By Liz Loewy, EverSafe General Counsel
Financial capacity is known as the capacity to manage money and financial assets in ways that meet an individual’s needs and which are consistent with his/her values and self-interest, according to Dr. Daniel Marson from the University of Alabama. There has been a recent focus on the issue of financial capacity, both because of the growing age demographic and the fact that an estimated 5.3 million people now suffer from Alzheimer’s disease. According to the New York Times, studies show that the ability to perform simple math problems, as well as handle financial matters, are typically one of the first types of skills to decline with the onset of age-related cognitive challenges. Even more alarming? The same research also indicates that a person’s financial decision-making ability peaks in their 50s. Is it time to panic? Absolutely not. But the findings should serve as a call to action for families.
Advance planning can resolve issues related to a loved one’s diminished capacity before they become vulnerable to poor decision-making or even fraud. Consider asking your parents to introduce you to their durable power of attorney and/or financial advisor. They may want to introduce you as their “trusted advocate” – a person to contact if there ever comes a time when they can’t make decisions. An even better idea might be to ask your parents to build a team of individuals to act as a circle of trust. They may want you, and/or their team, to know how they intend to handle their finances over a retirement period that could last for 30 years or more. You may also want to discuss the importance of using that team to assist with financial monitoring. Math skills may deteriorate with aging, but with advocates serving as an “extra set of eyes,” irregular activity can be prevented or addressed at inception.
Naturally, there will be families who delay putting a durable power of attorney or a team in place to address issues related to diminished capacity until it’s too late. If a loved one from such a family appears to suffer from cognitive impairment and has been subjected to abuse such as fraud, identity theft or exploitation, or is engaging in uncharacteristic behavior that puts his or her finances at risk, consider calling Adult Protective Services (known as APS). APS is a state or local agency that delivers social services to abused, neglected, or exploited older adults and adults with disabilities. APS may assist with house cleaning and other supportive services, investigate alleged exploitation and/or provide legal interventions such as an application for the appointment of a surrogate decision-maker like a guardian or conservator. You can find more information on APS in your state by visiting the NAPSA locator. If concerned family members feel that APS intervention is not necessary, they may opt to pursue a legal proceeding in civil court for the appointment of a guardianship or conservatorship over the alleged incapacitated loved one. A guardianship is a crucial legal tool that empowers an individual or entity to make decisions for the incapacitated person.
The number of Americans who will experience diminished financial capacity in the coming decades is increasing dramatically. Elder fraud is currently a billion-dollar industry and the importance of pre-planning can’t be overstated. Pay attention to family members' changes over time and, most important, communicate with loved ones and family professionals early and often.
Liz Loewy is General Counsel at EverSafe, a technology company focused on the prevention of financial exploitation and identity theft in later life. Ms. Loewy was formerly the founding Chief of the Elder Abuse Unit at the Manhattan District Attorney’s Office, where she served as trial counsel in the case involving the late Brooke Astor.
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