Estate planning for someone with dementia presents several unique challenges. First, you will need to get the estate plan correct since it will be used to help make decisions for them and plan care while they are still alive. Second, there will be an issue with obtaining valid consent for the estate plan. Nonetheless, in order to avoid a solution that the court will impose on the family and to still have some say in the estate plan, it is vital to make sure that the estate plan is in place. The one thing that is critically important is getting a start on estate planning soon after you learn that either you or a loved one is suffering from dementia. Here are some issues that need to be considered when estate planning for someone with a cognitive disease.
One key question is whether the person who signs a legal document actually has the capacity to do so. In other words, if they do not understand what they are signing, there will be questions about the legal validity of the document. It is very important to lay the groundwork for the court to find that the person had the proper capacity. The key part of this is to establish that the person knows what they have signed. It is likely that if this issue comes up in court later on, the person will not be able to explain that to the court since dementia is a progressive disease. It is important to make sure that whatever the person is signing is thoroughly explained to them and that there are witnesses and evidence of this. Any revision of an existing document will also need to be explained before it is signed. Once the disease progresses beyond a certain point, it will simply not be possible for someone with dementia to sign a legally binding document. This is why estate planning is extremely important.
Durable Power of Attorney
One way to get the person’s wishes down on paper in a legally binding way is for them to execute a durable power of attorney. This is a directive that is signed in advance that lays out what the person wants to happen when they are no longer able to make decisions. This document will give someone else the power to make decisions on the person’s behalf. The document will often cover matters such as financial and healthcare issues. Like any document, this document will need to be formalized when the person still has legal capacity because, after that, the document will not be legally binding. This document can be as broad or as narrow as you wish to make it. The power of attorney is a document that can be customized to fit the situation. Once this document is signed, it will always be valid even if the person no longer has legal capacity.
Establishing a Trust
As a person with dementia declines, the costs of their care will be considerable. If a trust has not already been established, chances are that the government will expect that person to exhaust their assets before Medicaid will cover the costs of care. Even still, a trust will be helpful to ensure that the person’s assets will be used for their benefit. In addition, a trust will help manage the person’s finances for the rest of their lifetime. The trustee will make investment decisions. This will be even more formal than the durable power of attorney and it will impose more rules on how the assets can be used. The trustee will usually be a family member or a close friend. In other words, this will ensure that the assets will be managed by someone trustworthy.
It is better to appoint a guardian for someone with dementia than to have the court appoint someone. This will give the family a choice as to who will make the necessary decisions. Guardianship requires that the person with dementia be found incapable of making their own decisions. Appointing a guardian may still require a court hearing depending on what documentation you have. The two issues at play in a hearing are whether the person is incompetent and then who the proper guardian is. Once approved, the guardian can make both healthcare and financial decisions.
There are other documents that can be helpful such as a living will and a will. The will sets forth the person’s wishes for what happens to their property after they pass. Once diagnosed with dementia, there is little time to draft a will if one does not exist already. A living will can include healthcare directives or a do not resuscitate order.
If you have a loved one who has been diagnosed with any form of dementia, it is vital to contact an attorney to help you get started on the process of planning ahead. There is not much time to waste if you do not understand the law or the options. An attorney can help you execute all of the options that are mentioned above and will make sure that they are done correctly. Any mistake that you make when trying to execute estate planning for those with dementia can not only cost time but will also risk your ability to put in place measures that can make a more difficult period easier in one respect.
This article was written by Blake Harris, the Managing Attorney at Mile High Estate Planning (milehighestateplanning.com) where he assists clients with Wills and Trusts, Asset Protection, and Probate. Blake has extensive knowledge and experience helping families plan for and manage the transfer of their assets.
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