This blog is the third blog in a series on this topic and is written specifically for family members. In our last blog, Plan for Diminishing Capacity: Pre-dementia Financial Warning Signs – All About Estates, we discussed unusual financial behaviours. If a loved one is missing bills, repeating transactions, or falling for scams, it may be more than forgetfulness. These early financial warning signs could indicate mild cognitive impairment, a precursor to any one of the dementias, or they could arise from other factors, such as the impact of cancer treatments or medication side effects. Whatever the cause, the warning signs indicate that a loved one is vulnerable and at risk for financial abuse; it is wise to prepare before this happens.

As our parents and loved ones age, we begin to realize that the risk of diminishing capacity is more common than we might think. So why do so many people put off this type of planning until it’s too late?

Why do we miss the warning signs of diminishing capacity?

There are numerous reasons why families hesitate to act, such as:

• Denial – Dementia does not run in my family, so it won’t happen to me.
• Fear – If I have this conversation with my dad, it will be real, and he may get angry at me.
• Lack of knowledge – I don’t even know what this is or who should address it.
• Procrastination – Let’s worry about this after our holidays
• Lack of experience or simple naivete – We already have wills and power of attorney (POA) documents, so we’ve done our planning.
• Cost Avoidance – Why should I spend money to plan?
• Confusion – On some days, we notice Mom’s difficulties with her banking, but on other days, she appears to be fine.

All these reasons stem from a lack of understanding about cognitive impairment and how financial warning signs are often the first sign of a problem. In our blog post,  Financial Issues: An Early Warning Sign of Memory Disorders – All About Estates,  we mapped early symptoms of memory disorders to examples of financial issues to give the readers a clearer picture of when to be concerned.

How to Plan for Diminishing Capacity

If a family wishes to be proactive rather than procrastinate, where do they begin planning for diminishing capacity?

Start with a Framework

Start with an easily understood picture or analogy, such as the leaky financial pipeline that we discussed in our last blog. The analogy helps people to understand the costs of dementia and pre-dementia circumstances, as well as the financial risks associated with not recognizing early warning signs.

Considerations and Steps

1. Be empathetic to your parent or loved one. You may wish to start by assuring them that you are here to help them and to respect their wishes and their dignity. It is also important to respect their privacy and confidentiality.
2. Suggest you review together their current estate plan and related documents. What is the reality of their preparation so far?
   1. List of advisors and contact details
   2. Will – updated?
   3. POAs – updated?
   4. Advance Care Planning directives

• Suggest you review the current financial plan with them and their advisor.
  1. Review title on their properties.
  2. Review bank accounts, investment accounts, life insurance, other investments..
  3. Review primary and secondary beneficiaries.
  4. List their digital assets and login information.
• In the early stages, it may be enough to do 1 and 2 and then do a review as needed.
• As time goes on and with more impairment, it may be time to consider supportive decision-making where you provide more support regularly.
  1. Your parent may ask for help with major purchases such as new appliances or an air conditioner.
  2. As time goes by, it may be appropriate to reconcile monthly bank statements and get more involved in supporting financial decisions.
  3. The supportive decision-maker should work well with the older person, keep good records, and be accountable for their actions.

At some point, with diminishing capacity, formal substitute decision-making may need to occur with the Power of Attorney (POA) for Property being enacted. In our practice, some of our older clients are quite pragmatic. They are working with us to plan for their future lifestyle and want to include a plan for the potential of diminishing capacity. However, it is more often the case that families are dealing with this thorny topic and seeking advice on how to start the conversations when the parent has already been taken advantage of by a scammer or other person.

How to Start the Conversation

If a family begins to suspect early cognitive decline in a loved one—especially due to unusual financial activity such as overspending, double-paying bills, or declining resources—taking prompt action is crucial to protect both the individual and their assets. The following items give suggestions on where to start.

1. Observe and Document the Financial Warning Signs

• Keep a detailed record or journal of unusual financial behaviors, such as missed or double payments, unexplained withdrawals, or impulsive purchases.[i] [ii]

2. Start a Respectful Conversation

• Approach the person with empathy, emphasizing collaboration and support rather than control.[iii] [iv]
• Discuss the importance of budgeting and suggest creating a spending plan together.[v]

3. Seek a Medical Evaluation

• Suggest you schedule an appointment with a healthcare professional, ideally a neurologist or geriatrician. Go with the loved one to talk about memory loss and assessing cognitive function to determine if there is an underlying medical cause.[vi]
• Attend the appointment to provide additional context and observations and to take notes, and ask questions.[vii]

4. Consider Practical Financial Safeguards

• Suggest reviewing bank statements and bills together to identify patterns and ensure transparency. [viii]
• Set up automated bill payments to prevent missed or duplicate payments.[ix]
• Reduce spending limits on credit cards. Suggest they consolidate credit cards so there are not so many to monitor.[x]
• Discuss how much cash is needed on a weekly basis rather than carrying large sums on their person.[xi]

5. Establish Legal and Financial Protections Early

• Review and get a copy of the up-to-date POA for Property.
• If possible, ask your parent to introduce you to their bank manager so the manager knows who to call if they are concerned.

Diminishing capacity is a very complex topic. It may happen quickly or be a long, slow decline in the ability to make effective decisions. The risks can be devastating, impacting a person’s health and financial well-being. Many families find it very difficult to have the financial risk conversation with a parent. However, it is much easier to take the time to start the conversations before there is a preventable financial crisis.

[i] https://www.npr.org/sections/health-shots/2023/05/12/1175141042/as-some-families-learn-the-hard-way-dementia-can-take-a-toll-on-financial-health

[ii] https://www.brainandlife.org/articles/cognitive-decline-financial-struggles-scams-look-for

[iii] https://www.brainandlife.org/articles/cognitive-decline-financial-struggles-scams-look-for

[iv] https://www.nia.nih.gov/health/legal-and-financial-planning/managing-money-problems-people-dementia

[v] https://www.nia.nih.gov/health/legal-and-financial-planning/managing-money-problems-people-dementia

[vi] https://www.brainandlife.org/articles/cognitive-decline-financial-struggles-scams-look-for

[vii] https://www.brainandlife.org/articles/cognitive-decline-financial-struggles-scams-look-for

[viii] https://www.brainandlife.org/articles/cognitive-decline-financial-struggles-scams-look-for

[ix] https://www.nia.nih.gov/health/legal-and-financial-planning/managing-money-problems-people-dementia

[x] https://www.nia.nih.gov/health/legal-and-financial-planning/managing-money-problems-people-dementia

[xi] https://www.nia.nih.gov/health/legal-and-financial-planning/managing-money-problems-people-dementia