Mild dementia and portfolio risk

[eta2020]

I would rather setup Irrevocable Trust then get an FA.
Good way to pass money to kids as well......

[ivinsfan]

Quote:

Originally Posted by eta2020 I would rather setup Irrevocable Trust then get an FA. Good way to pass money to kids as well......

That is a choice some make. Some extended family had their parents who I am not sure had their full facilities working, put everything in an Irrevocable Trust. What they said was, You should sign this if you don't want all your money to go to a nursing home. Of course 4 years later. they are still living at home alone. It felt semi-slimy....

This whole subject makes me feel queasy, as even decent people get messed up on the subject of money.

[eta2020]

Quote:

Originally Posted by ivinsfan That is a choice some make. Some extended family had their parents who I am not sure had their full facilities working, put everything in an Irrevocable Trust. What they said was, You should sign this if you don't want all your money to go to a nursing home. Of course 4 years later. they are still living at home alone. It felt semi-slimy.... This whole subject makes me feel queasy, as even decent people get messed up on the subject of money.

I have in mind lets say you have 2 million in 401k and 3 million in brokerage account in 50% VTI 50% VXUS. Something simple that even simple man can follow.

Take 3 million in brokerage account and place in Trust where you get portfolio Dividend yield till your death. Thereafter your kids get Yield until age 50 at which point they can access money in Trust. Money must stay in VTI and VXUS rebalanced on date XYZ once a year until your kids reach age 50 at which point they get control of the money.

I am not talking about shielding 300k from Nursing home cost

[ivinsfan]

Quote:

Originally Posted by eta2020 I have in mind lets say you have 2 million in 401k and 3 million in brokerage account in 50% VTI 50% VXUS. Something simple that even simple man can follow. Take 3 million in brokerage account and place in Trust where you get portfolio Dividend yield till your death. Thereafter your kids get Yield until age 50 at which point they can access money in Trust. Money must stay in VTI and VXUS rebalanced on date XYZ once a year until your kids reach age 50 at which point they get control of the money. I am not talking about shielding 300k from Nursing home cost

Not I'm sure you are not and I just meant that even with mild dementia or a little confused thinking someone can be manipulated by a broker or a family member. The elders in this case only heard the words "nursing home"...

[eta2020]

I like simple portfolios like 50/50 VXUS VTI. SO this is how my Trust would look.

Dementia to me would be searching for something sophisticated where I make big money now
I hope my wife will warn me when I start getting it....... and really I would not hesitate much to create Trust. We already had discussions along this topic.

[Hermit]

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Originally Posted by growing_older Somehow I'd find this more convincing if it wasn't hosted on a site dedicated to investment advisers. Of course they recommend using an adviser. There may be lots of good reasons to use an adviser, but "because advisers recommend you use advisers" isn't one of them

Even with this sounding very reasonable, I would have a hard time having my DD read this and at the same time start implementing the suggestions. My DD, being the prudent person that she is may take me in to have me evaluated for basing my financial planning at any level on someone named "Psycho Analyst" in an internet article without even so much as a reference.

If, on the other hand, I could find references for the information provided, it would be a good starting point for discussions that should be coming up sooner rather than later.

With no references, its just another internet puff piece.

[shortstop14]

Had a friend in his 70s who was getting by, a pension and social security covering base expenses and not much more. As he started down the road to dementia, he took his only reserve, cash from selling his house, and started playing with margin in a brokerage account, eventually losing it all. It made a huge difference in his quality of life, using credit cards to cover his discretionary expenses rather than having his reserve to cash. And even then, he spent way too much on lottery tickets still hoping for the big win to bail him out.

He let me help with finances a little eventually, but part of the dementia was being very protective of his independence - so there wasn't much leeway to change much. He died with the credit card debt and hospital debt. The altered decision making undid a mostly careful retirement.

[rodi]

My husband has had to face this with his parents. His dad had dementia for years - but MIL was a good caregiver so it was not an issue.

... until it was. Dementia was slow and steady with her. We noticed she couldn't do her taxes anymore... Mind you she worked for the IRS for a few decades AND had very basic taxes (pension, SS, interest income... no mortgage, no cap gains, no stock transactions.) Then she started forgetting to pay bills. She'd call in a panic that her tv was broken - and we found she'd forgotten to pay the cable bill. The second time this happened we knew it was only going to get worse. Unfortunately, her caregiving skills also declined... and adult protective services got involved.

Hubby had to petition for guardianship of both parents. MIL was spitting mad and fought it every step of the way. The court and medical experts, unfortunately, agreed that she had dementia and could no longer be in charge of FIL or her financial affairs.

It is MUCH better to have POA in place before you need it. It's too late after the dementia has set in. An incompetent person can't issue POA.

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Originally Posted by Tadpole Me too. But seriously, if I were to go with a relative, what would be a fair "carer's allowance" if their responsibilities included all financial transactions (SS, pensions, investments, RMD, taxes, bills, nursing, etc.) The UK NHS gives 61.35 pounds (about $95) per week for 35 hrs. care which doesn't seem right so it must be just a subsidy, not a payment. I imagine $70,000/year would be a decent salary for a beginning accountant. So, if the work-year was 2080 hours, the hourly rate is $33.65. One afternoon a week should be sufficient so call it 4 hours. That is $135/week or $7020/year.

I know with guardianship it varies from state to state. My husband is reimbursed for expenses (like airfare to go to court in her state)... but is not paid for the financial management. When he first took over as guardian he was spending 10-20 hours per week for the first several months. Now it's down to about an hour a month for financial matters. (Everything is on autopay from her accounts. He just checks the balances and statements.)

I've taken this to heart. DH has POA for me, and vice versa. When the kids become adults, we'll give them POAs - but keep the physical copy until we need it. As mentioned, you can't issue a POA when you are deemed to have dementia... but you can get one in place well in advance and tuck it away in a safe deposit box for when the family deems it necessary.

[zerogravity]

Very well written post, imoldernu.

Ironically, DH and I just watched Still Alice tonight. And this past weekend my 75 YO FIL told me he feels like he has a 'hole in his brain.' This is coming from a retired civil engineer. He is such a proud guy, I know he must be serious to admit that. He has a Young guy at his bank in the wealth management office (under 40) who keeps a backup of all accounts, etc. but all trading decisions are DIY. MIL had expressed concern especially since she doesn't understand the financials. Should he set up a trust?

[Brat]

One advantage of putting their assets in a trust is that a trustee can be authorized to manage it. BUT the trust must provide for that. It won't prevent a grantor trustee from mis-managing assets in the trust. IRAs can't be put in a trust but the account owner can authorize a third party to manage the account. I found that in my parent's case that if I 'consulted' them about my paying bills, managing their investments, they were happy with my efforts. The other factor is that as their thinking began to slip they didn't have the capacity to change what I had done. My parent's assets were at Fidelity, I can't speak highly enough about their representatives in dealing with that issue. After using Vanguard for a couple years personally I don't believe they would be able/willing to provide that level of service.

I am in my mid-70s and considering writing a letter addressed to both of my children asking them to work together should my cognition slip. As others in this thread DD is a CPA, she would likely be the one to manage our investments.

[Free To Canoe]

Quote:

Originally Posted by imoldernu +1 This should be mandatory reading for everyone. Not so much for the financial advice, but for the description of dementia, and the onset symptoms. The author was spot on, in describing how the memory and judgement processes begin to degrade. Going through the process myself, his explanation is right on target. Small losses of memory give way to more problematical issues like attention span, and panic when names, words or memories of events or uncompleted tasks begin to change daily life. From my standpoint, the management of finances is a task shared by me and DW, and the necessary legal documents and POA are in place... still at the next family meeting, we'll share the details with our sons, and be sure that necessary copies are secured. We feel safe for the time being, but in another year we will do a complete legal review with an elderlaw lawyer. Whether dementia or some other untoward situation, leaving the legal door open to challenge or subversion of any sort is not a risk that should be taken lightly by anyone, no matter the current state of mind or general health.

Half of the battle here is having someone you have great trust in and who is somewhat competent financially. I am out of luck in this regard.

The other option is to at some point, get the money out of your control. To the best of my knowledge, mutual funds, management companies like Betterment and even trusts are easy to get your funds out of.
Sadly, the only reasonable options are annuity type products that are relatively "locked in". This train of thought makes it easy for me to bypass the social security early option and wait for a higher payout.

[JoeWras]

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Originally Posted by Rick_Head But if you suffer mild dementia, might you not fire this FA and sign up with IG. How do you avoid that?

BINGO!

I have personal experience on how behavior variant FTD works, and it isn't pretty. In the early stages, a person suffering from BV frontotemporal degeneration acts perfectly well on the outside. Meanwhile, all the checks and gates can get burned out in different ways, each unique to the individual. Some people may keep sharp control on their finances and lose control sexually. Others may suddenly pick up gambling. It is unpredictable. The person suffering has no idea they are doing this. The family members just think the person has become evil.

The family is confused because on the outside, this person is the same, but has suddenly picked up some seriously bad behavior. A finance professional would have no idea they were speaking to a sick person.

But here's the problem: it is very likely the person with the risky financial behavior disorder would simply fire their adviser out of anger. Some people with bvFTD have sold their own house from under themselves, without even realizing what they've done.

More bad news: these kinds of dementia tend to hit us, the age focus on this board. 50s and 60s.

http://www.theaftd.org/

[REWahoo]

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Originally Posted by JoeWras I have personal experience on how FTD works, and it isn't pretty.

One of my very good friends was diagnosed with FTD in 2010 at age 62. He died last week.

[jerome len]

I knew a family where the DH owned a business, didn't want to sell it when in his 70's and experiencing demetia. DW knew nothing about the business and was shocked when she found out DH had placed his personal guarantee on a loan for a friend that included the assets of the business and their home........all lost, all they had left was SS......after years of hard work and saving. So, business owners have to be careful as well. I never have nor ever will sign a personal guarantee for anyone.....including myself as part of my business ownership. This was tragic.

[REWahoo]

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Originally Posted by jerome len I never have nor ever will sign a personal guarantee for anyone.....including myself as part of my business ownership.

I wonder if dementia could change your thinking...

[growing_older]

I understand the risk of mild dementia affecting financial judgement, but I don't think paying a FA is necessarily a solution. I've heard plenty of stories of people with advisers pulling out of the market in fear, or making ill advised investment changes. The advisers in those cases didn't prevent the problems. How could I possibly know that whatever adviser I pick (and pay) would detect and prevent lapses in judgement?

I think it would be much safer to have an heir or friend who knows me well supervising my activities and being able to check my written IPS to see if I'm actually doing what I said I wanted to do. Maybe an adviser could do that if the adviser had a similar IPS, but I suspect a financial adviser may not know me well enough to detect mild dementia changes, nor do I have any confidence in an adviser's ability to stick to a plan when faced with an adamant client wanting to do something.

[timo2]

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Originally Posted by growing_older nor do I have any confidence in an adviser's ability to stick to a plan when faced with an adamant client wanting to do something.

+1. DW and I had a scare once when my MIL (now deceased) told DW that at 80 years old, she was buying an annuity from a FA. DW called up the FA to yell at him, but it turned out it was all the MIL. She was getting scared about money, decided she was not getting enough returns on her CDs, and badgered the FA into the annuity proposal. Even though the FA could have been lying about how this went down, this sort of intimidation was clearly in the MIL personality.

[Meadbh]

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Originally Posted by timo2 +1. DW and I had a scare once when my MIL (now deceased) told DW that at 80 years old, she was buying an annuity from a FA. DW called up the FA to yell at him, but it turned out it was all the MIL. She was getting scared about money, decided she was not getting enough returns on her CDs, and badgered the FA into the annuity proposal. Even though the FA could have been lying about how this went down, this sort of intimidation was clearly in the MIL personality.

At 80 years old, MIL's plan to buy an annuity may have been a good idea in her own interest. Of course the annuity would decrease the estate value. That would be of interest to DW and you. Just saying.

[timo2]

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Originally Posted by Meadbh At 80 years old, MIL's plan to buy an annuity may have been a good idea in her own interest. Of course the annuity would decrease the estate value. That would be of interest to DW and you. Just saying.

Clearly in some cases that would be true. and something I might consider if I get to 80, as DW is 5 years younger. But not in my MIL case. To elaborate further, MIL was in very poor health (untreated diabetes for 30 years), very little money, and in fact she only lived 3 more years. And there was no estate. We ended up paying her remaining bill at the nursing home ourselves.

The point of my post is here is a person berating an FA into a path that was not good for her. And to agree with other posters that having an FA does not necessarily protect one's interest in case of some form of dementia later in life.