Life’s path often meanders through unexpected landscapes. Amid the many transformations we encounter, grappling with diminished cognitive abilities can be a formidable challenge. Through deliberate planning, we can chart a course that not only upholds our values and choices but also equips us to navigate the evolving terrain of our mental faculties.

Within the realm of financial planning, a fundamental principle emerges: remain optimistic while preparing for the worst-case scenario. Here, we present pragmatic measures to mitigate the impact of potential cognitive decline on one’s financial capacity:

1 – Create a Financial Power of Attorney: Appointing someone as your financial power of attorney grants them the legal authority to access your assets and manage your finances if you’re incapacitated. The financial power of attorney can be drafted to be effective immediately or to “spring” into effect upon a defined event, such as incapacity. Be aware that if the power of attorney you have is a springing power of attorney, there may be delays or complications in implementing it because proof of incapacity may be required. Because of these potential delays or complications, naming someone you trust as your attorney in fact (agent), and making the document effective upon signing, may be a better alternative. Consider whether you want to provide your named attorney in fact with a copy of the signed document or let them know where a copy could be obtained if needed. Also, consider naming a successor agent in case your first choice is unable or ceases to serve as an attorney in fact. A well-drafted power of attorney minimizes the risk of disputes.

2 – Establish a Revocable Living Trust: Beyond safeguarding significant assets and bypassing probate, a revocable trust assumes a pivotal role in securing your finances should your cognitive capacity diminish. This adaptable trust can be established with relative ease, allowing a co-trustee or a successor trustee, like a spouse or child, to oversee trust assets and manage financial obligations. Managing assets titled under the trust, including real estate, bank accounts, and brokerage holdings, is a more streamlined process. The co-trustee or successor trustee can use assets in the trust for your benefit according to the trust terms. Your agent named in your financial power of attorney can access assets not in trust (such as an IRA or qualified retirement assets) for your benefit.

3 – Organize Essential Documents: Safely store vital documents such as wills, trusts, financial powers of attorney, health care powers of attorney, living wills, letters of last instructions, insurance policies, and your Social Security card. Additionally, ensure a trusted individual in your household is aware of their location.

4 – Provide Trusted Contacts to Financial Professionals: Share the details of your designated trusted contact person with your financial planner and brokerage firm. This individual is authorized to be contacted under specific circumstances, particularly when communicating with you becomes challenging or concerns of financial exploitation emerge. Trusted contacts do not possess the ability to access your funds; they are informed when the financial institution detects potential signs of financial abuse.

5 – Leverage Social Security Advance Designation: This resource enables you to nominate up to three individuals as your “representative payee” to manage your Social Security benefits if you’re unable to do so.

While navigating the uncertain terrain of potential cognitive changes, proactive planning can help provide a comforting sense of control. By embracing these strategies, you can empower yourself to confront the future with resilience and grace. These preparations can help you embark on the journey of life’s cognitive fluctuations with enhanced serenity and self-assurance.

Author Ritu Jain Associate Advisor

Ritu enjoyed a 20+ year career as an entrepreneur in technology and has a background in engineering. She brings a unique perspective and a diverse skillset with focus on client service and leveraging technology to meet client needs.

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