By Lee Sherman
According to the Alzheimer’s Association, approximately 15 to 20 percent of adults 65 and older will end up with some form of mild cognitive impairment (MCI), either from a stroke, a car accident, the onset of dementia or Alzheimer’s disease itself. If that happens to you it can make it difficult to continue to make financial decisions for yourself.
Once a doctor has determined that you are suffering from MCI, while you still may be healthy enough to carry out most of your activities, you’ll want to consider letting someone else handle your finances. Something as seemingly simple as remembering to pay your bills on time can become a mountain you can no longer climb.
But who can you trust and what are the best practices around letting someone else take over your financial planning? Often, this will fall to the spouse of the person affected. But, since most couples are around the same age, you need to be sure that at least one of you has not been afflicted.
Planning for this scenario is best done before as early as possible as part of your general financial planning. Just as you should designate an executor for your will, you should decide who should take over your day-to-day financial decisions for you in the unfortunate event that you become mentally incapacitated. Not only will this take the pressure off of your heirs, it will also allow you to ensure that your wishes for how your money should be handled will be respected. Do this now, while you are still of sound enough mind and body.
You can codify your wishes in a legally binding financial document such as a financial power of attorney, a will, or a living trust. According to financial planners, you can designate anyone you choose as your agent (a spouse, friend, adult child, or trusted advisor) to make financial decisions on your behalf including paying bills and taxes, handling your investments, taking over the operation of your business, and selling your home. A durable power of attorney will go into effect as soon as it is established, while a springing power of attorney (which isn’t available in every state) will only take effect when you’ve lost mental capacity.
A financial power of attorney ends when you pass and whoever is named the executor of your will takes over the distribution of your assets. Remember, you must specifically appoint the person you’ve given power of attorney to also be the executor of your will if you want them to continue managing your financial affairs once you’re gone.
A living trust, while it isn’t a replacement for a will, can keep your finances out of the public eye. While all of the benefits of a living trust are outside the scope of this article, it’s important to note that you can appoint yourself as the trustee and designate a successor, such as a spouse or child, to take over managing the trust should you become incapacitated, keeping your money in the family.
A financial power of attorney, (along with a medical power of attorney, an advance directive, and a will) will give you the peace of mind you need to know that you will be able to live out the rest of your life and ensure a financial future for your heirs.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.