Proactive Planning for Cognitive Decline

Very few people are lucky enough to make it to the end of their life without experiencing some degree of mental decline. While not all people receive a formal dementia diagnosis, almost everyone sees some deterioration of their reasoning skills, processing speed, and memory ability. These don't always impact their day-to-day life in obvious ways, and as a result their decline is often invisible to their friends and family members for years.

Yet, when it comes to finances, these signs of decline are more visible. As a result, the financial professionals in a client's life are frequently among the first to notice that something is amiss. After all, the whole reason my profession exists is to help clients with an area of life that can be notoriously complex. This complexity makes it difficult for aging individuals to "mask" their cognitive decline with jokes, scripts, or hand-waving.

Proactively planning for this phase of life can potentially save a lot of heartache and frustration for those who care about you, while also maximizing the likelihood that your wishes will be followed. Because of how early cognitive decline shows up in financial decision making, it is better to take some steps sooner than later.

To be clear, this doesn't mean surrendering your financial decision-making ability, nor even creating a "springing financial power of attorney," whereupon you would cede control once certain conditions are met. Instead, there are some small, simple things you can do to get started right now.

A good first step is simply to talk with your financial advisor about who you want to bring into the inner circle of your finances. As a rule, we are bound by confidentiality, but can speak to people that you explicitly authorize us to, about specific subjects that you authorize us to. You don't need to it figured out all at once, just a few potential candidates would be a good starting place.

Next, you might sit down with your expanded inner circle and your advisor to discuss, in general terms the reasons that you have decided to include them in your financial planning process. There may come a time when they are helping you run the day-to-day of your finances and it will be good to have them in the loop. Ideally, these are people you trust completely and who regularly visit you in your home. They are tuned in to your day-to-day life, and ideally can identify the other important people in your social circle.

Initially, it may not be necessary to reference specific dollar figures. But you might say, "Nicholas has a copy of my estate plan, a summary of my assets and debts, and other information related to my financial plan. We meet periodically to discuss these numbers, and update my plan. At some point, I'd like you to join me in those meetings as my advocate to help me make decisions based on what I would want, even if I can't keep track of all the details at that time. For now, I just want you and Nicholas to have one another's contact information."

Eventually, you may choose to authorize that person to act with financial power of attorney, and by that time they should be well-prepared for the job. Not only will they have a clearer sense of your finances, but they'll also have a better grasp of your goals and wishes as a result of sitting in on meetings with you. Between them, your advisor, and other professionals, you'll have a whole team dedicated to serving your best interests. As a result, you can drastically reduce the risks to your quality of life that normally accompany cognitive decline.