Steps to protect finances of those with Alzheimer's
For the 5.5 million Americans with Alzheimer’s, new money rules may be needed
Writes regularly about personal finance and health
Managing money can be challenging in the best of circumstances, but for someone with a diagnosis of Alzheimer’s disease – a form of dementia that affects thinking, memory and behavior – money management can be an impossible task.
If a loved one is having trouble remembering to pay the credit card bill or spending money recklessly as a result of the disease, there are steps you can take to protect his or her credit and financial security.
As many as 5.5 million Americans were living with Alzheimer’s disease in 2017, according to the Alzheimer’s Association, an organization that provides resources for families impacted by the disease. By 2050, 16 million Americans could be living with Alzheimer’s disease. For many of them, money management problems may be the first sign that their brain functionality is on the decline. Among the red flags: unpaid or unopened bills, more purchases on a credit card than usual and numerous cash withdrawals from the ATM.
“A person with Alzheimer’s disease might get into arrears on their debt because they don’t remember that they didn’t pay it,” says Rick Gow, a Falls Church, Virginia-based wealth management adviser who specializes in elder care issues.
A study published in 2017 in the Journal of the American Geriatrics Society found that money management challenges become common as people age. In the study, 30 percent of participants 65 and older developed difficulty managing finances over a 10-year period. For the 10 percent of people 65 and older who have Alzheimer’s disease, the ability to manage money can be even more compromised.
Alzheimer’s disease takes a physical and emotional toll on every family it touches. Here are six ways to lessen the financial side effects.
6 ways to lessen financial effects of Alzheimer's disease
1. Create an environment of trust
No matter what type of financial decisions they’re making, people living with Alzheimer’s disease deserve respect. If it’s your parent, “Don’t walk in there and tell your parent what to do,” says Brenda Avadian, who launched CaregiversVoice.com, a website for caregivers of people living with Alzheimer’s disease and other illnesses.
Avadian watched her father, who was diagnosed with Alzheimer’s disease, go from sending checks to a charitable organization annually to sending them biweekly.
Once a person with Alzheimer’s trusts you, they’re more likely to let you intervene. “My dad ultimately did trust me because of the patience I took with him, and he said, ‘Why don’t you just handle all my stuff, because you seem to know more about it than I do,’” Avadian says.
2. Handle legal matters first.
There are legal steps that can help you protect a person with Alzheimer’s disease from making devastating financial mistakes. Contact an elder law attorney soon after the Alzheimer’s diagnosis, advises Howard S. Krooks, a partner with Elder Law Associates PA in Southeast Florida and a former president of the National Academy of Elder Law Attorneys.
- Appoint a durable power of attorney (POA) for finances.
With power of attorney, an individual has the authority to make financial decisions on another person’s behalf.
- Establish a revocable trust.
With a revocable trust, a family member or other trusted individual is put in charge of the assets of the person with Alzheimer’s. Since the trustee would manage the money, the person with Alzheimer’s disease would need to confer with the trustee before making large expenditures, says Krooks.
- Set up a conservatorship.
If Alzheimer’s disease has become so advanced that the person is unable to make sound decisions, another legal recourse is to convince a judge that the person is incapacitated, or unable to manage his or her own affairs. If a judge agrees, a guardian or custodian would be appointed as a conservator to make decisions on the person’s behalf and take control of the checkbook and credit cards. A guardian would then have the legal authority to take financial actions, such as canceling the person’s credit card account. Because the person with Alzheimer’s disease would lose all control over his or her financial affairs, this option is typically a final resort.
Next, you need to deal with the day-to-day money logistics.
3. Create a bill-payment system.
If a person with Alzheimer’s disease is responsible for paying the household bills, problems may develop down the road if the bills don’t get paid or get paid multiple times, says Ruth Drew, director of family and information services at the Alzheimer’s Association. As a safeguard, you might suggest that the two of you pay the bills together, Drew suggests.
4. Monitor banking activity.
See if the person with Alzheimer’s disease is comfortable with the idea of letting you periodically look at bank statements to ensure that the disease hasn’t diminished his or her financial decision-making skills. If you have a joint account with the person or if you have financial power of attorney, some banks will require two signatures if the person with Alzheimer’s disease makes a withdrawal above a certain amount, Drew says.
5. Set limits on transactions.
Suggest that the person with Alzheimer’s disease contact their credit card company to lower the credit limit on any credit cards. You might also see if they’re comfortable with canceling their credit cards and becoming an authorized user of one of your cards. American Express, for example, lets you add additional card members onto an account and set spending limits for them on some of their charge cards, says spokeswoman Elizabeth Crosta. Debit cards typically have daily cash withdrawal limits, but many banks will let you lower them.
6. Allow for some cash.
As long as a person with Alzheimer’s disease is able to get around on his or her own, give them access to a small amount of cash that they can spend any way that they want.
“Nobody wants to trample on somebody else’s autonomy,” says Drew. “Yet when a person is no longer able to exercise the good judgment that they used to have, you want to preserve their financial stability.”
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