It is tough to know when you should step in and help your parents with their finances. You may go back and forth about when to take over. Deciding whether your parents still have the cognitive ability to manage their money is a difficult call to make. A recent report reveals why it may be important for you to get involved.

The Study Results

An analysis published in September 2022 showed that seniors with cognitive impairment are struggling to handle their financial affairs. Reviewing a survey of 8,800 men and women aged 65 and older, the researchers found that seniors continued to maintain control over their finances even when experiencing some sort of cognitive decline.

In the population studied, almost 14 percent of these older adults suffered from cognitively impaired nondementia (CIND). Another 6 percent were experiencing dementia.

The study reported that cognitive impairment problems disproportionately affected groups who reported having less education or who identified as a member of a racial minority group. 

Does Your Parent Show Signs of Cognitive Impairment?

There are some signs that may indicate diminished cognitive ability. Watch out for the following if you suspect your parent is experiencing diminished mental capacity:

• Your parents are confused and get lost in familiar places
• Your parents may lose their train of thought throughout a conversation with you
• Your parents are more forgetful
• Your parents forget about important events (like birthdays, holidays, and doctor's appointments)
• Your parents are making impulsive decisions

Are Your Parents' Financial Resources at Risk?

If your parents have a large estate, you should take care to determine whether they have any cognitive impairment. The study found that many of the men and women surveyed had large amounts of money or property valued at more than $100,000.

“Risky” financial assets, like valuable stock portfolios, may be “particularly susceptible to mismanagement” in those with cognitive impairment, the researchers state.

What Can I Do for My Parents?

Ensuring that your parents are properly cared for as they age is a priority for many adult children of older people. However, knowing what you can do for your parents' finances if they have any cognitive impairment is hard.

If you suspect your parents are having a difficult time managing their money because of a cognitive deficiency, consider the following.  

• Get Them Screened for Cognitive Impairment — The best first step is to confirm your suspicion with a cognitive impairment screening. Typically, patients are asked simple questions about themselves and their surroundings, including their name, address, the time, and to recall information. Learn more about cognitive assessments from the Alzheimer's Association.
• Even if your parent has a modest or small estate, some oversight and assistance may avoid bills going unpaid and insurance policies being cancelled due to premiums not being paid. It's not unusual to see senior citizens who have modest Social Security and pension income making monthly donations to multiple charities and groups, some of which are dubious, even though they have a limited income and really cannot afford these donations. By getting involved before a crisis, you may help your parent avoid falling victim to scammers who prey on the elderly. 
• It's important to remember that older people continue to have all the rights of an adult American, so get your parent's input about if they would like your help. However, be aware that sometimes dementia can manifest itself in an extreme reluctance to let go of any control of their finances and suspicion of the person trying to help, even if the parent already named you as their agent under a power of attorney or trustee of their trust.
• Appoint alternate decision makers — If your parents have not already done so, they should do estate planning to designate a patient advocate to make medical decisions for them and to appoint an agent under a power of attorney to make financial decisions for them and to pay their bills. This needs to be done while the older person has legal capacity to understand and sign legal documents. If you wait too long and the person no longer has capacity, more likely than not you will have to seek guardianship and conservatorship in probate court before you have authority to act on behalf of your parent.

If you have been designated as agent or trustee, be aware that the law considers you a fiduciary and there are certain legal requirements that must be followed when you are acting as an agent under a power of attorney or incapacity trustee under a living trust. Consider getting legal advice from an elder law attorney who is experienced in helping families deal with dementia. An elder law attorney can advise you on the fiduciary reporting requirements that apply to agents under powers of attorney and living trusts.

Also, if their estate is larger, you might consider meeting with a financial advisor to ensure that you comply with Michgian's prudent investor rule and that there is a good financial plan in place. I tend to see senior citizens whose estate is concentrated in a few stocks, putting them at risk if those companies decline. Alternatively, many seniors have all of their savings in a bank account earning next to nothing in interest, so they are experiencing an ongoing loss due to the effects of high inflation.