Managing Money for a Loved One with Dementia

A dementia diagnosis is a life-changing event. As families grapple with emotional and medical complexities, they often face another immense challenge: taking control of their loved one's finances.

Dementia progressively impairs the cognitive functions required for sound financial judgment—tasks like balancing a checkbook, spotting a scam, or tracking monthly bills become overwhelming. For a person who has managed their own money for decades, losing this independence can be deeply distressing.

To protect their assets and ensure their bills are paid, the transition of financial responsibility must be handled with sensitivity, diligence, and, most importantly, the correct legal tools.

Establish Legal Authority (The Golden Rule)

The moment a dementia diagnosis is made (or even suspected), legal authority must be addressed. Delaying this step until the person lacks capacity forces the family into the expensive and public court process of guardianship.

1. Secure a Durable Power of Attorney (DPOA)

This is the single most important document. A Durable Power of Attorney for Finances allows your loved one (the Principal) to name a trusted agent (or Attorney-in-Fact) to make financial decisions on their behalf.

• Crucial Timing: It must be signed while your loved one still has the legal capacity to understand what they are signing.

• The Key: The document must be "durable" to remain in effect after they become incapacitated.

2. Consult an Attorney

An estate planning attorney can ensure the POA is properly drafted to grant the agent specific powers (like applying for Medicaid or managing complex investments) and that it meets all state requirements to stand up to scrutiny.

Protecting Finances and Simplifying Management

Once you have the legal authority, your focus shifts to organization and protection.

3. Gather and Organize Everything

You cannot manage what you cannot find. Create a secure, centralized file (physical or digital) containing:

• Names and contact information for all financial institutions.

• Account numbers for banks, credit cards, mortgages, and investments.

• Sources of income (Social Security, pensions, annuities).

• Insurance policies (life, health, long-term care).

• Copies of tax returns and all legal documents (POA, will, trust).

4. Automate and Consolidate

Simplify the financial landscape to reduce the need for decision-making and manual labor.

• Set up Auto-Pay: Automate all recurring bills (utilities, rent/mortgage, insurance premiums) to prevent late fees or service shut-offs.

• Consolidate Accounts: If your loved one has multiple bank accounts, consider consolidating them into one or two easy-to-manage accounts to simplify monitoring.

5. Implement Fraud and Scam Protections

Individuals with dementia are highly vulnerable to financial exploitation, both from strangers (scams) and sometimes from trusted insiders.

• Limit Credit Access: Reduce credit card limits, or cancel unneeded cards, replacing them with a single debit card linked to a small, monitored checking account for spending money.

• Register for Alerts: Set up banking alerts to notify you of large withdrawals, international transactions, or suspicious activity.

• Place on Do Not Call Lists: Register phone numbers on national Do Not Call lists to reduce telemarketing attempts.

• Monitor Mail: Scrutinize mail for sweepstakes offers, scam letters, and strange solicitations.

Respecting Dignity and Independence for Loved One with Dementia

Taking over finances is a loss of control for your loved one. Maintain their dignity by allowing them to handle some money matters for as long as possible.

• The "Spending Account": Give your loved one a small, predetermined cash allowance or a low-limit debit card for day-to-day purchases. This maintains their feeling of independence while protecting major assets.

• Involve Them in Simple Tasks: If they can still manage, allow them to handle routine tasks like paying for groceries or signing voided checks for practice.

• Communicate Respectfully: Frame the conversation as a team effort—you are helping to reduce their stress and manage the complexity, not taking away their authority.

Managing money for a loved one with dementia is an act of devoted care. By taking proactive legal and organizational steps, you ensure that the wealth they worked for is preserved to fund their care and honor their long-term well-being.

Legal Disclaimer: This article is for educational purposes only. Nothing in this article or on this website should be considered legal advice. Please contact an attorney to discuss your situation.