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Important Documents to Consider when a Family Member has Dementia

If a member of your family has recently been diagnosed with dementia — or if an existing case of dementia in a family member has progressed — your mind is likely flooded with thoughts. From an emotional standpoint, dealing with a dementia diagnosis in the family can take its toll. Seeing someone you love struggle is never easy. Although there is another aspect of dementia that must be dealt with as well: the estate planning side. This can be an especially difficult topic if the family member has trouble remembering or following along. If you’re helping a family member with dementia get their affairs in order, the earlier you can cover the following bases, the better you’ll both feel.

Topic: Power of attorney

What it is: This legal document allows a person to appoint someone else to make specific health or legal and financial decisions on their behalf, particularly if they become unable to do so themselves. Power of attorney documents are divided into two categories: One for healthcare decisions and one for property. Each state has its own laws concerning these two documents, so it is likely you will need the assistance of an attorney who is familiar with the laws in which the person doing the planning resides. For example, in some cases, state laws may address agents taking financial advantage of a vulnerable principal through either criminal or civil laws with varying degrees of penalties, sometimes resulting in the possibility of charging the abuser with a felony. These documents are only valid while the principal is alive. Upon their death, the power of attorney is no longer in effect.

Why it’s important: Since dementia can often impact a person’s memory and judgment, it’s especially important that someone with a dementia diagnosis have these protections in place. With a properly prepared power of attorney, they can rest assured their affairs will be handled when they can no longer address important decisions themselves.

Topic: Wills

What it is: A will is the foundation of any solid estate plan. A will specifically names an individual(s), or a corporation, to act as an executor to distribute the property owned by the decedent. If minor children are involved, a will can nominate a guardian(s) for the court to consider appointing, should there not be a surviving parent. If a will is not available, the intestate laws of each state direct the disposition of the assets on behalf of the unrepresented parties. The Last Will and Testament comes into effect only after being approved by a judge. Until such time as the will is probated, the named executor has no legal authority. This document is not to be confused with a living will. A living will is an advanced healthcare directive giving instructions to family members and doctors about what medical treatment is or is not desired during periods of incapacity.

Why it’s important: With a valid will, most states allow for a simplified probate administration process that involves presenting a report to the court to complete the process.  In the absence of a will, however, that will not be the case. It will be up to the court and the state laws to decide the disposition of the assets. For example, many states provide that the surviving spouse splits the estate 50/50 with any surviving children. Preparing a will is the best way to ensure that the assets are distributed as desired. A living will helps ensure that any end-of-life medical procedures are conducted (or not conducted) as the family member would have wished.

Topic: A Revocable Trust or Living Trust
What it is: A revocable trust and living trust are separate terms that describe the same thing: A trust in which the terms can be changed at any time by the person who created it. Unlike a will, a trust is in effect when signed and properly witnessed and/or notarized. A revocable living trust usually names the creator as the primary beneficiary, directing that the trust assets be used for their benefit, even if they cannot make their own decisions. It also establishes other beneficiaries who will receive either future income and/or principal from the trust. A trust document is not part of the public record and does not require probate. The name “revocable” refers to the fact that a person who created the trust may change the terms of the document whenever they like, and the trust is “living” because a person creates it during their lifetime.

Why it’s important: Although a revocable trust is similar to a will (both allow a person to direct the disposition of property at death while allowing for revisions during life), a trust will have successive provisions for handling assets held in the name of the trust if the initial trustee is incapacitated. Usually, the creator is the initial trustee, who names a successor to take over in case of death or disability. A trust, therefore, is a good means of transferring decision-making abilities if the creator is unable to act.

Topic: Instructional letters

What it is: These types of optional letters are part of an overall estate plan and can be left to express additional instructions or messages.

Why it’s important: Instructional letters, although not legal documents, are a means of clarifying the wishes of the decedent. By avoiding legal terms, an instructional letter can make it easier for family members to understand their loved one’s wishes for disposing of personal items not included in the will or trust. It’s also a good way to communicate personal messages to heirs, as well as the deceased’s feelings about service arrangements.

Dealing with dementia in the family can be stressful, both emotionally and financially. Experts at First Midwest Bank Wealth Management can help guide you on ways to prepare for the future and reduce the stress and worry about the financial and legal challenges brought on by impending cognitive impairment.


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