Welcome to our guide on estate planning for cognitive decline, where we examine dementia and estate planning's role in protecting our aging loved ones. The National Institute on Aging (NIH) article, "Managing Money Problems for People With Dementia," sparked our discussion on estate plans and cognitive decline. As an elder law attorney, I've witnessed firsthand the challenges families encounter when safeguarding their loved one's assets from fraud and exploitation. This article examines the financial risks of cognitive decline and how practical estate planning strategies can protect individuals experiencing dementia.
Cognitive decline, particularly associated with conditions like Alzheimer's disease, poses risks for financial exploitation. Individuals with dementia may struggle to manage bills, discern trustworthy individuals, and understand financial transactions. This vulnerability makes them prime targets for fraud and abuse. Here's a closer look at common forms of financial risks and exploitation:
Understanding the legal safeguards available and assessing the individual's capacity to enter into agreements is essential. Here are key considerations:
Legal Capacity: Contracts and agreements are enforceable only if both parties have the legal capacity to enter into them. Individuals with Alzheimer's or cognitive impairment may lack this capacity, rendering contracts voidable.
Capacity Assessment: Assessing mental capacity is crucial in determining the validity of agreements. Physicians, family members, and legal experts play a vital role in providing testimony and evidence of cognitive decline, aiding in capacity assessment.
Signs of dementia are sometimes slow to appear or hard to detect. The National Institute of Aging pointed out that financial management is one of the first signs of cognitive decline affecting a loved one.
Estate planning tools help prevent loved ones with dementia from losing money or property to unscrupulous people. Establishing financial powers of attorney before signs of dementia enables a trusted family member to oversee bank accounts and bill payments on behalf of a loved one.
Living trusts are another tool for protecting an aging loved one experiencing cognitive decline from financial loss. The creator of a trust appoints a trustee to manage the assets and outlines how funds are distributed, thereby preventing misuse of an individual's finances. Individuals can be the grantor and beneficiary of a living trust, providing access to their assets and protection from financial exploitation.
Estate planning for cognitive decline requires careful consideration and proactive measures to protect vulnerable individuals from financial loss. If you need help safeguarding your loved ones' future, we are always happy to help. Contact The Werner Law Firm living trust lawyers for a free consultation.
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Reference: National Institute on Aging (NIH) (Oct. 3, 2023) Managing Money Problems for People With Dementia
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