Dealing with Mental Capacity Issues

It might be an elderly parent, it might be your spouse, it might be a close friend but most of us will have to deal with a person close to us struggling with diminished mental capacity.  Some changes in behavior can be an early sign.  It also often shows up early in the ability to make and understand financial matters.  In fact, I have picked up on it a few times in discussions with long time clients.

Many factors can contribute to behavioral changes and not all are due to diminished capacity.  Financial strain can be a significant factor.  This can be due to reduced income, inflation, and increased medical cost.   Family members can help with this by creating a monthly list of bills and by covering some costs for them.  Memory issues and physical discomfort can be contributing factors, as well.  It can be very frustrating for the person having neurological conditions and can lead to behavioral changes.  Loved ones can help with this by remaining calm and redirecting attention to something positive or some fun activity.  The person with physical discomfort may not be able effectively communicate what is wrong.  Therefore, it is important to check on the person’s physical comfort regularly. 

Behavioral changes can also be brought on by fear of uncertainty, boredom, and significant loss.  There is a tendency to fear that the cognitive decline along with mobility issues will get much worse quickly.  The best way to address this is to encourage them that you will always be there for them and to keep them going with activities.  When a person engages in interaction with others and gets out to enjoy nature’s beauty, they can receive a sense of purpose and fulfillment.  Therapy and support groups can help them deal with loss of loved ones and close friends.  These may help offset the mood swings, anger, and other problems that come with these losses.[1]

Our loved ones can experience significant changes in behavior from factors other than dementia.  It can be side effects from taking multiple medications.  For some it can be triggered by changes in vision and hearing.  Depression can also be a cause of the changes in behavior.  It is important when these changes appear to consult with doctors about their medications and get vision and hearing checked.  Often, the person will not seek these things out because they may not want to deal with the fact that they are having problems.[2]

Strokes often go undetected.  The National Stroke Association says that about 20% of stroke survivors have cognitive impairments.  It often leads to confusion, memory loss, diminished attention span, and difficulty with routine tasks.  It is important to have the person evaluated by a doctor as soon as possible when these symptoms present. 

There may be significant personality changes like aggressions, belligerence, apathy, or depression that appears suddenly and inexplicably.  Sometimes a person who has been gentle and easy-going suddenly has angry outbursts.  It might also manifest in risky behavior like suddenly taking up gambling, promiscuous behavior, or use of illegal drugs. It is important that you do not take these things personally but do take them seriously.  Remember that sadness often shows up as anger in our culture and do your best to be empathetic.[3]

A non-judgmental talk and working on solutions together can go a long way toward helping the person deal with these concerns.  Otherwise, they may keep their own fears bottled up inside which may lead to more changes in behavior or personality in the future.

There are some serious financial risks to a person dealing with diminished capacity.  The Mental Health Foundation has identified that these people demonstrate loss of one or more of the following:

  • Ability to understand the information given to them,
  • Ability to retain the information long enough to make decisions,
  • Ability to consider all available information to make a decision, and
  • Ability to communicate their decision to others. 

The Securities and Exchange Commission (SEC) resources defines “diminished financial capacity” as a decline in a person’s ability to manage money and financial assets to serve his or her best interests, including the inability to understand the consequences of investment decisions.[4]

Family members can help their loved ones and protect them from challenges in the future by helping them take a few important steps:

  • Organize all important financial documents in a safe place and give copies to trusted loved ones.  Make a list of all accounts including the account numbers.  Make a separate list of online bank and brokerage accounts with passwords and PIN’s.  List all other important documents and accounts (insurance policies, pensions, social security information, contact information for medical and financial professionals). 
  • Ensure all financial accounts have a designated trusted emergency contact.  This can be used if the financial professional is unable to reach them or suspects something might be wrong.
  • Consider creating a durable financial power of attorney.  This gives someone the legal authority to make financial decisions on their behalf if they cannot.  It can be changed or cancelled as long as the person is still able to make decisions but remains in effect even in the event of incapacity.
  • Keep everything up to date
  • Speak up if something goes wrong.  Sadly, sometimes people we think we can trust commit financial crimes.  This includes financial professionals.  Never be ashamed to admit someone has taken advantage of you.  The sooner it gets addressed the better.[5] 

Be aware of some of the warning signs of diminished financial capacity and get help.  If you notice that your loved one is having credit difficulties, is making irrational purchases or inappropriate investments, have unpaid bills, or any other financial troubles cognitive decline may be the culprit. 

Dennis J. Rogers, CPA, CFP® is a Registered Principal offering securities and advisory services through United Planners Financial Services. Member FINRA/SIPC. The information contained in this article is general in nature.  You should seek professional tax and financial advice prior to implementing any of these ideas.  FireSky Financial and United Planners Financial Services are not affiliated. Dennis is a partner in a financial advisory practice in Phoenix that focuses on helping clients make smart decisions about their money based on their personal core values. He can be reached at drogers@FireSkyFinancial.com or 602-748-1900.

[1] https://www.harrisburghomecare.com/what-might-cause-an-older-persons-behavior-to-change/

[2] https://www.homecareassistancearlingtontx.com/why-is-my-older-loved-ones-behavior-changing/

[3] https://www.freedomcareny.com/posts/personality-changes-in-the-elderly

[4] https://www.forbes.com/sites/catherineschnaubelt/2018/06/20/understanding-the-financial-risks-of-diminished-capacity/?sh=7e2ec7e75285

[5] https://www.finra.org/investors/insights/diminished-financial-capacity

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