How to protect a loved one in cognitive decline from financial harm
CNN
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Caring for an elderly family member with dementia can be heartbreaking and difficult in so many ways.
One of the hardest tasks may be protecting them from ruining their finances as their condition deteriorates.
Research shows that those with dementia often show signs of financial trouble years before diagnosis. Left unchecked, their unpaid bills, gratuitous spending or willingness to give money away whenever asked can drain their savings and push them into debt.
Just one unnerving example: CNN Investigates discovered that elderly adults with dementia unwittingly donated millions of dollars over the past five years to political candidates in response to a constant barrage of emotionally charged fundraising requests.
To prevent or spot the kind of situation that can devastate a person's finances requires that you be both observant and proactive about putting up financial guardrails to minimize your loved one's temptation to extend themselves.
Aim for cooperation first, not control
Don't assume that a dementia diagnosis, or any diagnosis that can eventually lead to cognitive impairment, means your loved one is currently incapable of managing their financial affairs or is willing to sign over control of them to you or anyone else.
"The diagnosis itself doesn't necessarily mean the person lacks capacity," said Judith Flynn, a certified elder law attorney at Falco & Associates and president of the board at the National Association of Elder Law Attorneys. "It's important that the caregiver doesn't just step in and try to take over."
Indeed, "a diagnosis doesn't tell us much about a person's cognitive functioning, and what they have capacity for," said Dr. Jonathan Canick, a neuropsychologist who specializes in aging and cognition. "For that you need a measure of cognitive functioning, which is what neuropsychology provides."
Canick noted that he has diagnosed patients with early Alzheimer's who have full cognitive capacity. "And I have cases of those without any diagnosis but who lack capacity to care for themselves," he said.
His advice: Focus on a person's functioning, not their age or diagnosis.
Roughly 55 million people worldwide are living with dementia today, a number that is expected to rise to 139 million by 2050, according to the World Health Organization and Alzheimer's Disease International.
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With or without a formal diagnosis, if you see signs a person is struggling to manage their money, for instance, stacks of unpaid bills and past due notices on your elderly parent's desk, or bank and credit card statements lying around that show very unusual patterns of withdrawals or spending, bring it up with them. Just don't be argumentative.
"The conversation should not be accusatory. [As in] ‘You're not paying your bills!" said Steven Rubin, a certified elder law attorney and partner at Drazen Rubin.
Instead, Rubin suggested, "You might say, ‘Hey, I see a bunch of stuff here and I know you've got a lot going on. How can I help you?' If you accuse them, they may shut down," he said.
Make a plan that includes financial caregiving
News of a dementia diagnosis is the time to make a plan not only for how your loved one will be cared for medically and physically but also financially before things get any worse.
Both Flynn and Rubin stressed that one of the most important parts of that plan is assigning power of attorney to someone whom your loved one trusts to manage their financial and contractual affairs should they become unable.
It can be a hard sell because people wrongly assume assigning a power of attorney means immediately giving up control of their financial decisions to someone else, Rubin said. But that's not the case. (More on that below.)
"Most of us deep down are control freaks. But by doing the planning, [let them know they are] staying in control," he said.
Flynn also notes that if they don't have a plan in place and there's a crisis, a court could appoint someone they don't want to manage their affairs.
Why having a customized power of attorney is beneficial
It's easy enough to download a standard power of attorney form from the internet. But, for three reasons, both Flynn and Rubin recommend using an experienced attorney to draw up the form.
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First, the power of attorney document should be tailored to your family member's specific situation and preferences. For instance, Rubin said, he has two dogs and wants to make sure the person to whom he assigns power of attorney not only is empowered to pay their vet bills if he's unable to manage his own affairs, but also take over decisions about their medical care.
Second, rules on how powers of attorney are structured and what they may entail differ from state to state, he noted. For example, some states let you have a "springing" or "contingent" power of attorney that only goes into effect under certain circumstances that the client specifies (e.g., when two independent physicians assess that a person is no longer competent to act on their own).
Or you may opt to have a durable power of attorney that goes into effect immediately. But that doesn't mean the elderly person, if cognitively able, can't also maintain control over their finances.
(This guide from the Consumer Financial Protection Bureau offers more details on the fiduciary responsibilities a person assumes when granted powers of attorney.)
The third reason it pays to have an experienced attorney draw up the form is because that lawyer can provide helpful counseling, not just on the options available, but also in helping your family member pick the person whom they can trust most to act as their fiduciary, Flynn said.
Take the case of an elderly parent, who is considering naming one of their adult children to hold power of attorney.
"It's about having those candid discussions. I will always have a private meeting with the elder to assess that there are no issues with the child [they're considering]," Flynn said. For instance, does the child have a history of gambling or bankruptcy? Do they have an overbearing spouse who might push for certain actions to be taken?
There also can be periodic discussions with the client after a plan is in place, because situations can change. A client can always revoke the power of attorney if they feel a person is not acting in their best interest, Flynn said.
It's also up to the lawyer to convey frankly to clients that while powers of attorney are set up to carry out their financial affairs when they can't themselves, in the hands of the wrong person those powers can be used to exploit them, she said.
Other ways to help a loved one avoid financial pitfalls
Having powers of attorney is the most comprehensive way for you to address potential problems with your loved one's financial behaviors or spot if they're being scammed.
With or without them, though, you also might try to:
Be named a "trusted contact": See if you can be named as an elderly parent's "trusted contact" on bank and brokerage accounts, Rubin said. In that instance, you may be contacted by the institution if they see something amiss or unusual in the account. However, without powers of attorney, you won't be able to act on what you learn.
Be appointed a co-trustee: If a person sets up a revocable trust for their assets and names an adult child as co-trustee, the adult child can have oversight as the elderly parent's cognitive capacity declines, Flynn suggested.
Implement good phone, email and social media practices: She also recommends making sure your parent's phone has caller ID and advising them not to answer calls from numbers they don't recognize.
If scammers have been calling frequently, you might consider changing your loved one's phone number, if you have powers of attorney, Rubin said.
Putting their phone number on the National Do Not Call Registry to ward off telemarketers might also help.
With their email and social media accounts, try to monitor what they are receiving and unsubscribe to anything that appears designed to solicit donations or "save" by spending more.
"The first step should be working collaboratively with the elder and monitoring and unsubscribing with their permission. Our durable power of attorney does include an explicit power to deal with digital assets and accounts such as email, Facebook, Instagram, etc., so the attorney-in-fact would be authorized to take actions to monitor and take steps to mitigate any risks," Flynn said.
Blocking senders and callers that put out requests for money is one way to mitigate risk.
Set a lower credit card limit: For those with powers of attorney, if your loved one has been susceptible to scams or has started to spend excessively on things they don't need, you might set a lower limit on their credit card so they have just enough to pay for their essentials like groceries, Rubin said.
The National Institute on Aging also recommends canceling unneeded credit and debit cards.
Set up auto bill paying: Your loved one won't have to worry about paying bills on time. But you also may want to go over their bills with them from time to time to make them feel involved in the process, Flynn suggested.
Order your parent's credit report: Doing this periodically will let you see if any unusual accounts have been opened or properties purchased in your parent's name, she said.
Put alerts on their financial accounts: Ask the institutions housing those accounts what type of alerts are available, since they can vary, Rubin said. For a client who gave his firm powers of attorney, for instance, he put an alert on her credit card to send him an email whenever there is a charge over $200.
While no single step can guarantee your loved one won't unwittingly make a poor financial decision, combined they may let you keep them to a minimum. And that also may reduce the chances of them getting swindled.
"Doing this can decrease the risk of fraud, and make it much easier to prevent something from becoming a big fraud," he said.
