Kathryn, a long-distance caregiver, knew her mother was having memory problems but didn’t realize how bad things had gotten. This was until she visited her mother and took a closer look at her finances: unpaid bills, unusual cash withdrawals, and, most unexpectedly, the mortgage of the family home had been refinanced at a higher interest rate.
It wasn’t until Kathryn began reviewing her mother’s bank statements that she realized that her mother — once a successful businesswoman — had been affected by memory loss for longer than she had realized, and to a greater extent. Kathryn came to realize that she missed the initial signs of her mom’s deteriorating cognition because they lived in different cities, and she never thought in a million years that her mother, who was once as sharp as a tack, could decline so quickly and make so many bad financial decisions.
The doctor confirmed the Alzheimer’s diagnosis, and Kathryn hoped it wasn’t too late to save her mother from financial ruin. As she delved deeper into her mother’s financial situation, she realized that the family home was already in foreclosure.
Through Kathryn’s Herculean efforts on behalf of her mother, the bank was willing to halt the foreclosure on the family home, but only after Kathryn paid a lot of late fees, interest, and attorney’s fees to the bank out of her own pocket.
Financial Problems May be an Early Warning of Alzheimer’s Disease and Related Dementias
Research shows that people with dementia face worse financial outcomes. In fact, a recent study conducted by Johns Hopkins School of Public Health examined the health and financial records of 81,364 Medicare beneficiaries living in single-person households. Those with dementia were more likely to have missed bill payments up to six years before being diagnosed. They were also more likely to have subprime credit ratings up to two and a half years before diagnosis. This study is among several (click here, here, here, and here) that point to financial problems as a possible warning sign — rather than just the fallout — of cognitive decline.
“Financial decision making is very challenging cognitively,” says Dr. Jason Karlawish, a specialist in geriatrics and memory care at the Penn Memory Center at the University of Pennsylvania (my alma mater, and the alma mater of firm shareholder Sara Barr). “If you have even mild cognitive impairment, you can make mistakes with finances, even though you’re otherwise doing generally OK in your daily life.”
Karlawish often sees patients who are navigating financial disasters. What he doesn’t see are changes in banking practices or regulations that would mitigate the risks that come with aging and dementia. “A thoughtful country would begin to say we’ve got to come up with the regulatory structures and business models that can work for all,” he says.
Despite the evidence available and the aging of America, the risk-averse financial industry is hesitant to act – partly out of fear of getting sued by clients. The Senior Safe Act from 2018 was the last piece of major legislation to address elder wealth management on the federal level. It attempts to address this reticence, but more needs to be done. Please read my article on the Senior Safe Act here.
What You Can Do
If you have a loved one who you suspect is suffering from mild cognitive impairment, Alzheimer’s, or another form of dementia, there are some things you can do when it comes to helping with managing finances:
Know the Signs of Money Problems
The National Institute on Aging has identified some of the signs of money problems in adults who may have Alzheimer’s. They include unpaid and/or unopened bills, lots of new purchases charged to a credit card, missing money from the person’s bank account, and strange new merchandise showing up at home.
Have Open Conversations with Loved Ones
To avoid surprises, it is wise to have open conversations about money with loved ones and to set up tools that track finances and flag any unusual patterns. These are some options for individuals and families who are seeking support (please note we do not ever make money from links we provide you; we are just providing them because we believe they can be helpful):
- SilverBills is a concierge service that makes sure bills are paid on time and inspects invoices for fraud and errors.
- Carefull is an online company that monitors for fraud and financial errors, while also providing identity theft insurance.
- EverSafe scans accounts for unusual spending.
- Consider using a professional daily money manager — someone who can come to your home every week to go through your mail and help you pay the appropriate bills and throw out the junk mail. Of course if you have a trusted child who lives nearby, this child can serve in that role.
- Rocket Money can (in its free version) identify your recurring subscription payments so that you can cancel unwanted subscriptions yourself. They offer a paid version where they will purportedly cancel the subscriptions for you, but that should not generally be necessary.
Work Together to Set up a Collaborative Plan with Your Family
Even more than financial monitoring, one of the most important things you can do is to involve your family or friends in a collaborative plan around aging and finances — ideally before any symptoms of dementia appear.
The conversation should cover topics including:
- Signing a comprehensive durable general power of attorney document, which of course involves selecting a trusted agent (and, ideally, at least one alternate agent) your financial power of attorney (see below for more info);
- Discussion of and education about known financial scams that regularly target the elderly (click here for a list of our educational articles on this topic), and discussion of how to safeguard against these possible scams and financial exploitation;
- the responsibilities of day-to-day money management; and
- a discussion about whether to turn long-term money management over to a professional money manager.
If dementia has already set in, include loved ones in decision-making as much as possible:
- If a person can’t articulate their desires, it’s still important to consider the values and interests they held while healthy; and
- Try to find a way to stay on the same side with your loved one and not end up blaming each other.
Make Sure Your Loved One Has a Good Financial Power of Attorney.
If you or a loved one is experiencing cognitive decline, make sure that he or she has a good power of attorney done by an experienced Elder Law firm such as ours, not a junk document done online or something picked up from an office supply store.
A Power of Attorney is a legal document created by one person, known as the principal, to give another person, known as the agent, legal power to act on behalf of the principal. It is the most important legal document that every adult needs to have. The POA document can grant either broad and unlimited powers or limited powers to act in specific circumstances or over specific types of decisions.
Plan Ahead and Be Prudent
As you know, one of the most important decisions anyone can make is to plan for the future and for your family’s future. The time to plan is always now.
Through the years, I have begun to encounter more and more clients who need financial services in addition to legal services. Because of this need, in order to more effectively serve all of our clients, I offer specialized elder-focused financial services in addition to our traditional elder-focused legal services. Besides being a Certified Elder Law Attorney, I am also an experienced retirement planning advisor and long-term care financial advisor through my affiliation with Protection Point Advisors. Click here to learn more.
If you have not done Incapacity Planning, Long-Term Care Planning, or Estate Planning (or had your Planning documents reviewed in the past three to five years), now is a good time to plan and get prepared! Among other services, we offer peace of mind through our four levels of lifetime protection planning:
Level 1 — Incapacity Planning is about protecting your assets from lifetime probate.
Level 2 — Revocable Living Trust Estate Planning is about protecting your assets from lifetime probate and after-death probate.
Level 3 — Living Trust Plus® Asset Protection Planning provides protection from probate, lawsuits, home care, and assisted living expenses by allowing access to Veterans Aid and Attendance benefits, and nursing home expenses by allowing access to Medicaid.
Level 4 – Life Care Planning, Medicaid Asset Protection, and Veterans Asset Protectionprovides comprehensive planning and filing services, often at times of crisis, though this type of planning can be done anytime someone is beyond the first step of the Elder Care Continuum aka Aging Continuum.
Please contact us whenever you are ready to ensure that you have the appropriate level of planning:
Northern Virginia Elder Law Attorney: 703-691-1888
Fredericksburg, VA Elder Law Attorney: 540-479-1435
Rockville, MD Elder Law Attorney: 301-519-8041
Annapolis, MD Elder Law Attorney: 410-216-0703
About Evan H Farr, CELA, CAP
