Planning for Financial & Legal Challenges Associated with Alzheimer’s and Dementia

Last Updated: September 08, 2018

Financial and legal issues are not the first thing that most people think about when faced with a diagnosis or providing care for a loved one with Alzheimer’s disease or another form of dementia. However, these are important issues that should not be overlooked or put off. In particular, there are several legal documents that the person with dementia should sign so that if his or her decision-making capability is diminished in the later stages of the illness, care and financail decisions are made by someone that he or she trusts. Final wishes of all kinds that are important to the individual, such as preferred living situation, long-term care plans, care for a pet, and even funeral arrangements, need to be made while the person with dementia still has decision making capacity.


Legal arrangements documenting current and future plans should be made for all older people, not just persons with dementia. Many legal documents must be signed by an individual with the mental capacity to make decisions and sign documents while understanding the implications. Therefore, when someone is diagnosed with dementia, amending existing legal arrangements and setting up new arrangements can become complicated. Revisions or drafts of new legal arrangements should be written as soon as possible after dementia diagnosis so that the person still has the mental capacity to make sound decisions and can make his wishes known. Wishes of a non-legal nature, such as preferred living situation and power of attorney, can be described at the same time.


Understanding Guardianship

When people with dementia no longer have the mental capacity to sign a legal document (understanding what it means and what its implications are), it is more difficult to set up legal arrangements to make decisions for them. For example, a loved one might refuse needed help, but have serious problems with daily living. Guardianship is a legal arrangement that allows caregivers to make financial, healthcare, and other important decisions on behalf of loved ones who can no longer make decisions as a result of disability, incapacity, or mental illness.

Seeking guardianship can be a complicated and frustrating process, as it usually involves legal proceedings to establish that the individual is indeed incapable of making decisions for her/himself. In other words, the person is incompetent. In addition, if the process of guardianship is not done correctly, the case may take longer or be dismissed altogether. Consider obtaining a lawyer who is familiar with the laws of the state in which the person with dementia resides. In general, guardianship proceedings follow this general format:

  1. The caregiver or another individual (called the petitioner) files a petition to declare the incompetency of the person with dementia to the Superior Court clerk for the county.
  2. The clerk may require documentation from a doctor, social worker, psychiatrist, and/or another healthcare worker in order to establish whether a hearing is needed.
  3. The sheriff’s office will serve a notice of the hearing to the person with dementia and the person filing the petition must also make sure that all family members are notified.
  4. An attorney may be appointed to represent the person with dementia. The hearing will allow any objections to, or evidence for and against, declaring the person incompetent.
  5. The clerk or a jury will look at the evidence and make a decision on whether or not the person is incompetent and then he/she will hear evidence and make a decision on who should serve as guardian(s) for the person.

Once designated, a guardian is usually able to make decisions about an individual’s finances and personal health care and wellbeing. However, the legal proceeding may choose to establish separate guardianships. Contact your local Area Agency on Aging (AAA) or Alzheimer’s Association in order to be put in contact with an elder law attorney, social worker, or another individual who can assist you in learning more about guardianship.


Important Legal Documents for Persons with Alzheimer’s or Dementia

The following legal documents should be written and signed as soon as possible after a person is diagnosed with dementia. These documents protect the finances, health, and rights of an individual with dementia. In many cases, a lawyer and/or a notary public must write or verify the documents.

Durable Power of Attorney

Durable power of attorney is a type of advance directive, which is a written, legal document that spells out a person’s wishes if he/she is unable to make decisions. Durable power of attorney allows another individual, usually a close friend or family member of the person with dementia, to make decisions on his/her behalf upon incapacitation. (A second person should be named as a “back up” power of attorney in the event the first person named cannot act as power of attorney when the time comes). This person may act in the best interests of the individual, making decisions about his/her finances, properties, and estate. Power of attorney must be established while the person still is able to make informed decisions, and it must be a durable power of attorney for the arrangement to still be valid once the person no longer has mental capacity. Power of attorney may or may not include a right to make decisions on healthcare, as outlined in the agreement. Sometimes this document is called a durable power of attorney for healthcare or medical power of attorney.

Power of Attorney for Healthcare OR Designation of Healthcare Surrogate

Power of attorney for healthcare is a specific arrangement that names an agent, once again a close friend or family member, to make decisions about health care of the individual. This agent is able to decide on the kinds of treatment the person will receive, who will treat him/her, and when long-term care should be considered. The agent will also be expected to help make end-of-life decisions, such as resuscitation, especially if there is not a living will in place (see below).

Living Trust

A living trust, also referred to as an “inter vivos” trust, allows an individual with dementia to set up a plan for how his/her finances and property will be managed when he/she is no longer legally capable of doing so. A trust names “trustees”, which can be family members, friends, associates, or even financial institutions, to take over responsibility. Setting up a trust usually means putting all investments, accounts, and property into the name of the living trust as well. A living trust has more restrictions than a durable power of attorney. Therefore, many lawyers recommend that people complete both documents.

Living Will

A living will is another type of advance directive. It is a written, legal document where individuals can specify what sort of medical intervention and treatments they want (or don’t want) if they are seriously or terminally injured or ill. Individuals can also specify if they want medical treatments to keep them alive, including feeding tubes and resuscitation. (Individuals who have a DNR should mention this in their living will. Learn more about DNRs below). Living wills can spell out individual’s wishes regarding complicated medical decisions at a later time when there is disagreement or confusion among family members. However, it should be noted that having a living will does not guarantee that doctors, hospitals, or family members will follow an individual’s wishes.

Do Not Resuscitate Order

A do not resuscitate order, also called a DNR, is also a type of advance directive. It is a medical order that states the individual does not want cardiopulmonary resuscitation (CPR) performed if his/her breathing or heart stops. A DNR is only relevant when it comes to CPR. It does not give any other medical instructions.


A will expresses how an individual wants any remaining assets and belongings handled once he/she is deceased, whether disbursed to individual beneficiaries or dissolved and given to charities. In setting up a will, an individual designates an executor who will oversee the disbursement of the estate. This executor does not have the ability to make decisions for the person while he/she is still alive. Wills are state documents, and laws applying to them vary from state to state.


 Financial Management – Another responsibility that caregivers have their loved one’s dementia progresses is financial management.  Learn about financial planning for dementia care.