When part of a couple, many people divvy up everyday responsibilities according to preference or aptitude. One spouse will mow the lawn, while the other will do the dishes. This happens often with regard to the family budget: one spouse, who either enjoys or is good at managing money, will take care of the finances.
But what happens when the spouse who has traditionally handled the finances is diagnosed with dementia or Alzheimer’s?
A new study cited in MarketWatch reveals, unsurprisingly, that the other spouse then takes over. Unfortunately, however, the study also found that the handoff happens much too late.
According to Marketwatch, “80% of the spouses who were approaching or experiencing dementia and had been responsible for the couple’s finances were still managing the couple’s money.”
There are two major problems with this. The first is that the person with dementia may be making serious financial mistakes without realizing it. The second is that it may be too late for the financially illiterate spouse to educate him or herself: the spouse with dementia may not be cognitively capable of explaining everything.
Couples whose income comes primarily from investments they manage (401(k)s, IRAs, mutual funds, stocks, bonds, etc.) instead of Social Security or pensions, have the greatest risk.
When their income is variable and requires proper financial decision-making, mismanagement can be disastrous.
In addition to increasing the risk of poor financial decision-making, dementia can make the couple vulnerable to fraud. A 2011 MetLife study found that elderly victims of financial fraud lose $2.9 billion every year.
If you or your parents are approaching your golden years, take note. It’s important that you and your spouse share in financial decision-making, if you hadn’t before now. If the both of you make decisions together—or the non-decision-maker at least reviews the decisions of the other spouse—you both will be better able to spot when one spouse makes telling mistakes.
You should also talk with an estate planning lawyer about creating a power of attorney document for the both of you. This document allows the one spouse to make financial decisions for the other if he or she is unable to do so.
It’s also important to pay attention to the signs of cognitive decline and take the appropriate steps when necessary.
If you have questions about money management and financial power of attorney, please don’t hesitate to contact the estate planning attorneys at Lovett & House Co., LPA. We’d be more than happy to answer your questions.
Copyright: <a href=’http://www.123rf.com/profile_flynt’>flynt / 123RF Stock Photo</a>