SPOTLIGHT ON FINANCE
By Frances O’Rourke, Senior Vice President,
Key Private Bank
CAPITAL DISTRICT- Dementia is caused by physical changes in the brain and affects thinking, memory and reasoning. While Alzheimer’s disease is the most common form of dementia, there are other types of dementia caused by various infections and diseases, such as vascular dementia, mixed dementia, Lewy body disease, Parkinson’s disease and Huntington’s disease. All have an adverse impact on the cognitive abilities of aging adults, and all can make ordinarily routine tasks like balancing a checkbook increasingly difficult.
About 5 to 8 percent of all people age 65 have some form of dementia. This number doubles every five years above that age. In fact, it is estimated that as many as half of people 85 or older suffer from dementia.1 In America alone, more than 5 million Americans have Alzheimer’s disease. By 2050 that number could triple, adding significantly to the number of people suffering from dementia in our country.
From a financial standpoint, these statistics are important because the decline in mental ability associated with dementia ultimately manifests in a person’s inability to manage their finances. And the consequences can be severe. Therefore, understanding the impact of dementia on money management, as well as being able to recognize the signs of mismanagement and fraud, is important.
Preparing to live with dementia
When caused by degenerative disease or trauma, dementia is irreversible. However, while the mind cannot be preserved, the financial well-being of you and those you love can be. So the best way to prepare to live with dementia is to proactively plan to survive the cost of it. Here are five steps to take before diagnosis.
- Draw up an advance health-care directive and designate a financial power of attorney for you and your spouse. This way you will have a trusted person managing your finances if you are unable to do so.
- Work with a certified financial planner and attorney to develop a long-term strategy to pay for care and protect family assets.
- Designate money managers to monitor financial management and keep an eye out for financial negligence and/or abuse. Discuss ways to keep yourself involved and review statements regularly.
- Keep a folder with all of your current financial account information, insurance policies, income sources (employer, social security, pension, IRA withdrawals, etc.), prescriptions, service provider (physician, lawyer, accountant, financial planner, etc.) contacts, tax returns and will. Be sure a trusted professional or family member knows where to find these documents.
- Talk with your family and maintain an open dialogue. It’s not an easy conversation but it’s extremely important to talk about the possible onset of dementia. Whether ensuring that seniors’ wishes for care are understood and met or working as a family to develop a plan, these are serious issues that need to be addressed openly, with sincerity and fairness to all involved.
Looking for the financial warning signs
Mismanagement of money is one of the earliest and most reliable warning signs of dementia. While most people tend to look for signs of memory loss, financial mistakes and challenges might actually be better cues. According to Daniel Marson, a professor of neurology at the University of Alabama at Birmingham who has done several studies on financial capacity and memory loss, declining money skills are evident in people with mild cognitive impairment (MCI) in the year prior to the onset of Alzheimer’s disease.2
- Here are some warning signs to look for:
- Trouble counting change.
- Mistakes writing checks or balancing a checkbook, and repeated overdraft fees.
- A pattern of paying bills late, not at all or in duplicate.
- Falling for scams.
- Making unwise investments.
- Erratic or unusual purchasing behavior or money withdrawals.
- Calls from banks about problems with accounts.
- Unusually large number of donation requests.
Discussing memory loss and financial troubles with a loved one can be difficult, but you can help your parent or elder in several ways if you notice any of these money management warning signs. First, offer to lighten their load and take on one of the financial responsibilities, such as balancing the checkbook or paying the bills. Add them to a do not call registry. Help them create a spending plan for essentials and charitable donations. Set up automatic payments with as many accounts as possible to avoid late or duplicate payments. Work with them to help select a power of attorney. Last, make sure you know where all essential financial documents, passwords and other legal information, as well as living wills and health directives are located.
Ideally you will have an open conversation and discuss all financial and health matters before the onset of dementia. But if that doesn’t happen quickly enough, and you are having trouble starting the conversation, you can always enlist the help of a third party—an accountant, attorney or financial advisor—to help get the conversation going. It’s a very important conversation to have, and sooner is always better than later.
Fran O’Rourke is senior vice president and market manager, Key Private Bank, for Key’s Capital Region. She can be reached at either 518-257-8733 or [email protected] This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. ©2016 KeyCorp. KeyBank is Member FDIC.
Recognizing the signs of financial abuse of someone diagnosed with dementia
According to Genworth Financial’s “Genworth 2015 Cost of Care Survey,” the average cost of care in an American assisted living facility is more than $3,800 per month, or $45,760 per year.3 The average cost for a home health aide is $20 per hour. Other common care costs include ongoing medical treatment, treatment of conditions, safety-related expenses, prescription drugs and personal care supplies. With the cost of living with dementia so high, it is important to protect any and all money that someone diagnosed with dementia has.
Unfortunately, an older adult who shows the signs of dementia is an easy target for financial abuse from family members, caretakers and even strangers. As a result, poor physical and mental health make the elderly easy targets for financial predators—senior Americans are losing $2.9 billion per year to predators through deceit, threats and emotional manipulation. This statistic is relevant because we now know that one of the early signs of all types of dementia is a growing inability to handle financial matters.
- Here are some warning signs that someone diagnosed with dementia may be a victim of financial abuse:
- Excessive use of ATM cards and credit cards.
- Money disappearing and not being accounted for.
- Unusual purchases.
- Abrupt changes to wills and other financial documents.
- Unpaid bills.
- Unexpected changes to the house (incomplete renovations or unnecessary work being done).
- Unexplained disappearance of valuables.
- Unexplained transfer of assets or money to a family member or someone outside of the family.
- Additional names on bank accounts or credit cards.
- Discovery of family members’ signatures on forged or blank checks, financial documents or titles in their possession.
- Sudden new friends or acquaintances.
- Contributions to phony charities.
Experts estimate for every reported case of elder financial exploitation, 43 go unrecognized.4 This is why it is so important to expand the conversation around dementia to include warning signs of abuse. Because while the cost of dementia care is staggering, so too is the threat of financial destruction that this abuse can bring to the family. Therefore, it is a good idea to run background checks on potential care givers and to monitor all accounts. Proper planning certainly can’t minimize the disease, but it can reduce the financial devastation so often associated with it.
1“Diseases and Conditions: Dementia.” Cleveland Clinic.
2“Memory Problems Before Dementia,” by Paula Spencer Scott. Caring.com.
3“Genworth 2015 Cost of Care Survey.” Genworth, Inc.
4“Spotlight on Scams that Target Older Adults,” by Jenefer Duane. Consumer Financial Protection Bureau.