Protecting Your Estate from the Possibility of Cognitive Decline

A solid estate plan accounts for the full range of possibilities to create contingencies that will keep the property protected in virtually any situation. This includes the possibility of cognitive decline. With people living longer than ever before in history, the growth rates relating to dementia are increasing. Dementia and other forms of cognitive decline are an especially challenging situation for an estate as the plan needs to protect property from decisions possibly made without full faculties while also ensuring that you are provided for in the long term. After a dementia diagnosis, individuals can live for many years, but will need close supervision during this time. This may mean purchasing new products like long-term care insurance , as Medicare, and Medicare supplements do not cover the services that would be necessary. Planning for this ahead of time is crucial for maintaining financial solvency.  

Discussing the Estate Plan with a Financial Planner  

The first step in protecting an estate plan from possible cognitive decline is having an open and honest conversation with a financial planner. To the extent the planner is certified in long term care ( CLTC), that is even better. Even without memory issues, our ability to manage complex investments involving several different asset classes diminishes with age. For this reason, it is often desirable to simplify investment structures over time. A financial planner can help identify the best products for allowing this to happen. Many financial institutions have products made specifically for this purpose. These products help ensure that investments have the opportunity to grow more than they would in traditional savings accounts, yet remain protected from market losses as much as possible.  

Your financial planner can help you create contingency plans for moving your investments between these different products. You may want different pathways established so that your portfolio is able to manage itself more or less. For this strategy to be successful, it is critical to be clear about when to follow which pathway in the event that you are not able to direct it yourself. Once these pathways are set, you should revisit them regularly with your financial adviser to see whether or not they need to be updated. Remember that these pathways are what will keep your estate afloat if you experience cognitive decline, so keep them completely in line with your vision for the future. In addition, it is a good idea to talk about plans with family members and people who may act on your behalf in the future as a power of attorney “agent”, so that they understand your larger vision. 

Planning for the Future with Your Family  

At the heart of any estate plan is a vision of how assets will be distributed at the end of life. Your family, or at least key members of it, should have a thorough understanding of this plan and stay updated about any changes that you make. These individuals can help ensure that your vision is executed as you wish should you experience cognitive decline. Importantly, these individuals should have an understanding of how you want your investments to perform over time and then how your property will be divided. If your family needs to scramble or guess at your plan, that will create unnecessary stress while also jeopardizing your larger vision. Of course, there are also some official legal documents an attorney can create for you which you should review with your family in terms of planning for cognitive decline. 

The most important document is one that appoints an agent who will act on your behalf under a power of attorney document.  

This person assumes all responsibility for making financial and legal decisions on your behalf if you are no longer able to do so. Your power of attorney must have the best understanding of your overall vision and your goals as this person will make all decisions for you. Appoint someone who you trust to execute your wishes as discussed, but also someone who has your best interests at heart. Even with the best planning, there may be decisions that must be made that were not previously discussed, so keep this in mind. However, you should also have a few other tools to help with decision making, including a living will, or health care power of attorney document. 

If you become unable to make medical decisions, a health care power of attorney will outline what your wishes are . This legal document helps you spell out the types of care that you would like in specific settings. Using a template is often the best option as it will prevent you from overlooking important questions. As with everything else that is part of your estate plan, your living will should be reviewed frequently, especially as your values shift. A living will also allows you to appoint a medical power of attorney. While a power of attorney makes financial and legal decisions, the medical power of attorney can make medical decisions on your behalf when you are no longer able to do so. This person should have a very clear understanding of your values and priorities so that they can make decisions that align with them in regard to your health. Choosing the right person is especially important for those situations that fall outside of the ones outlined in your living will.