Wealth Management with Memory Disorders
What steps can a family take?
Besides impacting lives and relationships, dementia can also impact family finances. A memory disorder may call for another family member to assume money management responsibilities for a parent, grandparent, or sibling. It may also increase the risk of financial exploitation, even as we do our best to guard against it.
Just how many older adults have memory disorders? Here are two recent estimates. The Chicago Health and Aging Project estimates that nearly a third of Americans 85 and older have Alzheimer’s disease. The National Institute on Aging sponsored a study that concluded that 14% of Americans age 71 and older have dementia to some degree.[1]
Older women may be the most vulnerable. A new Merrill Lynch and Age Wave study notes that after age 65, women have twice the projected risk of Alzheimer’s that men do.[2]
In the best-case scenario, parents or grandparents acknowledge the risk. They lay out financial maps and instructions, telling adult children or grandchildren about the details of their finances. They involve the financial professional they have long known and trusted and introduce them to the next generation. All this communication occurs while the elder still has a sound mind.
Absent that kind of communication and foresight, catching up will be in order. The kids will have two learning curves in front of them: one to understand the finances of their elders and another to discover the degree of care they can provide. The stress of these two learning curves can be overwhelming. Asking professionals for help is reasonable.
The earlier the basic estate planning elements are in place, the better. This means a will, a durable power of attorney, a health care proxy, and possibly a revocable living trust. In cases of significant wealth or a complex personal history, more sophisticated estate planning vehicles may be needed. If a durable power of attorney is in place, another person has the ability to act financially in the best interest of the person with dementia.[1]
Children and grandchildren must also confer about major decisions. What kind of assisted living facility would be best for Dad? How much of Mom’s retirement savings should be used for her eldercare? How do we convince Dad that he should not manage his investments day-to-day anymore? What do we do now that Mom seems totally unaware she has to make an IRA withdrawal? These may be hard conversations and trying decisions. If they never occur, however, the household financial damage may worsen.[1,3]
Financial inattention or incompetence may be one of the first signals of Alzheimer’s disease or another dementia. The National Institute on Aging explains that difficulty paying for an item in a store or figuring out a tip at a restaurant could amount to early warning signs; trouble counting change or reading a bank or investment statement may also reflect cognitive impairment. These instances may be harbingers of problems to come—unpaid bills, impulsive and questionable investment decisions, and unwise credit card purchases.[4]
Should a household sign up for Social Security’s representative payee program? This may be a good idea. Many retirees have never heard of this option, which lets a designated, approved second party receive and manage monthly Social Security benefits on their behalf. The monthly benefit is sent to that representative, who must document to Social Security that the money was spent in the senior’s best interest. According to the Center for Retirement Research at Boston College, just 9% of Social Security recipients older than 70 with dementia were enrolled in this program in 2017.[2,3]
Elders suffering from memory disorders often resist relinquishing financial control. Allowing limited financial independence (credit cards with lower limits, access to some cash for discretionary spending) may make the transition easier. Loved ones can also emphasize that seniors are so often victims of fraud and other forms of financial elder abuse.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations
1 - forbes.com/sites/nextavenue/2017/10/31/managing-finances-for-a-loved-one-with-dementia [10/31/18]
2 - barrons.com/articles/the-stubborn-wealth-gap-between-men-and-women-1524099601 [4/18/18]
3 - usatoday.com/story/money/columnist/powell/2017/09/16/financial-help-retirees-cognitive-impairment-dementia/627326001 [9/16/17]
4 - nia.nih.gov/health/managing-money-problems-alzheimers-disease [5/18/17]
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor serving the greater Sacramento area with an office in Roseville, CA. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country's leading professional association of fee-only financial advisors.