Managing money can be challenging in the best of circumstances.
But for someone with a diagnosis of Alzheimer's disease -- a form
of dementia that affects thinking, memory and behavior -- money
management can be an impossible task.
If a loved one is having trouble remembering to pay the credit
card bill or spending money recklessly as a result of the disease,
there are steps you can take to protect his or her credit and
As many as 5.1 million Americans have Alzheimer's disease,
according to the Alzheimer's Foundation of America. For many of
them, money management problems may be the first sign that their
brain functionality is on the decline. Among the red flags: unpaid
or unopened bills, more purchases on a credit card than usual and
numerous cash withdrawals from the ATM.
"A person with Alzheimer's disease might get into arrears on
their debt because they don't remember that they didn't pay it,"
says Rick Gow, a Falls Church, Va.-based wealth management adviser
who specializes in eldercare issues.
A study by the National Endowment for Financial Education (NEFE)
found that 12 percent of U.S. adults have experienced a decline in
the ability to make financial decisions or have had family members
experience a decline. Among them, 41 percent did not pay bills or
paid them late, 35 percent made irrational purchases, 21 percent
drained their savings accounts and 18 percent incurred major credit
Alzheimer's disease takes a physical and emotional toll on every
family it touches. Here's how to lessen the financial side
Create an environment of trust
No matter what type of financial decisions they're making, people
living with Alzheimer's disease deserve respect. If it's your
parent, "don't walk in there and tell your parent what to do," says
Brenda Avadian, who launched CaregiversVoice.com, a website for
caregivers of people living with Alzheimer's disease and other
Avadian watched her father, who was diagnosed with Alzheimer's
disease, go from sending checks to a charitable organization
annually to sending them biweekly. Be patient and try to
cultivate the trust of the person with the disease, Avadian
advises. For example, you might ask, "did you realize you hadn't
opened these bills?"
Once a person with Alzheimer's trusts you, they're more likely
to let you intervene. "My dad ultimately did trust me because of
the patience I took with him, and he said, 'Why don't you just
handle all my stuff, because you seem to know more about it than I
do,'" Avadian says.
Handle legal matters first
There are legal steps that can help you protect a person with
Alzheimer's disease from making devastating financial mistakes.
Contact an elder law attorney soon after the Alzheimer's diagnosis,
advises Howard S. Krooks, president of the National Academy of
Elder Law Attorneys (NAELA).
- Appoint a durable power of attorney for finances. POAs, as
they're called, have the authority to make financial decisions on
another person's behalf.
- Establish a revocable trust that puts someone else in charge
of the assets of the person with Alzheimer's. Since the trustee
would manage the money, the person with Alzheimer's disease would
need to confer with the trustee before making large expenditures,
- Set up a conservatorship. If the disease has become so
advanced that the person is unable to make sound decisions,
another legal recourse is to convince a judge that the person is
incapacitated, or unable to manage his or her own affairs. If a
judge agrees, a guardian or custodian would be
appointed as a conservator
to make decisions on the person's behalf and take control of the
checkbook. A guardian would then have the legal authority to take
financial actions, such as canceling the person's credit card
account. Because the person with Alzheimer's disease would lose
all control over their financial affairs, this option is
typically a final resort.
Create a money management plan
Next, you need to deal with the day-to-day money logistics.
Create a bill-payment system.
If a person with Alzheimer's disease is responsible for paying the
household bills, problems may develop down the road if the bills
don't get paid or get paid multiple times, says Ruth Drew, director
of family and information services at the Alzheimer's Association,
which provides resources for families of people living with the
disease. As a safeguard, you might suggest that the two of you pay
the bills together, Drew suggests.
Monitor banking activity.
See if the person with Alzheimer's disease is comfortable with the
idea of letting you periodically look at bank statements to ensure
that the disease hasn't diminished his or her financial
decision-making skills. If you have a joint account with the person
or if you have financial power of attorney, some banks will require
two signatures if the person with Alzheimer's disease makes a
withdrawal above a certain amount, Drew says.
Set limits on transactions.
Suggest that the person with Alzheimer's disease contact their
credit card company to lower the credit limit on any credit cards.
You might also see if they're comfortable with canceling their
credit cards and becoming an authorized user of one of your cards.
American Express, for example, lets you add additional card members
onto an account and set spending limits for them on some of their
charge cards, says spokeswoman Elizabeth Crosta. Debit cards
typically have daily cash withdrawal limits, but many banks will
let you lower them.
Allow for some cash.
As long as a person with Alzheimer's disease is able to get around
on his or her own, give them access to a small amount of cash that
they can spend any way that they want.
"Nobody wants to trample on somebody else's autonomy," says
Drew. "Yet when a person is no longer able to exercise the good
judgment that they used to have, you want to preserve their
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