Legal and Financial Planning for People with Dementia
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Many people are unprepared to deal with the legal and financial consequences of a serious illness such as Alzheimer's disease or a related dementia. Legal and medical experts encourage people recently diagnosed with a serious illness — particularly one that is expected to cause declining mental and physical health — to examine and update their financial and health care arrangements as soon as possible. Basic legal and financial documents, such as a will, a living trust, and advance directives, are available to ensure that the person's late-stage or end-of-life health care and financial decisions are carried out.
A complication of diseases such as Alzheimer's and related dementias is that the person may lack or gradually lose the ability to think clearly. This change affects his or her ability to make decisions and participate in legal and financial planning.
People with early-stage Alzheimer's or a related dementia can often understand many aspects and consequences of legal decision-making. However, legal and medical experts say that many forms of planning can help the person and his or her family address current issues and plan for next steps, even if the person is diagnosed with later-stage dementia.
There are good reasons to retain a lawyer when preparing advance planning documents. For example, a lawyer can help interpret different state laws and suggest ways to ensure that the person's and family's wishes are carried out. It's important to understand that laws vary by state, and changes in a person's situation — for example, a divorce, relocation, or death in the family — can influence how documents are prepared and maintained. Life changes may also mean a document needs to be revised to remain valid.
Legal, Financial, and Health Care Planning Documents
Families beginning the legal planning process should discuss their approach, what they want to happen, and which legal documents they’ll need. Depending on the family situation and the applicable state laws, a lawyer may introduce a variety of documents to assist in this process, including documents that communicate:
- Health care wishes of someone who can no longer make health care decisions.
- Financial management and estate plan wishes of someone who can no longer make financial decisions.
Advance Health Care Directives for People with Dementia
Advance directives for health care are documents that communicate a person’s health care wishes. Advance directives go into effect after the person no longer can make decisions on their own. In most cases, these documents must be prepared while the person is legally able to execute them. Health care directives may include the following:
A durable power of attorney for health care designates a person, sometimes called an agent or proxy, to make health care decisions when the person with dementia can no longer do so.
A living will records a person's wishes for medical treatment near the end of life or if the person is permanently unconscious and cannot make decisions about emergency treatment.
A do not resuscitate order, or DNR, instructs health care professionals not to perform cardiopulmonary resuscitation (CPR) if a person's heart stops or if he or she stops breathing. A DNR order is signed by a doctor and put in a person's medical chart.
|Medical Document||How It Is Used|
|Durable Power of Attorney for Health Care||Gives a designated person the authority to make health care decisions on behalf of the person with dementia|
|Living Will||Describes and instructs how and when the person wants different types of end-of-life health care|
|Do Not Resuscitate Order||Instructs healthcare professionals not to perform CPR in case of stopped heart or stopped breathing|
In addition to these, there may be other documents for specific health care procedures including organ and tissue donation, dialysis, brain donation, and blood transfusions. For more information about advance directives for health care, see Advance care planning: Health care directives.
Advance Directives for Financial and Estate Management
Advance directives for financial and estate management must be created while the person with Alzheimer's or a related dementia has “legal capacity" to make decisions on their own, meaning they can still understand the decisions and what they might mean. These directives may include the following:
A durable power of attorney for finances names someone to make financial decisions when the person with Alzheimer's or a related dementia no longer can. It can help avoid court actions that may take away control of financial affairs.
A will indicates how a person's assets and estate will be distributed upon their death. It also can specify:
- Arrangements for care of children, adult dependents, or pets
- Trusts to manage the estate
- Funeral and/or burial arrangements
Medical and legal experts say that the newly diagnosed person with Alzheimer's or a related dementia and his or her family should create or update a will as soon as possible after diagnosis.
A living trust addresses the management of money and property while a person is still living. The trust provides instructions about the person's estate and appoints someone, called the trustee, to hold titles to property and money on the person’s behalf. Using the instructions in the living trust, the trustee can pay bills or make other financial and property decisions when the person with dementia can no longer manage his or her affairs.
A living trust can:
- Cover a wide range of property (including cars, homes, jewelry, bonds, cash, etc.)
- Provide a detailed plan for property transfer or sale
- Avoid the expense and delay of probate (in which the courts establish the validity of a will)
- State how property and funds should be distributed when the last beneficiary dies
|Legal/Financial Document||How It Is Used|
|Durable Power of Attorney for Finances||Gives a designated person the authority to make legal and financial decisions on behalf of the person with dementia|
|Will||Indicates how a person's assets and estate will be distributed among beneficiaries after his or her death|
|Living Trust||Gives a designated person (trustee) the authority to hold and distribute property and money for the person with Alzheimer's or a related dementia|
Where Can I Get Help with Legal and Financial Planning?
Health care providers cannot act as legal or financial advisers, but they can encourage planning discussions between patients and their families. Doctors can also guide patients, families, the care team, attorneys, and judges regarding the patient's ability to make decisions. Discussing advance care planning decisions with a doctor is free through Medicare during the annual wellness visit. Private health insurance may also cover these discussions.
An elder law attorney helps older adults and their families interpret state laws, plan how wishes will be carried out, understand financial options, and learn how to preserve financial assets.
It’s a good idea to ask about a lawyer’s fees before making an appointment. The National Academy of Elder Law Attorneys and the American Bar Association can help families find qualified attorneys. Also, a local bar association can help identify free legal aid options. See the resources at the end of this article for more information.
Geriatric care managers are trained social workers or nurses who can help people with dementia and their families. Read more about geriatric care managers.
Advance Planning Advice for People with Dementia
Start discussions early. The rate of decline differs for each person with dementia, and his or her ability to be involved in planning will decline over time. People in the early stages of the disease may be able to understand the issues, but they may also be defensive, frustrated, and/or emotionally unable to deal with difficult questions. The person may even be in denial or not ready to face their diagnosis. This is normal. Be patient and seek outside help from a lawyer or geriatric care manager if needed. Remember that not all people are diagnosed at an early stage. Decision-making may already be difficult by the time the person with dementia is diagnosed.
Gather important papers. When an emergency arises or when the person with dementia can no longer manage their own affairs, family members or a proxy will need access to important papers, such as a living will or financial documents. To make sure the wishes of the person with dementia are followed, put important papers in a secure place and provide copies to family members or another trusted person. A lawyer can keep a set of the papers as well.
Review plans over time. Changes in personal situations — such as a divorce, relocation, or death in the family — and in state laws can affect how legal documents are prepared and maintained. Review plans regularly, and update documents as needed.
Reduce anxiety about funeral and burial arrangements. Advance planning for the funeral and burial can provide a sense of peace and reduce anxiety for both the person with dementia as well as his or her family.
Legal and Financial Planning Resources for Low-Income Families
Families who cannot afford a lawyer can still plan for the future. Samples of basic health planning documents are available online. Area Agency on Aging officials may provide legal advice or help. Other possible sources of legal assistance and referral include state legal aid offices, state bar associations, local nonprofit agencies, foundations, and social service agencies.
For More Information About Advance Care Planning for a Person with Dementia
NIA Alzheimer’s and related Dementias Education and Referral (ADEAR) Center
The National Institute on Aging’s ADEAR Center offers information and free print publications about Alzheimer’s disease and related dementias for families, caregivers, and health professionals. ADEAR Center staff answer telephone, email, and written requests and make referrals to local and national resources.
Explore the Alzheimers.gov portal for information and resources on Alzheimer’s and related dementias from across the federal government.
Centers for Medicare and Medicaid Services
Fraud Prevention Toolkit
Consumer Financial Protection Bureau
Office for Older Americans
Financial Literacy and Education Commission
U.S. Department of the Treasury
Health Resources & Services Administration
This content is provided by the NIH National Institute on Aging (NIA). NIA scientists and other experts review this content to ensure it is accurate and up to date.
October 29, 2020