Given that the effects of dementia can be extremely gradual, it can be difficult to tell if you or a loved one is experiencing the early signs of dementia or if these are just symptoms of normal age-related memory loss. It can also be difficult to know when to start making decisions for your loved ones or handing over your decision-making to someone else if you’re experiencing the early signs of dementia.
We explore how to tell the difference between symptoms of dementia and those of age-related memory loss, and how to protect the finances of someone who has dementia.
Some warning signs of dementia
Memory loss: more severe than normal age-related memory loss, this would make daily activities and learning new facts or skills much more difficult.
Feeling disoriented: not knowing how to get home from a familiar place, or struggling to remember what day it is.
Misplacing items: we can all temporarily lose something, but people with dementia can start to put things where they don’t belong, such as leaving car keys in the freezer.
Mood swings: moving from happy to sad or angry, or changing behavioural patterns, for no apparent reason.
Losing interest: this could be a sudden disinterest in work, a favourite pastime or hobby, or socializing with family and friends.
Struggling to carry out everyday activities: these could include bathing, getting dressed or making a meal.
Finding speech to be difficult: forgetting even the simplest of words or using the wrong words, so the person becomes difficult to understand.
What to do if there are signs of dementia
If you or a loved one starts experiencing symptoms of dementia, you should go and see your doctor. Early diagnosis of dementia can help manage and slow down symptoms, as well as better prepare you for what to expect in the future.
You should also contact the Alzheimer Society, which has many resources and support to help people with dementia and their families to adapt to this new situation.
Protecting your finances after a dementia diagnosis
Your IG advisor can refer you to a number of experts within the fields of tax and estate planning who are experienced in helping people manage their finances after receiving a dementia diagnosis.
You should start putting a disability and estate plan in place (ideally with the help of an experienced estate lawyer, or a notary if you’re in Quebec).
It’s extremely rare to go from being fully capable of making your own decisions one day, to being completely incapable the next. It’s typically a gradual process. That’s why it’s important to act as soon as symptoms start appearing. If you are diagnosed with dementia, it’s important to make crucial, legally binding decisions while you’re still able to do so.
Some people feel defensive when they start to have dementia symptoms and may be reluctant to tell anyone about it. However, sharing how you feel will help in the short and long term. Your financial advisor can help you to simplify your portfolio so it’s easier for you to manage, especially when things become a little more difficult to understand.
It’s really important to get legal documents in place, such as a will and power of attorney for property (a mandate in Quebec) and a power of attorney for personal care (which, depending on where you live, could be referred to as a directive, personal directive, health care directive, advanced health care directive, representation agreement or mandate).
If you leave it too late, you won’t legally be able to sign documents; this can then make it far more expensive and complicated for your family to be able to make decisions on your behalf. Find out more about why it’s so important to have a power of attorney.
The assisted decision-making stage
Once you have put in place a power of attorney for property, you should introduce your attorney (the person chosen to eventually make decisions on your behalf) to your professional advisors, such as your accountant, lawyer and financial advisor.
This way, your attorney will get to understand your needs and wishes better and build a relationship with the professionals who help you manage your money. At this stage, your attorney can begin to help you make decisions.
Then, as worsening dementia symptoms make it harder to make decisions, the attorney can gradually make them on your behalf. This gradual transition will make the process easier for everybody involved.
How to protect yourself from financial abuse
When setting up a power of attorney for property, there are restrictions as to what your attorney can and cannot do on your behalf. For example, they can’t usually pass their role as attorney to someone else, add or change the beneficiaries on your accounts or insurance policies, or use your money to finance their own activities (such as pay for their vacation or home renovations).
You can also make your own stipulations in the power of attorney document to limit what they can or cannot do with their money.
Remember, though, that you will need this person to make important decisions on your behalf, so you should choose someone you believe to be completely trustworthy and then allow them to make as many decisions as you’re comfortable with.
Financial institutions, such as IG Wealth Management, allow you to name a trusted contact person for your accounts, who should be someone other than your attorney. This trusted contact person can help prevent financial abuse, (however, they cannot give instructions on your accounts).
Naming more than one attorney can also add extra protection from financial abuse but is only recommended if the attorneys get along well (otherwise you could end up with them being unable to agree on decisions).
Why joint ownership or ownership transfers can be a bad idea
Some people think that, when they start to suffer from dementia, it’s a good idea to transfer ownership of their assets (such as their home or investments) to one or more of their children or make those assets jointly owned.
This can lead to a number of legal problems. For example:
- If the child gets divorced, their ex-spouse could claim part of the property.
- If the child declares bankruptcy, their creditors could put a lien on the shared property.
- You could trigger capital gains tax and speed up your income tax liabilities, rather than defer them.
Some people transfer the ownership of assets to reduce their care costs. However, care costs are usually based on your income, rather than your assets. Unless your asset generates significant income, retaining ownership is unlikely to have a drastic impact on your care costs, whereas changing ownership and realizing capital gains could.
Before making any decisions about transferring assets or making them jointly owned, discuss this with your financial advisor. They will be able to run the numbers and work out if there is a sufficient benefit to be gained by this strategy.
Instead of making your children owners or joint owners of your assets, it usually makes more sense to simply name them as your attorneys in your power of attorney for property (they can make financial decisions on your behalf without being owners). There will be less chance of litigation issues, plus you’ll be more confident of having enough money to look after yourself during your lifetime.
Tax considerations for people with dementia
There are several federal tax credits in place that can be beneficial to people with dementia and their families, including:
- Disability tax credit
- Canada caregiver credit
- Medical expense tax credit
- Home accessibility tax credit
However, it’s really important to consult with an accountant who understands this field well first, before applying for any of these credits. Claiming one credit might prevent you from claiming another credit or deduction that could be more valuable.
Start a financial discussion
If you or a family member has been diagnosed with dementia, it pays to set up a meeting with your IG advisor as soon as possible. They’ll be able to help you set up an estate plan that can help protect your finances in both the near term and the future. If you don’t have an IG advisor, you can find one here.
Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Consultant.