Legal and Financial Planning in the Wake of an Alzheimer's Diagnosis

If you or a loved one have been diagnosed with Alzheimer’s Disease, dementia, or another illness that will ultimately affect mental capacity, you are sure to face many challenges.  While navigating a staggering array of medical treatment options and decisions will likely be your primary focus in the wake of diagnosis, it is also critical to consider the legal and financial implications.

Because people facing these illnesses will eventually lose the ability to think clearly and participate in decision making, it is vital that they (or their loved ones) make advance plans for their health care and financial arrangements. Ideally, advance planning should take place as soon as possible after a diagnosis of Alzheimer’s or other degenerative illness -- while the person is still able to participate in discussions.  In order to participate in this advance planning, the person with Alzheimer’s or dementia must have the mental capacity to do so.  For legal purposes, a person has "mental capacity" if s/he has the ability to understand and appreciate the consequences of his or her actions and to make rational decisions.

When families begin the legal planning process, they should discuss two main types of documents: (1) documents that address the health care needs and future medical decision-making of someone who may no longer be able to make health care decisions; and (2) documents that communicate the financial management and estate planning wishes of someone who may no longer be able to make such financial decisions.  If the patient already lacks the mental capacity to make these plans, court intervention may be required.

1. Planning for Future Medical Decision Making.  Assuming the person has sufficient mental capacity to do so, an individual with Alzheimer’s, dementia, or a similar degenerative condition should execute an advance directive for medical decision-making at the earliest opportunity. You may have heard of a Living Will – a document that sets out specific details concerning an individual’s medical wishes in the event of mental incapacity. Living Wills can be problematic, however. For example, if a Living Will’s terms are ambiguous, a medical provider may not be able to discern the patient's wishes.  As a result, the patient may be kept on life support or given other life-sustaining treatments that they themselves would not choose.  To prevent this ambiguity, it is best to execute a Power of Attorney for Healthcare (POAH). The POAH names another person such as a spouse, adult child, significant other, or friend as a person’s agent or proxy to make medical decisions when that person is unable to do so.  Careful consideration must be given to whether the agent can be "trusted" to give the medical instruction which the principal would want.  Such instructions may include the giving, or withholding, of artificial nutrition and hydration and/or the use of a ventilator.  It is important that the grantor (the person granting power of attorney to the agent) and the agent named in the power of attorney have communications in advance about the grantor’s wishes.  The grantor should also ensure in advance that the agent is aware of and will agree to take on this responsibility.

2. Financial Management and Estate Planning.  This type of planning involves developing an efficient and effective system for administering the property of the Alzheimer’s or dementia patient, both during the person’s life and after his or her death.  By establishing such a plan, the individual can make determinations for the future while still mentally capable of doing so.  The main legal devices for this type of property management are the Power of Attorney for Property (POAP), and estate planning documents such as Wills and Revocable Trusts.  Under Illinois law, the POAP – like the POAH described above – becomes effective upon the grantor’s incapacity, and names an agent to make decisions concerning the grantor’s property and finances when s/he is unable to do so.  Again, the grantor should ensure in advance that the agent is aware of and well-equipped to take on the responsibility of managing the grantor's finances when s/he becomes incapacitated. 

3.  Court-Ordered Guardianship.  If the Alzheimer's or dementia patient does not have the advance planning documents listed above, and lacks the mental capacity to create them, there will likely be the need for a judicial determination of who will manage the patient's affairs.  To accomplish this, the patient's loved one or caregiver must open a court proceeding and seek to be appointed as the guardian of the Alzheimer's or dementia patient.  Guardianship is typically divided into two main sets of responsibilities - guardianship of the person, and guardianship of the estate.  The same person may be appointed to act in each of these roles, or the responsibilities may be divided between individuals (or a financial institution in the case of estate guardianship).  The guardian of the person has custody of the disabled adult, and is responsible for his/her support, care, comfort, and health (including health care decisions). The guardian of the estate has the duty to take care of, manage, and invest the disabled adult's assets, and to use those assets for the ward's benefit.  Though necessary when advance planning has not been completed, court-ordered guardianship can be a costly and time-consuming process. When facing a diagnosis of Alzheimer's, dementia, or other similar illness, it is imperative to seize the opportunity at the earliest possible time to plan for the patient's future financial and medical care. 

These issues can be complex, so when facing such a diagnosis, you should contact an attorney to assist you as soon as possible.

Have a legal question you'd like to see answered in a future article? Email it to me at hgwalser@lavellelaw.com 

Disclaimer: This article provides legal information of a general nature and is not intended as legal advice, nor does it create an attorney-client relationship with any person or group of persons. Should you wish to obtain legal advice concerning your particular situation, contact an attorney.