Planning for the cognitive decline that often accompanies aging can prevent expensive mistakes, says a recent article from U.S. News & World Report, “How to Minimize 4 Financial Management Disasters That Come With Aging.” Planning for cognitive decline can make our later years less stressful.
Age and Vulnerability to Financial Elder Abuse. Simple tasks like paying bills can become problematic as our cognitive abilities diminish. This also leaves people more susceptible to fraud and scammers—today’s thieves prey on the elderly through telephone, online, mail, and in-person schemes. Add a layer of protection by having a trusted person or family member oversee accounts. A professional fiduciary or a bill-pay service could be used if no family member is available or trustworthy enough.
Freezing a senior’s credit with major credit bureaus can make it harder for thieves to steal their identity, take out loans, or open credit cards under their names.
Financial documents should be organized, and their location should be shared with loved ones. Your estate planning attorney, financial advisor, and CPA should have the contact info of a trusted person who can step in to manage your affairs, if necessary. Your estate planning attorney can create a Financial Power of Attorney, so they can act on your behalf.
You can appoint a representative payee with the Social Security Administration, so another person can help you with Social Security matters.
The Death or Disability of the Family’s Financial Person. One person in the household very often runs the business side of life, paying bills, balancing checkbooks, and keeping an eye on investments. If that person dies or becomes disabled, the spouse needs to be able to take over finances. To do this, they’ll need to know more than the usernames and passwords on accounts—although they’ll need to know this information as well. Regular check-ins on financial matters with a spouse and a trusted adult is a good practice.
Planning for Long-Term Care Expenses. Failing to prepare for the cost of long-term care or to protect a couple’s assets with Medicaid planning can be financially catastrophic. Medicaid can help with the cost of nursing home care. However, if the family has assets, they must be used up before the person is eligible for care. Medicaid also has a five-year lookback period, meaning any transfers or sales of assets taking place five years from the date of application will delay eligibility. An estate planning attorney can help with the use of irrevocable trusts, often referred to as Medicaid Asset Protection Trusts. There are also trusts designed to protect assets for the healthy spouse. A consultation with an estate planning attorney long before long-term care is needed is critical to avoiding this mistake.
Outliving Your Money. Experts believe nearly two-thirds of Americans nearing retirement age are unprepared for two, three, or even four decades of retirement. The past year’s skyrocketing costs of living have prevented many from adding to their savings during the end of their working lives, and many don’t even have emergency savings. Having a financial plan and an estate plan is important at every age and stage of life.
Cognitive changes don’t happen to everyone as they age. However, it is still wise to have your estate planning done long before any changes occur. Having a will and any necessary trusts created and executed while you are at full capacity allows you to be the one making these decisions.
Estate planning for cognitive decline requires careful consideration and proactive measures to protect vulnerable individuals from fraud and financial exploitation. Families can confidently navigate these challenges by understanding legal safeguards, assessing capacity, and seeking expert guidance. If you want to safeguard the economic welfare of your vulnerable loved ones, we can help. Our Frisco living trust lawyers can walk you through the estate planning process.
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Reference: U.S. News & World Report (June 26, 2024) “How to Minimize 4 Financial Management Disasters That Come With Aging”
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