Texas Estate Planning

Money & Dementia: How the Diagnosis Can Affect Your Finances

Aging is difficult, especially if you have dementia. In a recent story from NPR titled, “An older person's money management errors may be a sign of some sort of dementia,” reporter, Sarah Boden, speaks with people across America who have experienced the effects of dementia on family finances. The conversations are insightful, yet heartbreaking. 

“Dementia specialists say money problems can be one of the first signs of trouble,” NPR reported. Experts spoke of elders being scammed or taken advantage of by financial institutions and family members, but stories also included reckless spending and seniors forgetting to mail out checks. Everyone should be on the lookout for financial predators and missteps as their loved ones begin to age. 

The story continues, citing, “One study of some 81,000 Medicare recipients found that people with Alzheimer's disease and related dementias started to develop poor credit up to six years before their diagnosis.” Dementia comes in many different forms which can impact someone’s ability to handle their money. But one thing is clear: dementia negatively impacts cognition and memory, two functions necessary for taking care of financial duties such as paying bills. 

Many seniors value their independence, making conversations about money and aging emotionally challenging. And although financial institutions are taking steps to protect seniors from scams and thoughtless spending, the responsibility ultimately falls on family and friends who know the aging person and their values. 

It can be hard to see the impact of dementia on a loved one’s finances, especially if you live out of state, but it’s important to check in to avoid catastrophe. This was especially important for one family in the story who needed money to afford their mother’s care, but lost out on selling their home due to foreclosure because her dementia made her unable to pay the mortgage. 

There are private companies that will keep an eye on finances for a monthly fee and certain accounts allow owners to add a trusted contact to be notified in case of any major withdrawals, but these options aren’t available or appropriate for everyone. In estate planning, a Durable Power of Attorney is a document which grants someone you know and trust the authority to access all of your financial accounts. 

It’s a huge act of trust and respect to give someone that much access to your finances, but it’s often vital for estate planning purposes. For instance, if your loved one is in the hospital for an extended period of time, someone will need to go to their residence and pay the bills before they begin to pile up. But banks are built to keep people’s money safe, which is why a legally binding document is necessary to handle someone else’s finances when they are unable to. 

Speak with an estate planning attorney licensed in your state if you begin to notice things are changing with you or your loved one’s cognition and spending habits. Making sure the family home and other assets are protected can be immensely helpful for the next generation – start the process today by giving us a call: 713-429-0218

Blunders in Estate Planning May Lead to Breach of Family Harmony

The Financial Post’s recent article entitled “Avoid these five mistakes when estate planning to preserve family peace” provides us with some of the biggest mistakes:

1. Treating family members differently. People do this frequently. They may have valid reasons for doing so. However, it’s still not a great idea. Instead, comfortably tell your children in advance why you’re doing this. This will avoid anger and jealousy between the children when they discover this. Try to leave assets equally, even if you don’t think it is fair.
2. Pass the family vacation home to multiple children. It's best to either sell the home in your later years or, if you keep it, make sure it is openly discussed. You might set up life insurance to specifically pay taxes and perhaps one or two children, so the remaining children can afford to keep the cottage. Even so, a sale is the cleanest approach.
3. Don’t tell the children anything about your money. Not a good idea. This approach often eliminates any ability to understand what might be most meaningful to your children or beneficiaries. Maybe less so in terms of cash, but in terms of family heirlooms or property. Perhaps a favorite piece of furniture was really important to two children, but there was never any discussion about it. As a result, it’s now completely left to them to fight over. This may sound like a small issue. However, many families have split up forever over just this type of scenario.
4. Purposely or inadvertently leaving most or all assets to a new spouse. It can occur by accident due to poor planning around ownership titles, lack of pre-nuptial agreements or the unintended naming of beneficiaries on investment accounts or life insurance. However, sometimes, it’s meant to hurt the children. The hurt can certainly go both ways and is frequently a major issue when a spouse isn’t treated fairly. Ask an experienced estate planning attorney to walk through this with you.
5. Significant charitable giving. If your gifts to charity aren’t discussed with your so-called traditional beneficiaries, there can be conflicts with the charity that can be drawn out.

Communicate what you’re doing and why to your family.

Reference: Financial Post (Nov. 9, 2022) “Avoid these five mistakes when estate planning to preserve family peace”

 

Making a Family Foundation Work

For a long time family foundations have been an excellent way for wealthy people to leave a positive legacy of philanthropy in their communities. Some foundations last for generations after the founder passes away and create a sense of purpose for later family members. Other foundations, however, become sources of family feuds and do not last.

Recently, Wealth Management wrote about the traits of those foundations that do last in "Top Five Traits of Effective Family Philanthropy."

The identified traits include:

• Mission – Foundations that work have clear missions so everyone knows what the purpose of the foundation is and they can all work towards it.
• Decision-Making – It is important to recognize that family members will not always agree. A clear and fair decision-making process should be put in place so those disagreements do not fester and spoil the foundation.
• Dialogue Across Generations – It is important that younger generations be brought into the process when they are capable so they can learn from experienced family members.
• Personal Passions – Different family members will be passionate about different charitable works. Allowing family members some freedom to pursue their passions keeps them involved and excited about the foundation.
• Outside Experience – It is important to be open to professional advice about foundation operations and the best ways to carry out the mission.

Ultimately, an experienced estate planning attorney can help ensure the long-term success of a family foundation by careful planning upfront.

Reference: Wealth Management (May 13, 2016) "Top Five Traits of Effective Family Philanthropy."