What Happens If You Get Dementia Without an Estate Plan?

Estate planning attorney Peter Klenk explains the legal and financial challenges families face when a loved one becomes incapacitated without key documents such as a medical power of attorney, durable financial power of attorney, or revocable trust. Whether you're planning for yourself or helping aging parents prepare for the future, this episode highlights the critical steps everyone should take before a crisis occurs.

Transcript

Hello, it's Peter Klenk, trusts and estate planning attorney, here to talk about death and taxes—the fun things you love to hear about and think about. I know, I know.

Let's try to make this as interesting as we can. Today's question is a serious one:

What happens if you get dementia without an estate plan?

As you know, dementia and Alzheimer's disease affect many people. It's a terrible disease. Unlike a stroke or a bus hitting you, dementia often comes on slowly. For some people, it's a gradual change. Sometimes it's more abrupt. Sometimes it's peaceful, and sometimes it's terrible—almost violent.

So what happens if you get dementia and haven't done any planning at all?

Let's talk about that, because it's not a good situation.

First, remember that estate planning isn't just about death. We're not only talking about what happens when you die. Believe me, death is easy compared to taking care of someone with dementia who doesn't have a durable power of attorney, a medical power of attorney, a living will, or perhaps a revocable trust.

Why is that?

When you're dead, there's a process. Things get handled. But if someone has dementia, they're still alive. They may need to be placed in a facility. They may need daytime assistance. They might actively act against their own best interests, lashing out because they feel people are taking advantage of them.

It's a problem.

Within a family, when someone dies, people can still fight—believe me—but things are relatively fixed. With dementia, someone might still be in charge and spending money, while other family members disagree about how much is being spent or how it's being spent. There is a whole world of complications that comes with someone being alive but unable to take care of themselves.

That's why it's important to make sure you have someone you trust to take care of your assets and look out for you. Someone reliable. Someone who will carry out your wishes.

They may completely disagree with your plan, but if it's the plan you want, that's what they're supposed to do. They're supposed to carry out what you would do.

Some people are happy to step up and take care of you, but they may do what they think is right instead of what you want. You're looking for someone who will honor your wishes, and that can be difficult to find.

So what are the key documents?

Let's start there.

If someday you develop dementia and are no longer able to make decisions for yourself, there are two separate areas to think about: medical decisions and financial decisions.

Let's start with medical decisions because that's what people usually think about first.

If you can't make your own reasoned decisions anymore, someone needs to make sure you're getting treatment, taking your medications, and seeing doctors when necessary.

That's where a medical power of attorney comes in.

A power of attorney is a document in which you grant someone the authority to act for you. This person has the authority to sign your name and authorize things on your behalf.

For medical matters, that authority only becomes active when you are no longer able to make your own decisions. The doctor generally determines when that point has been reached.

The doctor may determine that you've advanced to the point where you can no longer make reasoned medical decisions. At that point, the doctor turns to the person you've appointed—your medical agent, healthcare surrogate, or personal representative, depending on the terminology used in your state.

That person then speaks for you.

Their role is to answer questions such as:

• Would you want this surgery?
• Would you want this treatment?
• Would you choose this doctor?

They're supposed to be speaking your words through their mouth.

Not everyone can do that.

Some people become overwhelmed by stress. Others make decisions based on what they think is right rather than what you would want. That's why choosing this person requires careful thought.

People often say, "Well, that'll be my spouse," or "It'll be my oldest child."

Then I ask a few more questions.

Sometimes the spouse faints in hospitals, and the oldest child is in jail. You hear some wild stories.

The point is that this person must be capable and willing to respect your wishes.

Once you sign your medical power of attorney, some states also have a separate document called a living will. In Pennsylvania and many other states, these concepts are often combined into one package.

The living will portion is essentially a message to your doctor. It says:

"Hey, Doc, if someday you and my agent agree that I've reached the point where extraordinary measures are no longer appropriate, here are my wishes."

You can express your preferences, whether that's:

• "Keep me alive as long as possible."
• "Allow natural death."
• Or something in between.

People often refer to the entire package as a living will, but that's not technically accurate. The living will is the message to the doctor. The power of attorney grants authority to someone to act for you and gives them HIPAA rights.

Remember, your medical information is private. Doctors can't simply share it with anyone.

The medical power of attorney identifies the person who can access your information and help make decisions on your behalf.

Once it's signed, make sure the document is scanned and distributed to the people you've appointed. It does no good sitting in a kitchen drawer.

If you're in Paris drinking coffee and have a medical emergency, your agent needs to be able to text that document to the hospital immediately.

It's also important that your family knows who you've chosen.

You don't want it to be a secret that one child was selected and another wasn't. Otherwise, someone may show up at the hospital believing they have authority when they don't, and chaos ensues.

Be clear. Tell everyone:

"Here's who I picked. Here's who I trust."

And if possible, name backups.

Now let's talk about finances.

Imagine that someday you need to move into a memory care facility because of dementia.

There are medical decisions to make—but there are also financial decisions.

Someone has to sign contracts.

Someone has to pay bills.

A medical power of attorney doesn't necessarily grant authority to sign binding financial agreements or manage your money.

That's where a durable general power of attorney comes in.

"Durable" means it remains effective even if you're incapacitated.

A general power of attorney authorizes someone to handle virtually all financial matters, including:

• Paying bills
• Signing contracts
• Filing taxes
• Managing investments
• Handling your 401(k)
• Shutting down a business
• Selling or maintaining a home

It's called "general" because it covers broad authority rather than a single specific task.

Without this document, things can become very difficult.

Here's a worst-case scenario:

You begin calling the bank and telling them someone is stealing from you. Maybe it's your children. Maybe it's your spouse.

The problem is that dementia can make people genuinely believe they're being taken advantage of. They don't remember bills being paid or transactions being completed, so they assume money is disappearing.

The bank doesn't want liability.

If they receive complaints like that, they may freeze or close the account.

Once that happens, reopening it often requires court involvement.

And that brings us to guardianship.

If you don't have a financial power of attorney and you don't have a medical power of attorney, and you become incapacitated, someone will eventually need legal authority to act for you.

That means going to court.

A petition must be filed asking a judge to appoint a guardian.

There may be:

• A guardian of the person, who decides where you live and how you're cared for.
• A guardian of the estate, who manages your money.

Sometimes they're the same person. Sometimes they're different.

Even when everyone agrees, the process is expensive.

The court has to determine:

• Whether you're truly incapacitated.
• Whether you're being taken advantage of.
• Whether the right person is being appointed.

Evidence must be gathered. Hearings may be required.

It's not unusual for the process to cost several thousand dollars.

And who pays for that?

Often your family.

Because they don't yet have access to your money.

So now your loved ones are spending their own time and money fixing a problem that could have been avoided.

This is one of those chores everyone should do.

You may not enjoy it, but it's important.

By creating these documents now, you spare your family significant stress and expense later.

If you're still competent, it's often a good idea to provide the financial power of attorney to your financial institutions while you're healthy. That way, if questions arise, you can answer them yourself.

Later, if you become incapacitated, your chosen agent is already recognized and can step in quietly to help.

That's exactly what these documents are designed to accomplish.

A revocable trust can also be useful.

That's really a separate conversation, and we've covered it in other podcasts.

The basic idea is that assets can be transferred into a trust while you're healthy and capable. If you later become incapacitated, a successor trustee can step in and manage those assets.

In some situations, this can be cleaner than relying solely on a power of attorney.

However, even if you have a revocable trust, you still need powers of attorney because some assets—such as IRAs and 401(k)s—generally cannot be transferred into the trust.

It's a more advanced planning strategy, but it's often part of a complete estate plan

If you don't have an estate plan and you develop dementia to the point where you can no longer care for yourself, life becomes much harder for everyone involved.

It's hard on you.

It's hard on your family.

It often creates disputes, confusion, and hurt feelings that could have been avoided.

It's much better—and much less expensive—to plan ahead.

Work with a trusts and estates attorney. Think carefully about who you trust. Put the right documents in place.

That way, if this horrible disease affects you, your life can be as comfortable and dignified as possible without unnecessary distractions, disputes, and court proceedings.

That's the message for today.

Always fun to talk about death and taxes, right?

I'm Peter Klenk, trusts and estates attorney. Please like and subscribe so that, as I lose things in the future, you can listen in.

Have a great day.