How Does A Loved One’s Dementia Diagnosis Impact Estate Planning?

If a loved one has been diagnosed with dementia, it makes proper estate planning more important and it also raises issues of whether the person has the ability to make his or her own planning decisions. Only people who have legal capacity to sign legal documents can do so.

Legal capacity is the level of judgment and decision-making ability needed to sign official documents. Just because someone has been diagnosed with dementia does not mean he or she necessarily lacks legal capacity. However, if legal capacity is lacking, any document signed by the person has no legal effect. In this case, a conservator may be needed to make decisions for the person’s benefit.

If the person has legal capacity, the following documents should be drafted and executed before that capacity is lost.

• A living will can enable the person to spell out what kind of medical treatment he or she wants, or does not want, including the use of artificial life support. An agent can also be named to make decisions for this person when the capacity to make medical decisions is lost.
• A health care power of attorney can also name an agent to make medical care decisions above and beyond end of life medical treatment.
• A financial power of attorney can give another person, an agent, the ability to manage the person’s financial affairs and pay bills. This agent needs to be organized, good at handling money and trustworthy. An agent needs to act in the person’s best interests and not spend money for his or her own affairs.
• A will allows a person to decide how assets will be divided following his or her death, after all debts have been paid. Without a will, these assets will go to the next of kin by action of state law. If that is not what the person wants, a will or some kind of trust document should be created so the person’s wishes can be fulfilled.

People often consult with estate planning attorneys after a life-changing diagnosis like dementia is made.