Supporting a loved one with cognitive decline can be one of life’s most challenging challenges. Those with cognitive impairments, such as dementia or Alzheimer’s, often need to be emotionally resilient and make practical adjustments. However, proactive financial planning to secure their well-being is frequently overlooked.
The reason? The Wall Street Journal reported that those with undiagnosed memory loss are prone to significant financial declines. Researchers at the University of Michigan found that people without knowledge of their memory problems lost an average of $31,000 in net worth, while people with knowledge lost $5,400.
Keeping this in mind, here’s a guide for providing compassionate care while protecting their savings and financial stability.
Understanding Cognitive Decline
Memory loss, confusion, difficulty concentrating, or difficulty managing daily tasks can all be signs of cognitive decline. Although natural aging can cause mild forgetfulness, cognitive decline goes beyond lapses in memory and can significantly impair one’s ability to live independently.
Among the most common conditions are;
- Mild Cognitive Impairment (MCI). A transitional stage between normal aging and dementia, characterized by noticeable but not debilitating memory problems.
- Dementia. A group of symptoms severely affects memory, thinking, and social abilities.
- Alzheimer’s Disease. The most common form of dementia, which causes progressive cognitive impairment.
Caregivers need to be aware of the symptoms of these conditions so they can seek appropriate treatment early.
Identifying the Risks of Cognitive Decline
Cognitive decline, particularly dementia, can influence a person’s judgment and decision-making abilities. Additionally, it can affect one’s ability to identify and avoid scams, putting them at risk of being exploited by unscrupulous individuals.
A few financial risks to be aware of are;
- Impulsive spending. It is common for individuals with dementia to spend excessively or unnecessarily without considering the consequences.
- Phishing scams. Fraudsters may steal sensitive financial information from them through phishing emails or phone calls.
- Donation scams. In some cases, impulsive and excessive giving can be sparked by emotional appeals for donations.
- Caregiver exploitation. Sometimes, caregivers misappropriate their loved one’s financial resources.
The Importance of Empathy and Collaboration
The importance of approaching financial matters with empathy and understanding cannot be overstated. It is important not to assume that the person you love cannot manage their finances. Rather than focusing on their past capabilities, tailor your approach to their present abilities.
- Start with open communication. Engage in supportive, non-judgmental conversations about finances. Ask open-ended questions such as, “How are you managing your bills these days?” or “Have you noticed any changes in your spending habits?”
- Observe and assess. Unpaid bills, unusual withdrawals, and impulsive purchases could be signs of financial difficulties.
- Offer gentle guidance. If you observe an issue, offer to assist without taking over. For example, you could suggest reviewing bills together or setting up automatic payments.
- Seek a medical diagnosis. You can develop a comprehensive care plan and prevent financial risks by getting a timely diagnosis.
Proactive Financial Planning
In the case of cognitive decline, financial difficulties may be an early indicator. Johns Hopkins University researchers found that dementia symptoms, including financial concerns, can appear up to six years before a diagnosis is made. In light of this, consider the following;
A Power of Attorney is essential.
A Power of Attorney (POA) must be established as part of this plan. If your loved one becomes incapacitated, this legal document allows a trusted individual to make financial decisions on their behalf.
However, as opposed to popular belief, granting power of attorney does not automatically relinquish control. In a well-crafted POA, your loved one’s decisions can be limited only to necessary ones, maintaining their autonomy as long as possible.
Obtain a customized POA.
More specifically, you can better protect your loved one’s financial future with a customized power of attorney;
- Personalization. Include preferences for pet care, charitable giving, or other specific wishes in the POA.
- State-specific compliance. A lawyer can ensure your POA complies with state laws, including provisions for “springing” powers.
- Expert guidance. You can enlist the aid of an attorney to choose a fiduciary who will act as your loved one’s agent and represent their interests.
Implement financial safeguards.
- Limit access to funds. Consider reducing cash on hand and limiting credit card access.
- Set up automatic payments. To minimize the risk of missed payments or late fees, automate bill payments.
- Monitor accounts regularly. Check your bank, credit card, and investment accounts.
- Review financial statements. To identify any unusual activity in the financial statements, review them regularly.
- Consider a conservatorship. A conservatorship may be necessary if your loved one’s financial situation is severe.
Consider strategies that provide guaranteed income.
Chris Heye, PhD, writes for Kiplinger that guaranteed income strategies like annuities can also provide protection. They can minimize financial transactions that could cause individuals and their families to make ill-advised decisions.
Moreover, protected income products can be a valuable component of a safe, risk-reduction “autopilot” strategy since they provide a regular income stream without the need to perform transactions, he adds.
A protected income product can also help guard against financial risks related to health. A health event may leave you temporarily or permanently incapacitated (physically or cognitively), outlive your savings, or require lengthy long-term care.
Protection against scams.
- Screen calls and emails. Unsolicited calls and emails should be avoided, especially those requesting personal information or financial contributions. In addition, you can register their number on the National Do Not Call Registry by calling 1-888-382-1222 from their phone or visiting DoNotCall.gov.
- Educate your loved one. Make them aware of unsolicited requests for money or personal info.
- Limit social media exposure. To minimize the risk of online scams, monitor their social media activity.
Ensuring Proper Healthcare
It is often necessary to seek specialized medical care for cognitive decline. To address their healthcare needs, follow these steps;
- Find the right specialists. Work with neurologists, geriatricians, and therapists familiar with dementia care.
- Secure health insurance. Verify their Medicare, Medicaid, or private insurance coverage, including long-term care coverage.
- Maintain regular appointments. By maintaining regular check-ups, symptoms can be managed, and new concerns can be addressed as soon as they arise.
Creating a Safe Living Environment
Enhance their comfort and safety by modifying their living environment;
- Reduce hazards. Install grab bars in bathrooms, secure loose rugs, and secure furniture.
- Improve navigation. Use clear signage to identify rooms and cabinets.
- Technology assistance. Use GPS trackers, medical alert systems, or home monitoring devices to ensure their safety.
As long as these adjustments are made, people can age in place for as long as possible, which lowers the cost of long-term care.
Planning for Long-Term Care
When cognitive decline progresses, professional care may be necessary. And the price can be steep.
For someone with dementia, Genworth reported that the average cost of a home health aide is $6,292 per month. As such, to protect the assets of a loved one suffering from cognitive decline, you should do what you can to reduce the cost of their hands-on care.
Explore options early to ease the transition:
- In-home care services. You can hire caregivers for daily support, meal preparation, or medical care.
- Assisted living. Those experiencing moderate decline may benefit from facilities that offer independence and support.
- Memory care units. Environments are designed specifically for people who have severe cognitive impairments.
Ultimately, you have to consider the costs and preferences of the individuals when making these decisions.
Seek Professional Help
- Consult with a financial advisor. You can mitigate risk and manage your loved one’s finances with the help of an advisor.
- Work with a geriatric care manager. A geriatric care manager can help with financial planning and other aspects of care.
- Seek legal counsel. Having an elder law attorney on your side will protect your loved one’s rights.
You can guard your loved one’s financial future by seeking professional guidance and taking proactive steps. Furthermore, this can help alleviate the stress and anxiety that can accompany cognitive decline.
Conclusion
It takes patience, empathy, and careful planning to help a loved one navigate cognitive decline. Your goal should be to ensure they live with dignity and comfort by addressing their emotional, physical, and financial needs. As a caregiver, you can make a lasting difference in your loved one’s quality of life by providing support.
FAQs
How can I tell if my loved one is experiencing cognitive decline?
The following are common signs;
- Memory loss. Memory loss or difficulty recalling recent events.
- Challenges with familiar tasks. Having difficulty managing finances, cooking, or driving.
- Changes in mood or behavior. An increase in irritability, anxiety, or depression.
- Difficulty with problem-solving. Inability to make decisions or solve everyday problems.
- Disorientation. There is confusion about the time, place, or people.
For an accurate diagnosis, consult a healthcare professional if you notice these changes.
How can I identify early signs of financial difficulties in a loved one with cognitive decline?
- Bills that are unpaid or late payments.
- An unusual pattern of spending.
- Investment behavior changes.
- A tendency to fall victim to scams or pressure tactics.
What legal documents should I consider to protect my loved one’s finances?
- Durable Power of Attorney (DPOA): Allows someone you trust to make financial decisions for your family member.
- Healthcare Power of Attorney (HCPOA): Gives someone the power of decision-making for your loved one if they are incapable.
- Living Will: Describes your loved one’s wishes regarding end-of-life care.
What strategies can help me monitor and manage my loved one’s finances?
- Regularly review bank statements and credit card bills.
- Set up automatic bill payments.
- Use a joint account or a trust.
- Cash and credit card access should be limited.
- Be cautious if you receive an unsolicited call, email, or visitor.
Image Credit: Andrea Piacquadio; Pexels
