Even though most seniors are still capable of managing their own finances, research has shown that even cognitively normal people may reach a point where financial decision-making becomes challenging. As people age, cognitive functions in the math area of the brain start to degenerate.
That deterioration may not be obvious to the casual observer. In some cases, a senior is no longer aware of how the banking system works or can only understand the concept of money if it is in his hand or she sees it physically.
Signs that financial skills are starting to decline may include things like difficulty calculating a tip at a restaurant, trouble paying and mailing routine bills, trouble understanding terms on a financial statement. This helps to explain why the elderly are targeted by scammers, unethical sales people and fraudulent charities. They take advantage of our vulnerable elderly population to sell unnecessary services, plead for charitable donations or direct money to dubious investments.
Major financial mishaps and outright theft can be avoided if seniors have a trusted assistant, an adult family member or a financial and legal advisor involved in managing their assets and accounts. Certainly it is advisable to have powers of attorney, a revocable living trust and health care directives readily available. These documents can serve as the first line of protection so that unethical people cannot open accounts or automate bill payments under a senior’s name.
Furthermore, some estate planning attorneys ask their clients to name a go-to-person if they suspect a decline in cognition. Sometimes called “a letter of diminishing capacity,” the document typically authorizes the adviser to raise the capacity issue with a trusted individual the client names.