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Addressing the risk of dementia within estate planning

Any Oklahoma resident who has helped care for a loved one who suffers from dementia knows how heartbreaking it is to watch a family member lose his or her grip on reality. Dementia affects many older people, and it places a huge burden on their extended family. When it comes to estate planning, many people want to devise protections against the risk of dementia but are unaware of their options. The following information focuses on how to best safeguard an IRA from dementia-related loss.

Most couples plan to leave their IRA to the surviving spouse, with the intention that he or she will roll the savings into a new IRA and then name any children as beneficiaries. This plan, however, could be negatively impacted if the surviving spouse is affected by dementia and loses the capacity to make those decisions. It is not possible to "pre-elect" beneficiaries to an IRA that has not yet been created, nor it is possible to name "secondary" beneficiaries to the first IRA.

A solution lies in drafting power of attorney paperwork that would give a trusted individual the ability to make financial decisions for either spouse, if and when the time comes that an individual is unable to make those decision on his or her own. In this way, a surviving spouse who begins to suffer from dementia will still be taken care of.  The family will also be able to direct the IRA account in the manner that was originally intended.

A second option is to seek guardianship rights if the surviving spouse becomes incapacitated. This requires a court action and can be a difficult and stressful process for all involved. The court process is public, and it is not unusual for family members to disagree about who should be named guardian and what level of responsibility that person should have over financial matters. While guardianship can be an effective means of addressing dementia within an Oklahoma family, it is often a last resort and not the best estate planning option.

Source:, "Planning for the Dementia Factor in Retirement", Natalie Choate, Dec. 12, 2015

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