Cognitive impairment does not necessarily have to derail your clients’ planning

By Ilana Polyak

Five million people and counting are living with Alzheimer’s disease in the United States. As a result, CPAs are encountering more situations where they are preparing financial plans for clients who are cognitively impaired. Estate planner Marve Ann Alaimo has some advice for CPAs on how to approach these clients so their plans withstand scrutiny.

Alaimo disputes the idea that once a person has Alzheimer’s or dementia, he or she lacks the capacity to make financial decisions. Though the illness brings impairment, she said, the degree of that impairment varies depending on which stage of a disease the patient is in.

“Someone who has been diagnosed with dementia or Alzheimer’s may still have some capacity or maybe even a lot of capacity,” Alaimo said.

During the first and second stage, and perhaps even the third stage, clients may have enough capacity so that CPAs can confidently continue to take instructions from them and plan according to their wishes, as long as they take certain precautions. Dementia often affects short-term memory first, but much of the planning process relies on long-term memory, which tends to stay intact longer, Alaimo said.

Ideally, clients and their families will establish a financial plan long before they are diagnosed with dementia. However, an Alzheimer’s or dementia diagnosis doesn’t automatically mean you can’t make a financial plan for these clients, Alaimo, a partner with the law firm Porter Wright Morris & Arthur in Naples, Fla., said.

Speaking at the AICPA ENGAGE conference in Las Vegas on Monday, Alaimo explained that these clients have windows of lucidity that CPAs can learn to recognize.

“When you are meeting with your client, you need to make sure that at that moment in time they are able to grasp what you are discussing,” she said.

CPAs need to take some necessary precautions so the plans are not subject to legal challenges from aggrieved beneficiaries and heirs after their loved one’s death. These challenges often center on whether the person had the capacity to understand what he or she was signing.

Capacity is not defined as strictly for estate planning as it is for other legal actions such as entering contracts, Alaimo said. To have confidence that their clients have the necessary capacity for estate planning and related decisions, she noted, CPAs need to be able to make sure they can answer yes to these three questions each time they meet with their clients: “Does my client have…”

  • The ability to understand the nature and extent of his or her property?
  • Knowledge of his or her natural beneficiaries?
  • An understanding of the practical effect of a will or a trust?

If they are reasonably confident a client grasps these issues, planning can proceed, Alaimo said.

At some point in the illness’s progression, however, clients’ cognitive abilities will deteriorate so much that they can’t answer yes to the above questions. At that point, planning will no longer be possible.

Practical tips for working with clients with dementia who still have capacity

Paying extra attention to a few key details upfront can help CPAs avoid problems later on. Alaimo recommends that CPAs adopt these best practices for working with clients with dementia.

  • Establish the best times and places to speak with them. Even someone whose mental abilities are diminished by disease has moments of capacity. CPAs need to learn when and what they are. They may occur during certain times of day or in settings where the person is comfortable. “You want to find a time that you’re getting them at their mental best,” Alaimo explained.
  • Dress in a manner that puts your clients at ease. Overly formal attire may make your client nervous. If you are visiting clients in their home or a nursing home, dress casually.
  • Talk directly to them. Resist the urge to direct your conversation to a younger family member or acquaintance. Recognize that your client still has some capacity.
  • Document everything. Make detailed notes about each encounter with any client whose mental state concerns you, especially if a request is out of character. “I take copious notes,” Alaimo said.
  • Have witnesses. A witness can help establish a client’s mental acuity if your plan is ever challenged. Alaimo sometimes has a paralegal or associate sit in on her meetings with clients with dementia, “because those folks know what the capacity test is, and when they’re sitting on the stand, they’re seen as a credible witness,” she said.
  • Watch for undue influence. Trust your gut. If you feel that a client is being taken advantage of by an acquaintance or family member, step in to halt the planning process and contact someone who can advocate for the client. Get to know who the most responsible members of their family are, so you are “able to get them into a situation where the right people are making the decisions for them,” Alaimo said.

For more information on estate and financial planning for clients with Alzheimer’s disease, view this video featuring Martin Shenkman, CPA/PFS, J.D.

Ilana Polyak is a freelance writer based in Northampton, Mass. To comment on this article or to suggest an idea for another article, contact Courtney Vien, a JofA senior editor, at or 919-402-4125.

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