4 Early Signs that an Aging Loved One is Struggling to Make Financial Decisions and How to Handle It

It's excruciating to come to terms with the fact that my grandpa has dementia. My sweet, wouldn't-hurt-a-fly grandpa now can't recall my name and it was painfully obvious over the Thanksgiving holiday. Though we've all been coming to grips with it for a long time, we're finally to the point where we feel lucky that he still remembers my dad, my dad's sisters and my grandma. 

Naturally, everything falls on my grandma's shoulders and that includes making financial decisions. 

The number of adults with neurodegenerative dementias over the age of 65 has rapidly increased, which also results in age-related declines in financial skills and decision-making abilities. 

The number of Americans over the age of 65 should more than double over the next 40 years, increasing from 40 million in 2010 to 89 million in 2050.

Due to this rapid increase in longevity, the Alzheimer's Association estimates that 5.2 million people in the United States had a clinical diagnosis of Alzheimer's disease in 2014 and by 2050, it will increase to 13.8 million people unless treatments improve.

What should loved ones watch for? 

Early Warning Signs that a Loved One Needs Help Managing Their Finances

The National Endowment for Financial Education (NEFE) put together some early warning signs that an aging loved one is having trouble making financial decisions. Here are some questions you can ask yourself. 

Question 1: Is your loved one taking longer to complete financial tasks?

If your loved one has trouble preparing a check for a bill he or she received in the mail, that can be a sign that the completion of financial tasks might be becoming too much for your aging relative.

Question 2: Is your loved one overlooking the fine print in financial documents?

If your loved one cannot determine that he or she must pay a bill by a certain date or cannot understand how much it will cost to pay for insurance, for example, it could mean that his or her ability to make financial decisions has been compromised.

Question 3: Can your loved one make mathematical deductions?

If your loved one has trouble adding two bills together or has trouble counting out money for a purchase, it's a good indicator that he or she needs help with basic math and money skills.

Question 4: Does your loved one face challenges understanding broader financial concepts?

What about those broader financial concepts? For instance, your loved one may not be able to understand the risks of investing in a particular type of investment, how interest rate works on a loan or when a particular investment may not be in their best financial interests (such as a reverse mortgage). 

Steps to Take When You Have Concerns About Your Loved One's Ability to Make Financial Decisions

You might feel dread even thinking about having a conversation with your loved one about making the right financial decisions. Let's walk through some concrete steps you can take to ensure that your loved one isn't putting himself or herself in dangerous financial territory.

Step 1: Gently bring it up. 

Talk to your loved one (with your family's support, if possible) about your concerns. Your loved one may not agree with your assessment at all, so you should be ready for that possibility. 

Even if it's not well received, still ask where basic documents are stored, such as a will or where all the bank accounts are held. It's important to get a sense of where everything is located, especially if you suspect or know that medically, a loved one may be in the beginning stages of dementia.

Keep it light and break up the conversation into multiple sittings — not just one. The holidays may or may not be the best time to bring up these issues, so use your discretion based on what's appropriate for your family.

Step 2: Put together an inventory. 

Put together a list of all financial accounts and assets (all the stocks, bonds and mutual funds) and keep it in a safe place. Keep all information in a safe place. Consider tax statements, the will, beneficiaries and financial power of attorney information — these are all great places to start. If your loved one hasn't put together these crucial components, work to get a will, a medical directive and the right type of insurance policies together for his or her needs.

Step 3: Put together a professional and family team.

Like picking the best players for a baseball team, choose the best professionals to help you step in when your loved one's financial and cognitive skills start to slip. This involves financial advisors, estate planners, lawyers, doctors and more. They can help you understand the legal issues related to your loved one's estate, issues related to medical power of attorney and more.

If your loved one is still able to make decisions, he or she can name someone on his or her own to serve as your loved one's medical decision maker and as financial power of attorney. Family members can serve in these roles. 

If you want assistance from other family members, talk through what you're doing with your loved one so they are all aware. If they have expertise in certain areas (such as a sister who is a lawyer or a brother who is a financial advisor), make sure to utilize their expertise. Family members may also be in charge of other tasks but make sure they feel comfortable with their respective roles. 

Your loved one may have some definitive opinions about these choices, so make sure to respect those wishes.

Get Everyone in Sync When a Loved One's Financial Abilities Deteriorate

In 1910, the life expectancy was 48 years for men and 52 years for women. (It seems so young by today's standards!) By 2010, it had increased to 76 years for men and 81 for women. My grandpa has blown past his life expectancy. Even so, it doesn't make it any easier. 

It's also important to remember that dementia usually occurs gradually. Not all elderly loved ones show an obvious decline immediately. In fact, some individuals may not want intervention unless they show significantly reduced and obvious mental decline.