and is now becoming incapacitated, they’re removed as trustee. Another important document the person should have in place is an Advanced Health Care directive. This document is necessary because an incapacitated person cannot communicate clearly with medical personnel about what type of care and treatment they need.
What should you do if someone you love can’t or won’t sign a durable power of attorney?
In the first scenario, if it’s too late and the person never signed a durable power of attorney and now they have full-blown dementia, the law in California allows family members to take the person to court to get a conservatorship to protect their interest. A person is appointed as a conservator, and there’s a lot of paperwork and court supervision over the entire time the person’s alive with incapacity, but it’s the only way to handle the situation of getting authority to manage assets. If the incapacitated person never took the time to get their papers in order, there is one saving grace in a conservatorship, which is for people with a long-term marriage and all their assets are in community property. The competent spouse has complete right and authority to manage the assets for both spouses. However, this may not stop the other type of conservatorship, which is conservator of the person, but an Advanced Health Care directive goes a long way to help reduce the need for a conservator of the person, which means medical non-financial.
If the person is competent but refuses to sign a durable power of attorney, creating a voluntary conservatorship is a preventative document in case the person’s mental abilities are deteriorating. It’s a lot less time-consuming and costly if the proposed conservative consents, and there doesn’t have to be a doctor’s determination of incapacity. Eventually, if the person won’t get it, they’ll probably have to get a conservatorship of the estate, and at this point, it’s not so much about age or dementia, but about anyone over 18 with the ability to manage their assets.
The best idea is to take the situation and actively handle it with all family members participating and getting their estate plan in order for various types of things that might happen in the future when someone is declining in mental ability.
You might want to consult with a geriatric care manager to help determine what might be needed in the future. Also, start the discussion with the proposed conservative, gather important papers, get copies and information relating to Social Security, bank accounts, investment accounts, safe deposit boxes, and get all the financial and asset management information that you can, including passwords to internet accounts and online storage. Review the plans, the durable power of attorney, Advanced Healthcare directive, and the trust over a period of time to see if situations have changed. It’s also a good idea to discuss funeral and burial arrangements, cremation with the person so that it takes the anxiety away from the other family members when that event takes place.
Some of the things you look for as key indicators that someone might be approaching incapacity is having trouble with money, forgetting to pay bills, paying the wrong amount, or getting confused about what the bills are.
One thing you can do to help the person is set up automatic bill pay accounts with the bank, and also have a trusted family member start taking over and supervising the finances of the person, so that you’ve got the system in order if the person does get full-blown dementia.
Another thing that’s very important is to protect the vulnerable person from scams and frauds. I know when my mother was over 90 years old, we used to get phone calls all the time with every kind of scam you could think of, and it was very concerning that that kind of thing goes on. The other thing you want to try to establish is a plan and also start planning for long-term care costs, whether that’s a long-term care insurance policy or other ways that you might have to pay for long-term care if the person needs to go into a nursing home or a skilled nursing facility. It might cost six to seven thousand dollars a month for housing.
Another thing that is a possibility is if the person denies that they’re mentally slipping and they’re having problems, and you know that that’s actually happening, and they’re a risk to themselves and others in driving, you can contact the department of motor vehicles. They will, once they have a notification that a person is suffering potentially a case of dementia, require the person to come in for an evaluation and get medical opinions.
What DMV looks for is three things:
Consciousness, are they able to respond normally to the environment, cognitive processing, do they have the ability to remember what the destination of what they’re trying to do is, and strength and coordination.
So if somebody’s getting close to dementia, their stimulus response and their muscle movements may not be that effective for their own personal safety.
The DMV is there to help if that is of necessity or benefit to you. Overall, in summation, the best way to plan for dementia or incapacitated persons, which can happen and probably will happen to all of us, is to get an estate plan in place. Have a living trust, especially with real estate, have a will. A pour-over will that only speaks to death is not really useful in incapacity. Have a durable power of attorney for asset management, appointing an agent, an alternate agent, and another alternate agent for every appointment of a person in your estate plan. Have three alternates and an advanced healthcare directive, and also assignments of personal property.
So with these documents in order, the process is not going to be pleasant, but it’ll be a lot easier than it would have been without those documents.
And with the documents, it’ll cost the family less to administer the situation. If you have any questions, give our office a call. We’re happy to answer questions about estate planning, tax, and other issues.
