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A recent article in the New York Times, “As Cognition Slips, Financial Skills Are Often the First to Go,” discussed studies that indicate when older people start declining mentally, their ability to solve simple math problems is typically one of the first of their abilities to suffer.  For example, balancing a checkbook, paying bills, or calculating a tip may become a challenging task.  Financial judgment may start to suffer as well, increasing risks and vulnerability to scams of all kinds.

The article lists some warning signs that a person’s financial competence is declining.  For example, “Taking longer to complete everyday financial tasks” such as responding to bills or paying their income taxes. “Reduced attention to details in financial documents” is another.  The signs are subtle and usually appear gradually, and of course, they appear at a different age for everyone.  Sometimes the children don’t realize something is wrong until a disaster or crisis occurs.

Many scam artists make seniors their prime targets.  One of Lamson & Cutner’s clients, an apparently competent 74-year-old woman, wired several thousand dollars to “Julie” (just “Julie”) at a Post Office Box in the Dominican Republic, at the request of someone who pretended to be her grandson, and who claimed he was in financial trouble there.  Another elderly woman we know also tried to send money this way; fortunately, the Western Union office recognized it was a scam and prevented her from doing so.  But there isn’t always a helpful person watching out for you.  The person featured in the New York Times article was an elderly man whose much-younger second wife had emptied out his annuity, cashed blank checks sent by his credit-card issuer, and had almost completed a reverse mortgage loan when the man’s daughter stepped in.

The fact that people who otherwise seem reasonably competent would do such foolish things, or permit themselves to be victimized, indicates the complexity of the problem.  If you notice that your parent, relative or friend, is starting to decline, it’s probably time to make sure that financial matters are being handled appropriately, and to consider steps to avoid their becoming an easy target for con artists.

There are many scenarios as people age.  If you are getting older yourself, you might still be perfectly willing and able to handle your finances.  Since “mental gymnastics” such as crossword puzzles and handling financial matters are good for your brain, it can be unwise to take (‘wrench’ is a little strong) control from a person who is still competent.  But everyone’s abilities and energy level eventually decline.  An example of the latter is an 85-year-old client of our firm who is still in reasonably good shape physically and is mentally very “with it.”  In theory she could still handle her finances, but she is slowing down, and just doesn’t want to any more.  Her son and daughter offered to take over the bill-paying and investments, and she agreed gratefully.

Once cognitive decline starts, it is crucial for friends, family, and caregivers to keep a sharp eye on how the person is managing financially.   Bank accounts and credit cards should be monitored for suspicious activity.   Payments and withdrawals above a stated amount from bank and investment accounts can be made subject to dual signature.

Of course, a most prudent step – before your loved one loses mental capacity – is for him or her to establish a Power of Attorney with adequate scope of powers.   At the same time, it might be wise to consider creating an asset protection trust.  A trust is a great vehicle for protecting assets against scammers, preserving assets when costly long-term care services are needed, and facilitating an estate plan as well.

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