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Planning for Mental Incapacity: Safeguarding Your Financial Future Thumbnail

Planning for Mental Incapacity: Safeguarding Your Financial Future

Jonathan M. Gardey, MBA, CFA®, CFP®

President and Chief Executive Officer

Mental incapacity due to aging or illness is an uncomfortable topic that most of us prefer to avoid. However, the statistics make a compelling argument for confronting this issue head-on. According to the World Health Organization, approximately 50 million people worldwide have dementia, with nearly 10 million new cases every year. As people live longer, the prevalence of cognitive impairments associated with age, like Alzheimer's and other forms of dementia, is increasing.[i]

These conditions can significantly affect an individual's ability to manage their financial affairs, with potential detrimental outcomes. Research has found that people with dementia are less likely to pay their bills on time and accurately.[ii] It's a sobering fact that mental incapacity can lead to financial ruin if not appropriately managed.

The Power of Financial Planning

In light of these startling realities, I'd like to share a couple of scenarios highlighting the crucial role a financial advisor can play in these situations.

Consider the case of Mr. and Mrs. Thompson, both in their early 80s, and Mr. Thompson was showing signs of early-stage Alzheimer's. Their children lived out of state and felt helpless. A local financial advisor stepped in, worked with the family, and established a comprehensive financial plan.

The advisor helped them consolidate accounts, established automatic payments for recurring bills, and set up a system to monitor unusual financial activity. The advisor also helped put a legally enforceable Power of Attorney[iii] (POA) in place, ensuring that Mrs. Thompson could make financial decisions on her husband's behalf when he was no longer able to do so. Thanks to this proactive planning, Mr. Thompson's condition did not lead to financial distress for the family.

Then there was Mr. Sanchez, a lifelong bachelor with no immediate family. As he aged, his memory began to fail him, and his financial affairs became disordered. Before things got out of hand, a friend introduced him to a financial advisor. The advisor helped Mr. Sanchez establish a trust, with a trusted friend as the trustee, to manage his assets. This pre-planning allowed Mr. Sanchez to continue living comfortably even as his mental faculties declined, avoiding the potential financial catastrophe that could have resulted from mismanaged finances.

How a Financial Advisor Helps You Plan for Incapacity

There are several ways a financial advisor can assist you in planning for mental incapacity, both from a financial and legal standpoint.

1. Consolidating Financial Accounts: An advisor can streamline and simplify your financial life by consolidating your accounts. This process makes it easier for you or a trusted individual to manage your assets.

2. Automatic Payments and Fraud Monitoring: Setting up automatic bill payments helps ensure that obligations are met on time. In addition, advisors can help set up systems to monitor for unusual financial activity, providing an extra layer of protection against fraud or mismanagement.

3. Legal Planning: This involves establishing a Power of Attorney or setting up a trust. A POA allows a trusted individual to make financial decisions on your behalf if you become incapacitated. Trusts can be used to manage your assets, with a trustee of your choice handling your financial affairs.

4. Long-Term Care Planning: Long-term care can be expensive and is often a major financial stressor for those with cognitive impairment. An advisor can help you explore options such as long-term care insurance or assist in the creation of a financial strategy that factors in potential long-term care costs.[iv]

5. Regular Check-Ins: Regular meetings with your advisor can ensure that your financial plan stays up-to-date and changes as your needs and circumstances change. Planning for mental incapacity is a vital aspect of financial planning that too often gets overlooked. It's a difficult conversation to have, but one that is necessary to protect your assets and provide peace of mind for both you and your loved ones.

6. Estate Planning and Taxation: A crucial component of this planning process involves estate planning and taxation. Efficient tax planning strategies can help preserve your wealth and maximize the assets you pass on to your loved ones. This can involve strategies like gifting assets during your lifetime, using trusts, and optimizing the use of tax-free allowances.

Also, having a properly drafted will in place is essential. Without it, your assets may not be distributed according to your wishes upon your death. A financial advisor can work alongside your attorney to ensure that your estate plan and financial plan align and work hand-in-hand.

7. Regular Reviews and Updates: Remember that financial planning isn't a one-and-done task. Your circumstances, and potentially your mental capacity, can change over time. Regular reviews and updates of your financial plans are essential. Your advisor can help monitor these changes and make adjustments as needed.


Let's break down the uncomfortable barriers and confront this challenging topic. Engaging a financial advisor to manage your finances in the event of mental incapacity can secure your future and protect you and your family from unnecessary financial stress and hardship.

Planning for mental incapacity is not merely about preparing for the worst. It's about empowering you to make decisions about your life and assets while you are still able to do so. It's about laying a strong foundation that can help protect your wealth and provide for you and your loved ones, no matter what the future may hold.

Engaging a financial advisor in this process is not just a smart move—it's an act of care for yourself and those you care about. No one knows what the future will bring, but with a solid plan in place, you can navigate whatever comes your way with confidence and peace of mind. Remember, it's never too early to plan. The time to safeguard your future is now. Contact Gardey Financial Advisors today and take the first step towards protecting your financial future against mental incapacity. We best serve clients looking for exceptional client service, who value a long-term partnership, and have a minimum of $500,000 in investable assets.

Publication Disclosure:

To better understand the nature and scope of the advisory services and business practices of Gardey Financial Advisors Inc., please review our SEC Form ADV Part 2A and ADV Part 3 (Form CRS) available via the SEC's website, www.adviserinfo.sec.gov. (Click on the link, select “Investment Advisor Firm,” and type in the firm name. Results will provide you with both Part 1, 2 and 3 of the Gardey Financial Advisors Form ADV.) Statistics from third-party sources are deemed to be accurate but have not been confirmed by Gardey Financial Advisors.

This communication is for informational purposes only and does not purport to be a complete statement of all material facts related to any company, industry, or security mentioned. The information provided, while not guaranteed as to accuracy or completeness, has been obtained from sources believed to be reliable. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or is a substitute for, personalized investment advice from Gardey Financial Advisors. The opinions expressed reflect our judgment now and are subject to change without notice and may or may not be updated. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, expressed or implied, is made regarding future performance. Readers who are not market professionals or institutional clients of Gardey Financial Advisors should seek the advice of their financial advisor, tax, or legal advisor before making any investment decisions based on this communication. Gardey Financial Advisors does not render legal, accounting, or tax advice. Gardey Financial Advisors works closely with our client’s other professional advisors. The solutions discussed may not be suitable for you, even if your situation is like the example presented. Investors must make their own decisions based on their specific investment objectives and financial circumstances. It should not be assumed that the recommendations made in this situation will result in the mentioned outcome. The commentary does not represent any specific clients, investments, or strategies.

Hyperlink Disclosure

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[i] https://www.alzint.org/about/dementia-facts-figures/dementia-statistics/ 19 June 2023 

[ii] https://www.nia.nih.gov/health/legal-and-financial-planning/managing-money-problems-people-dementia/ 03 October 2023 

[iii] https://www.legalzoom.com/marketing/estate-planning/power-of-attorney?utm_source=google&utm_medium=cpc&utm_term=power%20if%20attorney&utm_content=606632162283&utm_campaign=Consumer_%7C_PoA_%7C_Exact&utm_campaignID=12170691591&utm_adgroupID=114323588102&utm_partner=googlesearch&gclid=CjwKCAjw-b-kBhB-EiwA4fvKrG6Z914vzTspmMoG9JIYMtOQY4xAHXGoreYFsLT5dsULSV9Jl11TMhoC_bAQAvD_BwE 19 June 2023 

[iv] https://assets.aarp.org/www.aarp.org_/cs/health/ltc_resource_guide.pdf 19 June 2023