Estate Planning to Prepare for Cognitive Decline

Since 2000, the national median age in the U.S. has increased by 3.4 years, with the largest single-year gain of 0.3 years in 2021, when the median age reached 38.8 years. This may seem young compared to the life expectancies of older Americans. However, the median age in 1960 was significantly lower, at 29.5 years, according to the article “Don’t Let Cognitive Decline Derail Well-Laid Financial Plans” from Think Advisor.

An aging population brings many challenges to estate planning attorneys, who are mindful of mental, physical, and financial aging. Experienced estate planning attorneys are best positioned to help clients prepare for these challenges by taking concrete steps to protect themselves.

Individuals with cognitive decline become more vulnerable to potentially negative influences; at the same time, their network of trusted friends and family members begins to shrink. As people become older, they are often more isolated, making them increasingly susceptible to scams. The current scam-rich environment is yet another reason to use estate planning.

When a person is diagnosed with Alzheimer’s or any other form of dementia, an estate plan must be implemented as soon as possible, as long as they can still express their wishes. A diagnosis can lead to profound distress. However, there is no time to delay.

While typically, the person may state they wish their spouse to be entrusted with everything, this has to be properly documented and is only part of the solution. This is especially the case if the couple is close in age. A secondary and even tertiary agent needs to be made part of the plan for incapacity.

The documents needed to protect the individual and the family are a will, financial power of attorney, durable power of attorney, and health care documentation. In addition, for families with more sophisticated finances and legacy goals, trusts and other estate and tax planning strategies are needed.

A common challenge occurs when parents cannot entrust their children to be named as their primary or secondary agents. For example, suppose no immediate family members can be trusted to manage their affairs. In that case, it may be necessary to appoint a family friend or the child of a family friend known to be responsible and trustworthy.

Creating a power of attorney by an estate planning attorney is critical. This is because if no one is named, the court must step in and name a professional guardian. This person won’t know the person or their family dynamics and may not put their ward’s best interests first, even though they are legally bound to do so. There have been many reports of financial and emotional abuse by court-appointed guardians, so this is something to avoid if possible.

Steps to take:

1. Update your Power of Attorney.  Have a current Power of Attorney in Place.
2. Update your health care directives. Ensure your health care proxy and living will are updated to reflect your current wishes.
3. Update your will:  Make sure your will is up-to-date and reflects your current wishes. You may need to change if your cognitive decline affects your decision-making ability.
4. Consider a revocable trust: This can help protect your assets and ensure your money is used for your care, simplifying the transfer of assets on your death.
5. Organize financial and legal documents: Ensure that all important documents are easily accessible and properly organized.  Nothing is more difficult for a caregiver than having to figure out your finances, where assets are located, and what bills to pay.
6. Organize Medications and List  Healthcare Providers. Have a list of your healthcare providers and share them with your caregivers and a list of medications and dosages.
7. Family Discussions.  Ensure you share your wishes with your loved ones, trustees, names, healthcare agents, and power of attorney agents.  They all need to understand your plans and wishes.

Reference: Think Advisor (April 21, 2023) “Don’t Let Cognitive Decline Derail Well-Laid Financial Plans”