Aging Options

Cognitive Impairment and Personal Finance: Recognizing the Warning Signs in Someone You Love

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According to the Alzheimer’s Association ( one senior in three passes away with some form of dementia – and those numbers are increasing. So that presents a pretty strong likelihood that an aging person you love is starting to deal with the effects of cognitive impairment. Every month there are many articles appearing that discuss the emotional toll that declining mental capacity imposes on families – but what about the financial toll?

A Tough but Necessary Conversation

A recent article on Forbes magazine’s website brought this important issue to our attention. It’s called “Recognizing the Warning Signs of Diminished Financial Capacity,” and those of us here at AgingOptions who deal daily with these types of issues and concerns think it’s an important read. “Many of us are aware of the emotional toll these [cognitive] conditions often have on a family,” Forbes writes, “but the implications they can have on a family’s financial health are not frequently discussed. Adults with cognitive impairment are more likely to experience diminished financial capacity or declining financial decision-making skills.” The Forbes article acknowledges that addressing these issues can be emotionally wrenching, but those who recognize and deal early on with cognitive impairment in an aging loved one can protect them from “damaging financial decision-making, exploitation or worse.”

Unfortunately, as the article suggests, it’s often too easy to ignore some of the danger signals in those closest to us and to practice a form of “creative avoidance,” especially in the case of our parents. Since we may not know how mom or dad might react, we can tend to overlook the red flags and avoid the topic altogether. But this, Forbes says, is a dangerous delusion. “It is important to take these warning signs seriously and not dismiss them as routine symptoms of aging,” the article states. “Delaying action until you notice some of the warning signs of cognitive decline and diminished financial capacity may make addressing these issues more difficult.” The Forbes article endorses an approach that we at AgingOptions strongly advocate: a family conference. “Ideally,” says Forbes, “your family should start having discussions well before these signs appear, so that all parties can openly communicate their intentions. Documenting these plans with a wealth manager or attorney may also prove beneficial.”

Six Warning Signs

The article lists six warning signs that can indicate the onset of cognitive decline, which is frequently an early indicator of more serious mental problems to come. If you start seeing these behaviors in someone you care about, it’s probably time to step in. Forbes writes that “a person exhibiting the early signs of dementia may demonstrate the following characteristics or behaviors”:

  • Memory lapses such as missing appointments, falling behind on bills, or forgetting the answers to frequently-asked questions
  • Lack of organization among important files and documents
  • Deteriorating checkbook management skills
  • Difficulty with basic math
  • Confusion and difficulty comprehending previously understood concepts
  • Poor or declining financial judgment.

There are also other danger signals that may indicate some form of financial manipulation, such as “making drastic changes to important financial documents, like naming a new power of attorney or changing the terms of a trust.” We would add similar red flags including altering the terms of a will or naming a new beneficiary on insurance policies and retirement accounts. People with diminished financial judgment have been known to make inappropriately large charitable gifts to suspicious organizations, sometimes in response to a shady telephone solicitation. (If this is a concern, we advise looking up the charity on a website such as Charity Navigator where you’ll find helpful data to make an evaluation.) If the person you love starts making uncharacteristically risky financial decisions, that should set off loud alarm bells. But a noticeable lack of interest in money matters can also be cause for concern. “Alternatively,” the Forbes article says, “a person that was previously engaged in making financial decisions and is now taking a more passive approach may be showing signs of cognitive decline.”

Where to Begin “The Talk”

If you decide that it’s time to have a difficult “money talk” with someone you love, Forbes has some suggestions. “Having a conversation that focuses on a review of the facts—for example, asking that person to name their professional advisors or verify the designated agent in the power of attorney—can be revealing,” the article states. “It may be helpful to focus on decision-making abilities, not cooperativeness or affability, and to track changes over time.” It’s also possible that other factors such as poor sleep, poor nutrition, or depression could be contributing factors, so we would recommend a thorough medical evaluation by a qualified geriatric physician in order to get an accurate assessment. Finally, as we often say, “Aging is a family affair,” so we echo this observation from Forbes: “Like most family matters, open and honest communication is often the best approach to handling difficult situations. If you are having difficulty recognizing the warning signs in a loved one or addressing the situation, speak with a trusted advisor about recommended best practices.”

Objective Advice and a Comprehensive Plan

If you feel it’s time for a family conference, we invite you to contact us at AgingOptions so we can talk the process through with you. But perhaps you are at a place where you need some guidance in the process of planning for your own retirement, and if that’s the case we hope you’ll accept our invitation to join Rajiv Nagaich at one of our highly popular AgingOptions LifePlanning Seminars. There you’ll discover an approach to retirement planning that is truly unique, weaving together your financial, medical, legal, housing and family strategies into one seamless blueprint, so you can build the secure retirement you’ve dreamed about. Our LifePlanning Seminars take place throughout the Puget Sound region, so for a complete listing of dates and times, visit our Live Events page and register for the seminar of your choice.

Aging brings a great deal of uncertainty, there’s no doubt about that. But you and those you love can face the future with greater confidence and security than you thought possible, with the guidance of an AgingOptions LifePlan.  Age on!

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