and Julia Davis
Dementia and financial planning has been a topic of increasing frequency in client conversations over the past few years. It’s also something we’ve experienced personally with close friends and family members. Those experiences reinforce an important truth: planning early can provide structure, stability, and peace of mind for everyone involved.
And the need is growing. More than 57 million people worldwide are currently living with dementia—a number expected to nearly triple by 2050.
For families, this creates both emotional and financial complexity. Whether you’re planning for your own future or helping care for an aging parent or spouse, preparing early can make a meaningful difference in protecting both wellbeing and financial security.
Fortunately, there are widely available tools for incorporating the possibility of future loss of mental capacity into financial and estate planning for aging persons. By careful attention to maintaining updated powers of attorney (POA) and a current healthcare proxy, many of the worst financial and emotional consequences of dementia can be avoided or mitigated.
Why early planning matters
As with all matters of estate and healthcare planning, having conversations early is truly a gift to your family. It allows you to communicate your wishes clearly, reduce uncertainty, and ensure that trusted individuals are prepared to step in if needed. As we often say: your children can learn about your finances at two times: when you pass, or now, when you can help create clarity and understanding while it matters most
When should powers of attorney be updated?
One of the most important steps in planning for potential cognitive decline is establishing—or reviewing—your legal documents. It’s a well-established fact that estate planning is not a one-and-done matter. Instead, as family and individual circumstances change over the years, the estate plan should be revised and adapted to changing conditions and needs. A durable power of attorney (POA) allows you to designate someone to manage financial matters if you are unable to do so. A healthcare proxy (or healthcare power of attorney) appoints someone to make medical decisions on your behalf.
For many couples, this includes transitioning responsibility from a spouse to an adult child or trusted family member, if needed over time. Putting these safeguards in place while you are still able to participate fully helps prevent complications later and ensures your wishes are honored. In some cases (especially those involving complex or large estates), powers of attorney may be vested in a trustee by the terms of a trust that holds assets maintained for the benefit of the grantor.
Practical steps to take early
Facing early-stage dementia in a spouse or loved one is emotionally difficult—but it also provides a critical window to plan thoughtfully.
- Establish legal protections early. Work with an estate planning attorney to ensure powers of attorney and healthcare directives are in place and up to date.
- Have proactive conversations. Discuss care preferences, living arrangements, and priorities. These decisions directly shape future financial needs and planning.
- Clarify your finances. Understand your current expenses and begin planning for future costs such as in-home care, medications, or assisted living. A clear picture today helps avoid difficult decisions later.
- Organize and simplify accounts. Create a centralized record of accounts, automate bills where possible, and reduce financial complexity. This makes management easier as responsibilities shift.
- Protect against fraud. Cognitive changes can increase vulnerability to scams. Monitor accounts regularly, stay alert to unusual activity, and take steps to limit exposure when appropriate.
How can families prevent financial exploitation?
Sadly, most elder financial abuse is perpetrated by family members or caregivers. Early planning, combined with consistent communication and oversight, can significantly reduce vulnerability. Having a trusted individual formally authorized through a power of attorney is one of the strongest protections available. In some cases, it may also be appropriate to structure that authority with reasonable limitations or oversight, depending on the situation.
Early planning doesn’t eliminate uncertainty—but it provides clarity, protection, and peace of mind. It allows families to spend less time reacting to crises and more time focusing on care, connection, and support. Your advisor at The Planning Center can also be a valuable resource for answering questions and developing strategies for protecting the financial wellbeing of aging parents or other relatives. Please let us know how we can help you find the answers you need.
