Caring for a loved one with dementia is a challenge that millions of families undertake each year. As a caregiver, understanding how a dementia diagnosis and incapacity affects your loved one's legal decision-making is crucial to ensuring their wishes are honored and that you are providing them with the best possible care.
In this blog, we'll explore the importance of estate planning, even after a dementia diagnosis, as the best method to ensure the wishes and rights of your loved one are protected.
Understanding that incapacity or Dementia is a progressive condition that affects memory, cognition, and daily functioning. As dementia causes your loved one's cognitive abilities to decline, there may come a time when they are no longer able to make sound decisions about their finances, healthcare, and overall well-being.
When the effects of dementia make it difficult for a person to understand information and make sound decisions, that person is considered to be incapacitated, which means they can no longer legally make healthcare or financial decisions for themselves. This change in their memory and cognition can be emotionally overwhelming for both your loved one and your whole family, and without proper planning, can require court involvement.
But there's still some good news. Thoughtful estate planning can ensure that your loved one is cared for by the people they know and trust if they can no longer care for themselves. Even if you're loved one has already been diagnosed with dementia; it is still possible for them to create a legally-binding estate plan during the early stages of the disease.
Every adult should create certain legal documents to protect their rights and wishes, and this is no different for a loved one with a dementia diagnosis. What is important to remember is that to create a legal document, you must have mental capacity – meaning you need to be fully aware of what you are doing and the consequences of your choices.
Thankfully, a person does not need to constantly be in a state of capacity to create an estate plan. As long as your loved one has the mental capacity at the moment they sign their estate plan documents, the documents will be valid, even if they regress into a state of incapacity afterward.
In the early stages of dementia, and ideally long before any health problems surface, your loved one should create (or review and update) the following estate planning documents:
A General Durable Power of Attorney (POA) is a legal tool that allows your loved one to appoint someone to make financial and legal decisions on their behalf. Their POA can write checks, pay bills, maintain their home, and manage their financial assets.
This document becomes especially significant as dementia progresses. Encourage your loved one to designate a trusted individual as their financial Power of Attorney while they can still make such decisions.
A General Durable Power of Attorney is an essential tool, but many financial institutions place constraints on using a POA or don't acknowledge their authority at all. To ensure your loved one has complete protection of their financial wishes, encourage them to establish a Revocable Living Trust and move their assets into the name of the Trust. Creating a Trust document alone is not sufficient. Assets must be retitled and beneficiary designations updated to ensure the Trust covers all assets and that the named Successor Trustee can easily step in when necessary.
As part of creating a Trust, your loved one will name the person they want to manage their assets when they can no longer do so. This person is called the Trustee or Successor Trustee. The Trustee and Power of Attorney are often the same person, but not always.
Determination of who should serve in what role and at what point your loved one should give up control over their financial assets is part of what we counsel our clients to decide. If you have any uncertainty whatsoever, please call us to discuss. It's far better to get the right tools in place and the right people named early than it is to wait until it's too late. Once it's too late, it's too late, and your family could be stuck with a court process as the only path.
By having these two estate planning tools in place and the support of our proactive guidance, you can rest assured that the people your loved one knows and loves will be able to manage their assets for them as their dementia progresses. Understanding the potential for incapacity and preparing for it provides comfort to oneself and one's family. One of the best things we've experienced about part of this process is that the people who have taken care of all of this before they begin to experience dementia can relax into a phase of life that can often be full of anxiety because they know it's been handled.
Similar to a General Durable POA, a Power of Attorney for Healthcare (HPOA) appoints someone to make medical decisions on behalf of your loved one when they cannot do so for themselves. Discussing and establishing a Healthcare Power of Attorney early on allows your loved one to express their medical preferences and ensures their wishes are honored.
Their Power of Attorney for Healthcare should also include a Declaration to Physicians, also called a Living Will, that outlines their desires regarding medical treatment, life support, and end-of-life care. Creating a Declaration to Physicians and discussing their wishes with you ensures that their preferences regarding life-sustaining treatment, resuscitation, and other medical interventions are documented and respected.
The economic burden of caring for a loved one with Alzheimer's or advanced dementia can be significant - between $2,500 to more than $10,000/month is not unusual. The time to discuss these costs and what you or your loved one want is right now before dementia or Alzheimer's makes it impossible to have any choice.
One of the most crucial steps in preparing for the challenges of dementia and understanding incapacity is to help your loved one complete their estate planning while they still can do so. Waiting until the later stages of the disease can limit their options and increase stress for everyone involved.
By addressing legal matters early on, you can ensure that your loved one's wishes are respected and their affairs are managed in the way they intended, by the people they trust, without needing court involvement.
If you have a loved one with more advanced dementia, check back here next week as we explore late-stage estate planning options and methods to avoid family and legal conflict over your loved one's care.
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