The September 2008 edition of Smart Money Magazine offers an article entitled Vanishing Legacy, which discusses the implications dementia may have on a person’s investments. While dementia is commonly associated with mood swings, memory loss, and confusion, another side effect that is not as readily recognized is a sudden inability to make sound financial decisions.
One family profiled ended up with the daughter going to court, fighting for several years to prove her mother’s incapacity and seeking guardianship over her mother’s finances. While eventually granted, the older women lost approximately $1 million of her life savings due to risky investments. The article emphasizes that brokers, unlike financial advisors, are not held to a suitability standard when working with clients.
Never knowing when dementia may or may not strike (one person profiled had early onset Alzheimer’s disease at age 48), it may be wise for people to complete powers of attorney for finance. These forms allow for a loved one or trusted advisor to take over financial responsibility if the person becomes incapacitated. While incapacitation needs to be proved, the process is more efficient than a court room fight for guardianship. Since a power of attorney needs to be completed by a competent individual, it is best to take action while you are healthy….don’t wait until red flags begin to emerge.