4 practical ways to protect your finances if you or a relative develops dementia
Dementia is a growing problem in the UK, affecting an increasing number of people as life expectancy improves.
On 21 January, Race Against Dementia Day aims to increase awareness of the disease and raise vital funds to help scientists develop new ways to prevent and treat dementia in the future.
Dementia can affect life in many ways, whether you’re affected directly or if you’re caring for a loved one who has the illness.
Fortunately, there are simple steps you can take today to mitigate the potential impact on your finances if you or a loved one is diagnosed in the future.
Read on to discover four ways to prepare for the possibility of developing dementia later in life and reduce the impact this could have on your finances.
1. Put a Lasting Power of Attorney in place
A Lasting Power of Attorney (LPA) is a legal document that you use to appoint a trusted person (your “attorney”) to take care of your affairs in the event that you lose the mental capacity to do this yourself.
An LPA might be needed if you develop dementia or another type of illness, or if you were to become injured as a result of an accident, since your family aren’t automatically allowed to manage your finances for you.
There are two different types of LPA:
- A Health and Welfare LPA allows your chosen attorney to make decisions about your day-to-day life, such as any medical care you may need.
- A Property and Financial Affairs LPA gives your nominated attorney the authority to manage your finances, such as paying your bills and managing your investments.
It is sensible to create an LPA at the earliest possible opportunity because it won’t be valid if you have already lost mental capacity when it is written.
If you lose mental capacity without an LPA in place, your family will need to apply to the Court of Protection to be allowed to manage your affairs for you. This can be a very costly and time-consuming process, adding additional stress at an already difficult time, and could delay you receiving the help that you need.
2. Create an “in case of emergency” document
An “in case of emergency” document can be a helpful way of keeping lots of important information in one place to help your family take over managing your finances for you.
It might include details of the following:
- Insurance policies
- Care instructions for your pets
- Any funeral plans you have made
- Any current accounts, savings, and investments
- Location of key documents including your passport, birth certificate, will, and property deeds
- Contact details for your doctor, accountant, financial planner, solicitor, or other professionals
- Details about your utility companies, subscriptions, and other accounts that may need to be transferred.
It’s important to store this information somewhere secure, such as a fireproof safe or password-protected file, and be cautious about including any passwords or PINs.
3. Review and update your will regularly
Your will is a legal document stating what you’d like to happen to your assets after you pass away.
In order for your will to be valid, you must satisfy certain conditions when writing it, including being of sound mind. After you have been diagnosed with dementia, it may not be possible to write a legally valid will.
If you pass away without a will, your estate will be distributed according to the laws of intestacy. This can be extremely time-consuming, as it must go through the courts, and could also mean that your assets are passed on differently than you would like them to be.
Once you have written your will, it’s also important to review it regularly to ensure it’s up to date. Any errors or omissions can create significant difficulties for the executor of your will and your beneficiaries.
4. Include later-life care costs in your financial plan
Dementia can mean that you require additional support with your healthcare needs as well as daily tasks such as preparing food, getting dressed, and keeping your home clean. Paying for this level of care can be expensive; Fidelity reports that the average person may need up to £99,500 to cover this cost.
So, it may also be helpful to consider any potential later-life care costs in your financial plan.
By making a plan for this eventuality, you can ensure that you have enough set aside to pay for the care that you need.
Caring for someone with dementia can also affect your finances
As well as the impact on the person who has dementia, caring for someone in this position can affect your own finances.
The NHS estimates that around 540,000 people in England are caring for a relative with dementia. Of these, 66,000 people have had to cut down their working hours and 50,000 people have left work altogether because of their caring responsibilities. This can affect your income and your ability to hit your long-term financial goals.
If you are looking after a family member with dementia, working with a financial planner can help you to mitigate the impact of caring responsibilities on your financial wellbeing.
Get in touch
At Logic, we can help you manage your finances, and the finances of your loved ones too.
If you have any questions about how best to help your loved ones manage their finances, speak to us now. Please email us at firstname.lastname@example.org or check with your adviser.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.