Home >Money >Personal Finance >Opinion | How to protect the interests of elders suffering from cognitive disorders
Photo: iStock
Photo: iStock

Opinion | How to protect the interests of elders suffering from cognitive disorders

Encourage the elder to appoint a trusted person who can help her take money decisions

I received a distressed call from one of my clients recently. The client’s mother was accusing her of stealing her money and wanted the daughter to move out of their family home. The mother is also my client and, hence, the daughter was seeking my intervention in resolving this unpleasant situation.

The mother, X, had been suffering from dementia, a degenerative cognitive disorder, for a few years now. An early sign of any form of cognitive decline is the inability to manage personal finances. Being X’s financial planner enabled me to recognize the symptoms early on and alert the daughter to X’s condition. X would struggle to remember recent conversations about her finances. She had difficulties filling application forms or signing cheques. Peculiar demands for redeeming large sums of money for insignificant payments, growing distrust of family members, and paranoia about losing all her money were some of the behavioural changes we noticed over time.

Disorders of such sort can create a litany of challenges for the individual’s families, who must now provide care in every aspect of the elder’s life, be it medical, personal or financial. They must also learn to deal with irrational and erratic behaviour, as was the case with X’s daughter.

The average life expectancy in our country is increasing each year and, hence, the odds that our ageing relatives’ mental faculties will deteriorate is fairly high. Elders with diminishing mental capacity are the most vulnerable to financial fraud and manipulation. Hence, you need to start putting in place guardrails to protect them today and in the future. Here are the things you can do.

1) Encourage the elder to appoint a trusted person—a friend or family member—who will be involved in her financial meetings and decisions. It is important to obtain the written consent of the elder in this matter. Every financial decision, whether it is about investments, estate planning, taxes, expenses or withdrawals, should be made in consultation with this designated person. If the elder is working with a financial adviser, the adviser must be informed about the trusted person, so the adviser can reach out to him to validate financial decisions or transactions.

2) Discuss with the elder if she wants to provide the trusted or designated person a mandate or a power of attorney (PoA) to act on her behalf. A PoA can enable the designated person to authorize financial transactions, execute the elder’s Will or be a trustee in the client’s estate plan. Making a Will is crucial for people with any form of cognitive impairment. If it is already made, ensure it is updated and kept safely.

3) Ensure that all money decisions with respect to investments, goals, taxes or expenses are documented and updated regularly. Doing so will not only help the designated person understand the elder’s requirements, but will also track any change in priorities or goals and hence identify inconsistences such as those relating to sudden expenses or withdrawals.

4) To help retain the elder’s independence and lower the impact of financial fraud, it is advisable for the elder to use a debit card instead of a credit card. A debit card can only be used to the extent of funds in the bank account, unlike a credit card, where the spending limit can be much higher.

5) With memory loss, the elderly may struggle to stay in control of routine payments such as utility bills, rent and insurance premiums. It is better to automate such payments, wherever possible, to avoid delays and penalties.

6) Collect, file and store important documents in a safe place and ensure the designated person holds a copy of all the originals. Ensure that the beneficiaries and nominees are properly assigned to all bank accounts and investments, including any assets held in the safe deposit. Create a digital file for all login details and passwords. Share this with the designated person only when the trust level is high.

7) A joint bank account may be opened with the designated person to enable him to transact on the elder’s behalf. However, this should be done only if there is a high level of trust, else the designated person can very easily misuse this trust for personal gain.

8) It’s important to simplify the financial and non-financial asset portfolio of the elder. Consolidate the portfolio and reduce the number of investments, so there are fewer items to monitor. Remove illiquid assets, such as property, from the portfolio, which requires management of rentals, tax, maintenance charges and so on.

If an elder has identified you as a trusted person, you are not only protecting her from being exploited by others, but also preventing her from harming her own financial well-being. She is fortunate to have your guidance and counsel in realizing her needs and goals. It also puts you in a position of great privilege and even greater responsibility.

Priya Sunder is director and co-founder, PeakAlpha Investments

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.

Close
×
My Reads Redeem a Gift Card Logout