Daniel Brockley

Aug 06, 2024

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Estate Planning with Dementia: Grappling with the Fears and Unknowns

How to take back control with thoughtful financial and estate planning

My dad has dementia. He survived stage-four esophageal cancer against every medical prediction, and then, just a couple years after his remission, his memory began to falter. It was hardly noticeable at first. Over a glass of wine, my mom confided in my brother and sister and me that she felt like something wasn’t right, that he wasn’t able to hold on to what they had just talked about or done. 

We didn’t see it, not at first. We listened to my mom and nodded along, but we all held out hope that what my mom was seeing was simply the natural signs of aging. The result of a mind overfilled with many years of thoughts and people and experiences. 

But she was right, of course.  

She knew this man, who she grew up with in a small town in Oregon, who she dated in college, and who she traveled the world with from Navy station to station, better than anyone. Even us kids who love them both. Eventually, despite not wanting to, we saw signs as well, and a neurologist confirmed what my mom didn’t really need any confirmation of: that my father was in the early stages of dementia. 

In the US alone, 5.8 million people are living with dementia as I write this. That’s more than all of the people who live in Los Angeles. By a lot. Worldwide, it’s 55 million. My fragile human brain that evolved to think of people in tribes of less than a hundred has a hard time even processing that many people. It’s so many. 

What do these big numbers mean? Well, they mean that you probably know someone well who has been diagnosed with dementia. And if you don’t, you will. That person might be you. 

There’s a lot that feels out of our control with this kind of diagnosis, but there’s one thing that’s not: a well considered estate plan. Estate planning done right will protect the person with dementia, ensuring their healthcare and financial wishes are fulfilled during their life and that their family is protected once they’re gone. It will give them and their family the reassurance that they are able to help shape the legacy they leave behind.

The self help people aren’t lying: Communication is key

Dementia isn’t just one disease. There are multiple forms of dementia, and within each of those classifications there are variations in how the diseases present themselves. 

My maternal grandfather had dementia, but his path was different than my father’s, with episodes of lashing out that are common but fortunately not yet present with my dad. My wife’s family is also dealing with Alzheimers, and again what we are seeing is not quite the same. Because, despite what we know about the stages and symptoms of dementia, everyone is different. 

But whatever flavor of dementia we’re talking about, one thing is true: the single most important factor in navigating it successfully (whatever that means) is communication. In order to protect the person with dementia, families often keep mum about it in the early days. We did this with my dad. If that’s how you want to handle things with family and friends in the beginning, do your thing, but clear communication between the core family caregivers, financial advisor, and attorney is absolutely essential. I’ve seen this go right, and I’ve seen this go wrong. It’s messy and painful when it goes wrong.

Do your best to look at the situation with empathy but unflinching clarity, and keep an open dialogue between the family and financial and legal team. It will save you heartache. It will also ensure that the client is cared for the way they want to be, and the rest of the family is protected after they’re gone. A word to the financial advisors out there: yes, you have a fiduciary obligation to your client and not to your client’s family, but in this case that may mean bringing in family members (with Powers of Attorney or POAs) as part of the team. Not doing so could be a huge disservice to your client.

Now, not later: The importance of acting quickly

It’s easy to bury your head in the sand when it comes to facing a client or loved one’s dementia–or your own for that matter. Because it’s such a difficult topic, many people become paralyzed, avoiding the big issues altogether, or hoping that the answers will come to you in time. They won’t.

“Get your affairs in order, so it’s easy for others to help you with your finances,” says Jennifer Raess, product counsel at Vanilla. “Name people you trust to act on your behalf. Get all your passwords gathered. Tell your family and fiduciaries where the docs are, so they can find them when needed. And don’t make that a safety deposit box that may be difficult to access.”

It’s vital to act quickly, ideally while the person with dementia is still in the very earliest stages. This way they can inform the choices in their plan, and may still be able to make key decisions. But once the disease progresses, they will no longer have the capacity to act on their own behalf in legal and financial matters. In extreme cases (if they don’t have a power of attorney in place), that may result in needing to apply for conservatorship, which is an arduous process, and does not guarantee that financial and healthcare power will be given to the person whom the client might have preferred. 

“You usually only need conservatorships and guardianships if there are no estate planning documents. When I see people go into the court to get these, it’s because they don’t have the right documents. It can be an invasive process and you generally don’t need to do it if you plan ahead,” said Dina Nam, attorney with AdvicePeriod.

From an estate planning perspective, someone with a dementia diagnosis needs all of the same core documents as anyone else: 

• A will
• trusts (if necessary)
• financial power of attorney
• healthcare power of attorney
• healthcare directive

How financial advisors can help clients (and families) with dementia

Finances can get tricky when someone is in the early stages of dementia, even when being aided by a trusted family member. In the early stages, when the client has some capacity, but may be occasionally struggling, or, for example, missing bill payments, there’s some gray area in terms of legal and financial capacity. I’ve seen how chaotic this can get close up, even with a well meaning financial advisor.

So, what are the obligations a financial advisor has to a client that has a dementia diagnosis? I put the question to Dina Nam.

“It’s not so much an obligation as it is a responsibility to protect the client, so they don’t harm themselves. Advisors and attorneys want to make sure you have documents early so you don’t get frozen out of accounts.”

Nam continued, “From the attorney side it’s a little harder, walking a fine line between medical and legal advice. When someone tells me they have a diagnosis, I have to dig in to understand if they have capacity. At that point, you can still do the documents, and you should do them as soon as possible before they lose capacity. It’s a sliding scale. Even with a diagnosis, you should get your documents set up before it’s too late. In some cases it might require independent review, but it won’t necessarily prevent them getting it set up just because they have a diagnosis.”

Powers of attorney: Do’s and Don’ts

Knowing that dementia diminishes memory and decision making ability, one of the first things to do post diagnosis is to secure a healthcare and financial power of attorney. Powers of attorney vary according to state, but the two most common types are springing and durable powers of attorney. The springing power of attorney goes into effect only after you become incapacitated. The durable power of attorney goes into effect immediately.

Raess notes that springing powers of attorney often require the signoff of a healthcare provider, sometimes delaying matters. With this in mind, it might be best to consider a durable power of attorney in the case of a dementia diagnosis. Keep in mind that these powers of attorney give enormous power to the agent, so this person needs to be chosen with care. You’ll want to have a power of attorney drawn up for financial matters and another one drawn up for medical matters.

The importance of long term care insurance

Long term care (LTC) insurance can be a godsend for families coping with dementia. My folks had a terrific policy they took out many years ago, and it now affords them the ability to have at-home caregivers. By the time you’ve reached the diagnosis stage, it may be too late to get a new policy, but it’s worth checking into regardless – especially if you’re at a very early stage. But if you’re reading this and you’re healthy, I highly recommend getting a policy as insurance against whatever the future may hold. I’m fairly young and spry, and I have a policy myself. Advisors, you will be doing your clients such a huge service by emphasizing the importance of LTC insurance to your clients.

Dementia and advanced directives

All states allow for advanced directives, but some states now allow advanced directives specifically designed for those with dementia called “Alzheimer’s Disease and Dementia Mental Health Advance Directive.” You can see an example of a version for Washington state here. As the End of Life WA organization states, “Even if this directive is not legal where you live, you can still use it to document your wishes and provide a guide for your family, health care providers, long-term care providers, and others.”

These are worth looking into. They address some of the specific challenges of dementia (such as sexual consent between partners) in ways a traditional healthcare directive does not.

Protection against elder abuse

Elder abuse is a big concern for people with dementia and their families. Beyond the terrible physical abuse that dementia patients sometimes experience, there are many ways in which they are taken advantage of financially. It turns out that thoughtful estate planning is one of the best ways to combat this abuse. 

To protect yourself or your loved one from elder abuse:

• Have a set of current core estate planning documents created, including a will, trust, financial and healthcare power of attorney, and advance directives.
• Carefully select the agent(s) of your power of attorney, understanding they will have broad control over your legal and financial affairs in the future.
• Engage with a team of trusted advisors, including a wealth manager, attorney and CPA. Set up a system that enables them to check each other’s work. For example, you might give the advisor access to the estate documents.

Additional support, beyond the financial  

If your spouse or parent or loved one is going through dementia, I’m sorry. It’s hard for them and for you. Scratch that, hard doesn’t begin to describe it. Watching someone you love slip away bit by bit, trying to hold on to those things that make them who they are, is excruciating. Standing by as the phrase doesn’t come, as the memory doesn’t surface, as the eyes you have known all your life look at you blankly, without recognition – it is brutal. And it feels so unfair. 

I do have a few resources that have helped me. I recommend the guide Help is Here, When someone you love has dementia, written by Marian O Hodges (a doctor) and Anne Hill (an attorney). I also got a lot out of Keep Sharp by Sanjay Gupta. It helps explain neurodegeneration and dementia from a medical side and helps define the typical progression. It also gives tips on how to stave off dementia for yourself. (Hint: eat veggies, exercise lots, don’t drink too much, do novel things that fire up your brain.)  

Both my wife and my mother attend caregiver support groups which have been enormously helpful to them. I highly recommend seeking out a group of people who understands what you are going through, and can offer firsthand guidance.

But for me, the one who has taught me the most about how to deal with dementia is my father. He adopted me when I was eight years old, and ever since he has been teaching me how to live. How to be a man, the kind of person who stands up for the little guy. How to treat people with kindness and respect. He was always the first person I would go to for advice with a vexing problem. That’s one of the difficult things about this dementia business. I see him across the room from me and want to ask him questions I know he can’t answer. So, I ask him in my head. I ask myself, what would he do? It helps. I thought he was emparting his last lesson when he taught me how to die, when he faced years of chemo with strength and grace. But here we are again. More lessons.

My dad has lost so much but somehow not lost his sense of humor. He can’t talk very fluidly, but sometimes he’ll catch a joke and give you this wry, Irish smile. When he still could talk a bit, he would tell you he was losing his marbles–but he managed to update his estate plan before those marbles were gone, so that’s something. He wanted to leave everyone in a good place. Now, he sits with my mom, holding her hand in silence. My mom makes up for his quietness by talking enough for them both. They are still very much in love. And I suppose that’s all that really matters in the end. Love.