Cognitive impairment is a growing reality as those we love age. It can be challenging to watch a loved one suffer from it, even if their impairment is mild. Unfortunately, according to the Alzheimer’s Association website, approximately 12-18% of people age 60+ are living with mild cognitive impairment. In addition, more than 6 million Americans are affected by Alzheimer’s. Any form of cognitive impairment can put your loved ones at risk for a financial mishap or scam. This could undo years of careful saving, investments, and planning.
Health issues involving cognitive impairment can be scary and difficult to face or discuss. Those who have dementia will often try to mask the symptoms for fear of possibly losing some of their independence or due to a perceived stigma. With this said, it is critically important to identify any cognitive issues as soon as possible. Once identified, you can work with your loved one to develop a game plan to address both financial and nonfinancial considerations. Getting an official diagnosis from a neurologist, neuropsychologist, or geriatrician can aid in the process. As a part of the diagnosis, a doctor may administer tests such as the Min-Mental State Examination (MMSE), Short Test of Mental Status, and/or the Montreal Cognitive Assessment.
What steps can I take?
Even if everything checks out with a specialist, there are still steps you can take to help your loved ones prevent potential mishaps. These steps include:
Adding an Individual to All Financial Accounts
If your loved one is willing to do this, this allows you to monitor their finances for potential scams or irregular spending patterns in order to step in. This tends to be more important for those who are experiencing more severe cognitive decline and is not something that many individuals would initially allow.
Power of Attorney
Establishing a Power of Attorney (POA) is a crucial step in protecting your loved one’s finances. A POA is a legal document that grants a trusted person (the agent) the authority to manage the financial affairs of someone else (the principal) if they become unable to do so themselves. There are different types of POA, including durable, which remains in effect if the principal becomes incapacitated, and springing, which only takes effect under specific circumstances. Having a POA in place ensures that your loved one’s financial matters are handled according to their wishes, even if they cannot make decisions themselves. It is essential to select a trustworthy and competent individual to act as the agent, and to consult with an attorney to ensure the POA is set up correctly and comprehensively.
Ensuring They Have Assigned a Trusted Contact
Since 2018, brokerage firms have been required to ask clients if they would like to provide the name of a trusted contact person. No one is required to provide a name. A trusted contact is someone the brokerage firm is authorized to contact in limited circumstances (i.e. if they cannot reach the client). This person can also help the brokerage firm respond to possible financial exploitation or fraud in the associated account(s). Being named a trusted contact does not give you the authority to act on your loved one’s behalf, execute transactions, or engage in activity in their account; but having a trusted contact named is a helpful safeguard.
Helping Your Loved One Create an Omega File
An Omega file can help organize information surrounding all financial affairs and desires in one place. This can help keep everything in one place should your loved one pass away. The Omega file is not a legal document itself, but it identifies where important papers are located. This information may include health care directives, information about business affairs, passwords, and anything else you would need to be aware of in the event you needed to step in. Once created, ensure their executor and/or designated family members are aware of the location. We would recommend against a safe deposit box. These are sealed at death, and therefore difficult to immediately access.
Questions?
If you are concerned about your loved one’s financial situation, there are additional steps you can take. These include adding an individual to all financial accounts and bills to monitor finances. You can also assign a Power of Attorney to allow a trusted individual the right to make financial decisions. Our Advisors are able to provide tips on approaching this sensitive topic and applicable steps to take. If you have additional questions, please reach out to one of our advisors.
Updated: June 24, 2024
Written: July 15, 2021