By Tim Grant, Pittsburgh Post-Gazette (TNS)
Cognitive impairment can have a huge impact on a person’s ability to look after their own money.
When someone who is usually prompt about handling finances starts forgetting to pay bills, it’s a common warning sign of the beginning stages of dementia.
“Depending on the family dynamics, the person’s financial adviser may be the first to notice,” said Shomari Hearn, vice president of Palisades Hudson Financial Group in Fort Lauderdale, Fla.
As a financial planner serving many older clients, Hearn sometimes works with people who are in the beginning stages of dementia. But even when they recognize and acknowledge their own declining capabilities, many people, even in the later stages of dementia, want to stay involved with their money.
“Giving someone else the power to take control of your affairs can be a bit scary,” Hearn said, which is why he recommends designing a health care proxy and power of attorney that only become effective once two physicians determine that you lack the capacity to make medical and financial decisions.
This type of power of attorney is called a “springing” power of attorney. Springing powers of attorney are not permitted in every state, but Pennsylvania does permit them.
In Florida, however, a power of attorney must be effective immediately. The person who has the power of attorney can act as an agent handling all of a person’s financial and legal affairs.
Dementia is not a disease, but rather a group of symptoms that affect mental tasks like memory and reasoning. Dementia can be caused by a variety of conditions, the most common of which is Alzheimer’s disease.
Alzheimer’s is a progressive disease of the brain that slowly impairs memory and cognitive function. The exact cause is unknown, and there is no cure. People who have it can easily get lost, forget things and have mood swings. Gradually they lose control of their bodily functions and usually die three to nine years after diagnosis, according to the Alzheimer’s Association. The association, based in Chicago, estimates about 5.4 million Americans were living with the disease in 2014.
Not everyone sees the use of springing powers of attorney as the answer for such situations. Pittsburgh trusts and estate lawyer E. David Margolis does not recommend them.
“The challenge in using springing powers of attorney is, when do they spring?” he said. “You have to have a trigger, and it’s not always a clear line as to whether the facts and circumstances are there for it to trigger.”
Even having two physicians declare a person unfit is far from perfect, he said.
“Which physicians? And what if they take opposite points of view?” Margolis said. “One of them could know the principal well and (have) seen him over the years and has a good feel for his cognitive capacity. Another one who has only seen the person once or on a bad day could reach” a different conclusion.
“Powers of attorney are fraught with problems,” he said. “The fundamental problem is, the power is vested in the agent to act for the principal and, if the principal is not capable of oversight, the relationship relies on the loyalty and integrity of the agent. It’s hard to police a wayward agent who has power of attorney.”
Springing powers of attorney can potentially complicate matters even more at a time when a person’s health is in decline.
“Anyone they use as an agent should be someone they trust completely and unquestionably,” Margolis said. “I use a presently effective power of attorney. But the agent can’t use it unless they have it or the principal gives it to them or makes it available to the agent.”
In many cases, he said, the principal will allow an attorney to hold onto the signed power of attorney. The attorney would turn it over to the agent only when necessary.
For those in the beginning stages of dementia who chose to use a springing power of attorney, Hearn said they need to make sure their loved ones know about the documents and they should give copies of the executed documents to their appointed agents.
“It’s also a good idea to give copies of your health care proxy and living will to your health care providers,” he said. “If your doctors know your wishes ahead of time, it will be easier for them to help ensure that your wishes are respected.”
(c)2015 Pittsburgh Post-Gazette, Distributed by Tribune Content Agency, LLC
Photo: Jeffrey Simms Photography via Flickr