Estate Planning for Dementia: An Essential Primer

More than five million Americans currently suffer from dementia, a mental disorder with a range of symptoms, including memory disorders, personality changes, and impaired reasoning. With our aging Baby Boomer population, the number of Americans with dementia is expected to grow by more than seven million between now and 2025. In addition, about 50 percent of people aged 85 or older will suffer from this debilitating condition that affects not only the individual, but family and friends as well.

With such high prevalence of this disorder, people should act well in advance of approaching their senior years with regard to estate planning. Documents that drive the distribution of your assets should be in place before dementia takes hold, as the disease makes it impossible for individuals to understand the often-complex issues related to estate planning and make informed decisions during the planning process.  When executing documents, you must have a “sound mind,” defined as the ability to understand the circumstances, act on your free will, and understand the consequences of your decisions.

Benefits of Pre-Dementia Estate Planning

The benefits of estate planning in any circumstance, especially in light of the threat of dementia are many in number. With proper planning, you’ll be able to provide financial support for your family/beneficiaries, even in the case of an unexpected death.  You can choose who will receive your assets according to your wishes, rather than having a probate court make this decision.

Also, you can decide in advance who will take care of your minor children in the event of the untimely death of you and your spouse. With the right legal documents in place, you control who makes important medical and financial decisions in the case you become incapacitated, and avoid the court guardianship process. Most of us want to determine our funeral arrangements, and through planning, you’ll avoid confusion regarding your funeral and final wishes.

In an age of already diminishing personal privacy, you’ll be able to maintain the privacy of your personal matters even after you pass way. Without the right documents in place, these matters become public during the probate process. If you own a business, you can ensure that the business continues to operate smoothly—for your employees and customers—and to the advantage of your benefactors.

Finally, you’ll benefit by avoiding extra time and additional expenses. In fact, you may potentially reduce your tax burden.

Taking Control with the Right Counsel and Documents

To plan properly for dementia and other health issues related to aging, you need to work with an estate planning attorney to execute a set of four basic documents that offer immense protection of your assets and ensure that those caring for you are empowered to abide by your wishes:

  • Durable Power of Attorney
  • Living Will
  • Health Care Power of Attorney
  • Will

Durable Power of Attorney

A durable power of attorney (DPOA) empowers an individual you trust (your attorney-in-fact) to carry out multiple duties on your behalf. First, your attorney-in-fact can manage your financial and legal affairs in case you are unable to do so. This includes taking care of routine items, from paying your bills to managing your investments and taking care of your housing needs.

Without a DPOA, no one—not even your spouse, or the executor appointed in your will would have authority to take care of necessary financial tasks. Family members would have to go to court, produce evidence that you cannot manage your affairs, and ask that the court appoint a conservator or guardian to handle your money.  Going forward, the conservator would be subject to court oversight.

The conservatorship/guardianship process is something that no one wants and can be avoided. It’s expensive, intrusive, and time-consuming.  DPOAs are beneficial, especially if there is a long period of incapacity, and these documents often take effect in light of a dementia diagnosis.

Living Will

A living will states your wishes for end-of-life medical care. This document addresses issues such as life support, pain management, life-prolonging medical treatment, and other critical information. Living wills are flexible documents, in that you can go into as much or as little detail as you wish.

For example, you might want everything necessary to relieve pain (palliative care or comfort care) at you’re the disposal of your care providers, even if you don’t want to receive extraordinary measures such as CPR or life support. Regardless, it’s your life, and the living will empowers those caring for you to treat you according to your desire.

Health Care Power of Attorney

A health care power of attorney (HCPOA), is another legal document pertaining to your health care.  The HCPOA allows the person you designate to make medical decisions on your behalf if you are unable to do so.  This person (your agent) will be in charge of making sure the wishes and directives set out in your living will are honored. As you can see, it’s important to have both a living will and a health care power of attorney in place, as the two documents often apply in concert to empower your appointed decision-maker to suffer while you are living and in end-of-life circumstances (which can sometimes quickly arrive at a decision point).

Will

A will allows you to name the person whom you trust to carry out your wishes after your death. The executor often has to make several key decisions. This person determines who will receive your property upon your death. A will also allows you to appoint guardians for your minor children.

People often ask me if dementia will prevent someone from executing a will. The short answer is that you must possess a sound mind and understand certain things in able to do so. Here’s a lengthier explanation. First, you must understand the nature and extent of your property, which means you know what you own and how much of it.  Also, you must remember who your relatives and descendants are and be able to articulate who should inherit your property.

Furthermore, you must understand what a will is and how it disposes of property. Finally, you need to have the capacity to understand how all these things relate to each other and come together to form a plan.

Final Thoughts

The standard of ability to sign a living will, power of attorney (POA), or a more specific health care power of attorney is slightly greater in the eyes of the courts than for a will.  However, just because one exhibits early stages of dementia does not necessarily mean they are yet incompetent under the law.

For example, a person may forget the date and have trouble remembering their telephone number, but he or she might remember many other important facts.  To certify a signature, you may be required to provide at a minimum a physician’s report stating that you are competent.

There are some key questions that should drive your considerations when preparing these documents with your estate planning attorney. For example, where would you like to live and receive treatment? Some people prefer to receive home-based care, while others would prefer to move to a specific assisted living facility.

Who do you trust to make financial and medical decisions for you? You should prepare for not one, but two or more people to take on the outlined duties in your legal documents. Often, while spouses are equipped to make end-of-life decisions, you may decide that having an adult child take the lead as your executor makes more sense, as your spouse may be overcome with grief upon your death.

And as with other considerations, how will you pay for your care? Effective estate planning should work in tandem with equally effective financial planning for the costs incurred due to hospitalizations, long-term care (both home-based and assisted-living), and funeral expenses.

We can’t stress enough how important it is to plan for your estate needs with regard to the prevalence of dementia, and the sooner the better. Nearly five percent of the dementia-suffering population is diagnosed as early-onset dementia, defined as occurring between the ages of 30 and 65.  Taking care of a loved one that has been diagnosed with dementia is a heart wrenching process.  Failure to put an estate plan in place just complicates a very difficult situation.  If you’d like to begin the process of estate planning or make adjustments to your legal documents based on the information outlined in this article, please contact us at the Forrest Firm today.