This issue of creating new legal estate planning documents or updating them comes up when adult children start to notice problems with aging loved ones. We examine the question of whether an elder has the capacity to sign any legal paperwork. Memory loss usually shows up first and many family members dismiss it as “just getting old”. But memory loss is not a a normal part of aging. It is an early warning sign of cognitive impairment. In many cases, this “mild” cognitive impairment increases and dementia follows. What should families know about this process? Does it affect the ability to sign legal paperwork?
The Threshold
In our legal system, we respect the right of self determination of all individuals. However, this does have limits. When we consider what the law calls “testamentary capcacity”, meaning the ability to make a will or trust, the standard is low. If a person generally has a clear idea of what one owns and whom they want to give to after they pass, we likely find them to have this capacity. They don’t have to be able to balance the checkbook or keep track of their bills to have testamentary capacity.
Financial Capacity
But there is a distinction between testamentary capacity and the capacity to handle finances. Financial capacity is a much more complex ability. One not only has to know about one’s financial status, the person has to understand the actual value of what is owned, how things are calculated and what a bank error looks like. Can the person calculate the tip on a restaurant bill? Can they recall when taxes are due and see that they are paid? At AgingParents.com, where we consult with families, we see a recurring issue when a family elder, usually an aging parent, fails to pay their income and property taxes. Forgetting these recurring obligations is a definite sign of diminishing or lost financial capacity. Their memory loss about money must never be ignored, nor dismissed as “just getting old”. When we are approached about an aging parent by family seeking advice, we do make it clear that taking protective action is essential when the elder can’t keep track of bills and payments due.
What Action Must Family Take?
One of the first questions we ask when an adult child seeks advice and says Mom or Dad is paying bills twice, or fogetting to pay the insurance premium, or taxes or whatever else, is whether anyone has been appointed as the agent on a parent’s Durable Power of Attorney document. It is always surprising when we hear that no one has been appointed. This is a basic necessity all of us need to have. Sometimes the family reports that they think this document exists, but no one can find it, the aging parent doesn’t remember, or the lawyer who prepared it with the will and trust is gone, so no one knows. The question then becomes: is Mom or Dad capable of creating a new document and understanding what they are signing?
Basics About A Durable Power of Attorney Document
For anyone with an aging family member who is seeking to protect the elder and ensure that finances are taken care of, know that you need legal authority to act on their behalf. The most common way to do that is with a signed and notarized standard legal form. A basic Durable Power of Attorney (DPOA) form is typically available free on the internet in your aging parents’ state. Here is an example for CA. You don’t have to have a lawyer draw one up, though an estate planning lawyer can tailor the language in the form to your loved one’s specific financial circumstances and needs, and make the legal authority clearer and more comprehensive. That is ideal, but a basic form is better than nor form when you need to act fast.
The Risks
The DPOA document is revocable at any time. This is the issue that can get some elders into serious trouble. A predator who targets a person with memory loss or Mild Cognitive Impairment as it is often diagnosed, can manipulate the aging parent into signing a new DPOA form. If there was one in place with a safer person as the appointee, the predatory person interferes with that. All they need is the form and a notarized signature of the elder. There is no court oversight of DPOA forms. The newly appointed person then has legal authority to fully rip off the elder, and there is no consequence. It can be done in secret. Cognitively impaired people are often malleable and subject to the influence of someone whom they see as trustworthy, even when the person is the opposite of trustworthy.
When Is It Too Late For An Elder To Sign Such A Document?
Even if an aging parent is cognitively impaired, they may still have the capacity to understand that they can’t keep track of their finances any longer and they know whom they want to be in charge for them. Those are the basic criteria family needs to pay attention to, when this situation arises. Loss of capacity for finances is on a continuum and is different for every individual. There is no magic formula for determining if they can make this decision, but you can’t figure it out unless you ask the aging parent some common sense questions. Short of having formal psychological testing as to capacity, it is a judgment call by family who needs to get this done.
Here are some sure signs that the elder is too far gone cognitively to sign a legal document like a DPOA. If you see these, and there is no DPOA in place at all, sometimes the only protective action to take is a last resort: guardianship. We do not discuss that option here. We do suggest using these as criteria for knowing it’s too late to get a valid signature:
1. Your aging parent does not know where he is and can’t say his location, address, city or even state.
2. Your aging parent is very easily confused, can’t follow a conversation at all and just nods without answering a basic question you might ask.
3. Your aging parent does not recognize you or know your relationship to her.
4. Your aging parent cannot understand any document you put in front of him, whether it’s a newspaper, bulletin, bank statement or any other writing. If you ask, “Do you know what this is?” she can’t say what it is.
5. Your aging parent is diagnosed with late stage dementia by a physician.
Takeaways:
No matter how competent an aging loved one has ever been in the past, aging can take its toll on capacity of all kinds. Financial capacity is the first to deteriorate with dementia, even in the early stages. At the very first indication of any memory loss, even if you think it’s “just getting old” locate all legal documents they have. If you can’t find a DPOA document despite a thorough search and attempts to reach any estate planning attorney the elder has had in the past, get a lawyeer or get a DPOA form from the internet. Explain it carefully and respectfully. Let your loved one know that you don’t want to allow anyone to rip them off and you want to be able to pay bills if they had an accident. Provided they agree, have them sign the document. before a notary. If they can’t get out to a notary easily, mobile notaires will come to their home and notarize there. Above all, don’t wait until it’s too late.
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