A dementia diagnosis changes life in profound ways—emotionally, practically, and financially. As memory and decision-making abilities decline, managing money becomes increasingly difficult, and the cost of care can place significant strain on family finances.

Early financial and legal planning is one of the most important ways to protect your loved one’s well-being and preserve family assets. Here’s how to get started:

Have Honest Conversations Early

Many families avoid talking about money or legal matters because it’s uncomfortable. However, the sooner these conversations happen, the more your loved one can participate in decisions about their future.

• Discuss wishes regarding living arrangements, healthcare, and how they’d like their finances managed if they can no longer handle them personally.
• Identify trusted individuals who could step in to help with financial decisions when necessary.

Get Legal Documents in Place

Legal planning is essential to ensure that someone trustworthy can act on behalf of a person with dementia. Key documents include:

• Durable Power of Attorney (POA) for Finances: Authorizes a chosen person to handle financial matters, pay bills, manage investments, and protect assets.
• Durable Power of Attorney for Healthcare: Appoints someone to make medical decisions when the individual cannot.
• Advance Healthcare Directives: Documents your loved one’s wishes for end-of-life care and medical interventions.
• Will and/or Living Trust: Ensures assets are distributed according to the person’s wishes and can help avoid probate delays and costs.

It’s wise to consult an elder law attorney, who understands laws affecting seniors and can help protect assets legally and ethically.

Gather and Organize Financial Information

Start by creating a clear picture of all assets, income, and expenses:

• Bank accounts and account numbers
• Investments and retirement accounts
• Real estate and property deeds
• Insurance policies (life, health, long-term care)
• Pension benefits, Social Security statements
• Debts, including credit cards, mortgages, loans
• Monthly bills and subscriptions
• Tax records

Keep these documents organized and accessible to those who may need to help manage finances.

Create a “Planning Book” for Emergencies

As you collect legal and financial documents, consider putting everything into a single, well-organized “planning book.”

This binder or folder should contain copies of:

• Legal documents (powers of attorney, wills, healthcare directives)
• Key financial records and account information
• Insurance policies and contact details
• Lists of doctors, medications, and medical histories
• Contact information for attorneys, financial advisors, and other professionals
• A summary of your loved one’s wishes for care and end-of-life decisions

Once the planning book is complete, tell trusted family members where it’s kept so they can access it quickly in an emergency. Having everything in one place helps prevent confusion, reduces stress, and ensures your loved one’s wishes are honored if something unexpected happens.

Understand and Plan for Care Costs

Care needs vary widely depending on the stage of dementia and the individual’s overall health. Costs to consider include:

• Home care services for assistance with daily activities
• Adult day programs for supervision and engagement
• Assisted living or memory care facilities
• Skilled nursing care if medical needs increase
• Respite care to give family caregivers a break

According to the Alzheimer’s Association, average costs for memory care facilities range from $4,000 to $8,000 per month, depending on location. Long-term care insurance can help if purchased before a dementia diagnosis, but policies often have waiting periods and limits on coverage.

Medicaid may help cover long-term care costs for those who qualify, but eligibility requirements and asset limits vary by state. An elder law attorney can provide guidance on Medicaid planning strategies.

Protect Against Financial Exploitation

Sadly, individuals with dementia are at higher risk for financial scams and exploitation. To help safeguard finances:

• Reduce the person’s access to large sums of money.
• Set up automatic bill payments to avoid missed payments.
• Regularly review bank and credit card statements for suspicious activity.
• Place safeguards on telemarketing calls and internet use if necessary.
• Consider appointing a daily money manager or professional fiduciary if family members are unavailable or uncomfortable handling finances.

Seek Professional Help

A team approach often works best. Professionals who can help include:

• Elder law attorneys for legal documents and asset protection
• Financial advisors specializing in elder planning
• Accountants or tax preparers for managing tax implications
• Care managers who can help locate services and coordinate care plans

The Bottom Line

Dealing with dementia is incredibly challenging, but planning ahead can bring significant peace of mind. By addressing financial and legal matters early, families can protect a loved one’s dignity, avoid costly crises, and ensure resources are available for quality care.

If you or someone you know is facing a dementia diagnosis, don’t wait—take steps today to secure the financial future and well-being of everyone involved.

You are not alone – For additional guidance and resources, visit AARP’s Dementia and Financial Planning page here.