PLANNING FOR MENTAL DECLINE

by Monte L. Schatz

When the topic of estate planning comes to mind, most individuals think about the distribution of their assets at death.   The increased longevity of our population requires equal attention to diminished cognitive skills caused by dementia or other diseases that affect normal cognitive functioning.

Dementia is a syndrome in which there is deterioration in memory, thinking, behavior and the ability to perform everyday activities.  An estimated 5.5 million Americans of all ages have Alzheimer’s disease.  One in 10 people age 65 and older has Alzheimer’s dementia.  The average survival time for people diagnosed with dementia is about four and a half years, new research shows. Those diagnosed before age 70 typically live for a decade or longer.  The time frame from mild cognitive decline to the onset of dementia averages seven years.   Typically, when an individual is in the moderately severe cognitive decline, assistance may be required for daily activities and management of the person’s financial affairs.

The difficulties that families encounter is determining when the person no longer can manage their own affairs or maintain his or her own physical well-being.  The ultimate question of capacity is a legal determination and in some cases a judicial determination, not a clinical finding. A clinical assessment stands as strong evidence to which the lawyer must apply judgment considering all the factors in the case at hand.  While psychologists and other health professionals may use different terms than lawyers, conceptually the clinical model of capacity has striking similarities to the legal model.

The best estate planning approach is to take proactive legal steps ahead of mental decline to assure adequate personal and financial care and to minimize unnecessary legal costs or litigation expenses.  The legal tools available to circumvent legal capacity issues include:

  • A will drafted in advance of cognitive decline to minimize heirs contesting an estate.
  • A living trust should be considered to assure proper management of assets and continuity of financial management by a trustee for the incapacitated person’s benefit.
  • A durable power of attorney for financial matters designating a trusted and financially responsible individual to manage assets upon the onset of mental incapacity.
  • A health care power of attorney or directive that provides for a designated person to make health decisions in the event of incapacity.
  • A living will that outlines, in advance, the wishes of a person who receives artificial life sustaining treatment.

Thoughtful estate planning in advance of mental decline can help avoid expensive court alternatives that can include court conservatorships or guardianships during life and/or estate litigation after the person’s death.  More importantly, well designed advanced planning minimizes the possibility of disputes among heirs that may disrupt family relationships.

© 2017 Vandenack Weaver LLC
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Preventing Financial Abuse of Elders

Elder abuse can take many forms, but according to a True Link report, 36.9% of elder abuse takes the form of financial abuse in any five year period. This same True Link report estimates that financial abuse of elders costs $36.48 billion, annually. One particularly challenging area of financial elder abuse stems from high-pressure selling tactics for estate planning tools, such as living trusts, that are unnecessary for the senior.

Although living trusts have many benefits, the seniors targeted by the high pressure sales tactics tend to have few transferrable assets, which makes the benefits of having a living trust relatively small. What’s worse, when a sales tactic is successful and the senior signs up for a living trust, usually that relationship leads to an estimated $2,000 of needless financial products sold to that senior for every $20 lost to the initial exploitation. Overall, this type of financial elder abuse costs seniors an estimated $17 billion dollars, with trust abuse at $6.7 billion, annually.

For elders, prior to agreeing to a living trust or other financial vehicle, speaking to another financial professional will aid in combating these abusive sales tactics. Moreover, if you purchase a living trust agreement in a location other than the seller’s place of business, you have three days to cancel the deal. Finally, take the time to verify any facts presented in a high pressure sales effort.

© 2016 Vandenack Williams LLC
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