Legal Issues when someone has Dementia – Update Beneficiary Designations

This week’s blog continues the discussion of Legal Issues when someone has Dementia.  The introductory installment (April 30, 2015) put forth the issue of “Who can speak for someone with dementia?”  The May 14, 2015 installment discussed the situation where the person with dementia has Advance Directives in place.  The May 21, 2015 installment discussed the legal issues in determining whether a dementia sufferer can choose to have new Advance Directives prepared.  The May 30, 2015 installment discussed options in preparing a Health Care Power of Attorney.  The June 4, 2015 installment discussed how to decide whether to prepare a Living Will.  The June 11, 2015 installment discussed some of the basic issues in preparing a General Power of Attorney.  The June 18 installment discussed the importance of making the General Power of Attorney “durable.”  The June 25 installment discussed the importance of NOT making the General Power of Attorney “springing.”  The July 2 installment discussed revoking prior Powers of Attorney.  The July 9 installment discussed Do Not Resuscitate orders.  The July 16 installment discussed the Right of Disposition designation.  The July 23 installment discussed the Will (or Last Will and Testament.)  Today’s installment will discuss beneficiary designations on life insurance policies, IRAs, annuities, etc.

Today’s installment continues the discussion of issues to manage when someone finds out that he or she has a disease that causes dementia.  These issues should be managed before the dementia gets worse, taking away the person’s ability to make decisions.

One of these decisions to make before the dementia gets worse is to decide who should be the designated beneficiaries on the person’s various financial accounts.  Life insurance policies, IRAs, 401Ks, and annuities usually ask for beneficiaries to be named when the accounts are first set up.  Bank accounts; investment accounts; real estate records; and auto, truck, boat, etc. title do not automatically ask for beneficiaries but may have beneficiaries (or an equivalent designation) added.  Before the dementia gets worse, the person with dementia should visit/revisit the question of whom to name.  Before the person with dementia loses the ability to remember whom he or she holds dear, he or she should look out for loved ones by naming beneficiaries or changing beneficiaries.

Starting with the accounts on which beneficiaries are usually listed, the person with dementia should see whom (if anyone) is designated as the beneficiary on life insurance policies, IRAs, 401Ks, (and any other similar retirement plans,) and annuities.  The policy or account may have been set up long ago, perhaps before the person’s children were born and perhaps even before marriage or the establishment of a similar long-term relationship.  If so, the beneficiary designations are probably inappropriate now.  They should be updated.

On bank accounts, investment accounts (, non-tax-deferred accounts,) real estate, and auto/truck etc. titles, it may be possible to name beneficiaries, but the beneficiary designation may have a different name.  It might be a Transfer on Death designation, or a Pay on Death designation.  For real estate, it might be a Transfer on Death Deed or, like in Ohio now, a Transfer on Death Affidavit that contains instructions on preparing a deed to carry out the transaction to the designated beneficiary.  Ohio auto title documents allow the designation of someone to get ownership of the automobile upon the death of the listed owner.  Because boats, trucks, personal watercraft, trailers, and several other kinds of “rolling stock” use similar title records in Ohio, a Transfer on Death is allowed for these boats, trucks, etc. as well.  (Automobile titles are covered by state law, so other states may or may not have allow the designation of a new owner for rolling stock in the way that Ohio allows.)  It’s always a good idea to consider using the available beneficiary designations (by whatever name.)  It’s an especially good idea to use them or to confirm them when dementia has started.

When the person with dementia looks at his or her beneficiary designations, no changes may be needed.  Perhaps he or she kept up with changing family circumstances.  Most people don’t keep up with those changes, though.

An account or policy or real estate holding, etc. may have been opened or created when the person with dementia was a young adult.  (For ease of discussion, we’ll just refer to everything as an “account” for the rest of this discussion.)  The account may designate a parent as the beneficiary.  The parents may have passed away.  The person with dementia may have a spouse or other long term relationship.  He or she may have children or grandchildren.  The older the account, the more likely that a beneficiary update is necessary.

The person with dementia may previously have named a spouse as beneficiary on some or all of the accounts.  The spouse may have passed away.  The spouse may be in long term care and may have Medicaid coverage or VA benefit coverage.  If any of these have occurred, the beneficiary designation may need changed away from the spouse.

If a child or grandchild (or anyone else, for that matter) is named as beneficiary and that person has his or her own disability or medical difficulties, the child/grandchild may not be an appropriate choice as a beneficiary.  If he or she receives government benefits (like Medicaid, SSI, or VA benefits) because of the disability or medical challenges, the arrival of new money (or anything else of value) might suspend the government benefits until the newly arrived asset is exhausted.  That loss of government benefits is a net financial loss to the family.

A future installment in this series will discuss working with an elder law attorney.  The elder law attorney may have suggestions on beneficiary designations that come from the experience helping people who need long term care.  Those suggestions may be different than the choices the person with dementia would have made by himself or herself.

In summary, when someone learns that he or she is suffering from an early stage of dementia, he or she should look at where he or she has or can designate beneficiaries to receive assets upon the person’ death (in addition to following the other suggestions made within this ongoing discussion.)  The person should take the opportunities to name beneficiaries where they have not been beneficiaries before.  The person should also make sure that the already-completed beneficiary designations are still the appropriate ones.  As the person with early-stage dementia should realize, circumstances can change.  Some plans may have to be changed to keep up.