Rarely does a day go by that Marcia Brodie doesn’t have a conversation with people who are unprepared for the unknown.
Through her business, Marcia Trains, Brodie teaches caregivers and family members the best practices for working with someone with cognitive impairment. As she explains how to care for an individual on a day-to-day basis, she often finds that family members are at a loss regarding financial decisions on behalf of their loved one.
“I see situations where someone has been recently diagnosed with dementia and they have nothing in place,” she says. “Sudden cognitive issues arise and there’s no control of the money.”
Scott N. Alperin, the principal attorney at Alperin Law, agrees. A lawyer for 30 years, Alperin has spent the last 20 years focusing on estate planning and elder law. “Timing is critical when it comes to a dementia diagnosis. There’s a limited time period when you have the cognitive ability to make decisions.”
In many cases, adult children who are not involved in their parents’ finances discover that the parent with mild cognitive impairment, dementia, or Alzheimer’s is succumbing to scams or moving money between accounts. With no mechanism in place, such as a power of attorney, what happens to the assets? “This person with cognitive decline can no longer speak for themselves. And no one has the power to manage the estate,” Brodie says.
“There’s a lost opportunity when they wait too long. There are more legal hurdles,” Alperin adds. Without plans in place, guardianship and conservatorship proceedings are required. “Then the court is making decisions instead of you,” Alperin says.
Mild cognitive impairment often precedes a more serious diagnosis, and a family may think there’s time to make these decisions. However, Brodie says, this is a progressive disease – so as the parent ages, it advances. She suggests acting sooner rather than later to determine what will happen to personal assets. “Don’t wait for the unknowns. Don’t be left second-guessing.”
The legal definition of capacity, or the mental ability to understand personal decisions, has several components, according to Alperin. An individual must know who the natural objects of one’s bounty are (the likely recipients of the estate), understand the nature and composition of their assets, and understand the nature and consequences of their decisions. While a neuropsychologist may be part of this evaluation, Alperin says that a lawyer can also make the determination. “There’s no litmus test for capacity,” he adds, though he often sees clues or red flags that don’t meet the threshold ability to make informed decisions.
The most important document to create is the general durable power of attorney (POA); all other planning can be done later even if the cognitive impairment gets worse. However, Alperin notes, an online POA does not comply with Virginia law. Two key powers in a well-drafted, elder law POA are often not included in a more general durable POA. Specifically, these powers include the right to unlimited gifting and the ability to create irrevocable trusts (where someone is given the authority to make decisions, enter into contracts and generally act on the behalf of the person granting the power).
In many cases, Alperin suggests engaging an attorney who practices elder law to draft the POA. “Many attorneys not practicing elder law are not dealing with Medicaid recipients or veterans, people who will run out of money if they need to pay $10,000 per month to a nursing home,” Alperin says. The goal is to protect the assets to pay for things not covered by Medicare or Medicaid. Planning keeps a pot of money for these expenses.
Many of Alperin’s clients with mild cognitive impairment don’t meet the definition of incapacity, but they are experiencing diminished or waning capacity and do not qualify for guardianship. However, they are prone to financial exploitation and their assets need to be repositioned to avoid scams. Like Brodie, Alperin suggests communicating with family members before losing this mental capacity. “Create a road map for them,” he says.
Early financial planning helps ease ramifications of cognitive impairment diagnosis
