Balancing care, finances and dignity for a parent with dementia

Question

My mother is a widow and has been diagnosed with early onset dementia. She owns several rental properties that provide her with an income. She now needs to move into care. How do we manage this situation?

Answer

Few situations are as emotionally complex for a family as watching a parent gradually lose the ability to manage the financial structures they spent a lifetime building.

Establish legal capacity early

Many families assume that signing a power of attorney will solve the problem. A standard power of attorney only remains valid while the person granting it still understands the decisions being made. Once mental capacity is lost, the document falls away.

If your mother can no longer manage her own affairs, the family may need to apply to the master of the high court for the appointment of an administrator under the Mental Health Care Act, or in some cases, approach the courts for the appointment of a curator bonis. These processes are not quick, which is why acting early is so important.

Use the window of clarity wisely

If your mother still understands the nature and consequences of financial decisions, this window should be used carefully.

A medical practitioner should provide a written opinion confirming her current decision-making capacity. This documentation becomes extremely important if significant financial decisions are taken – such as selling properties or restructuring her investments. Without the medical confirmation, decisions could potentially be challenged later by family members claiming she did not fully understand what she was signing.

Dementia can also place unexpected pressure on family relationships. One child may believe another is moving too quickly or unfairly. In these circumstances, transparency matters. Keep records of meetings, property valuations, medical reports and reasons for major decisions.

Some families explore placing assets into a special trust to manage administration and governance.

Understand the true cost of care

Request detailed quotations from the care facilities under consideration and clarify assisted living costs, frail-care fees, memory care services, medical and nursing charges, and annual fee increases. It is also wise to include medication costs, clothing, medical shortfalls, personal spending money and a reserve for unexpected expenses.

Reassess the role of property

Property often feels reassuring because it is tangible. However, rental property is rarely passive. Tenants move out, maintenance issues arise, insurance must be reviewed and someone must monitor cash flow to make continuous decisions.

When a parent moves into care, those responsibilities do not disappear. They shift to the family, so simplifying the estate is often the most practical solution.

Property can be an excellent long-term wealth-building asset. However, when the client is no longer an active investor and instead needs stable funding for care, the priorities change.

In many cases, this leads to selling some or all of the properties and investing the proceeds in a structure specifically designed to fund long-term care. This could be a flexible investment or a life annuity. An experienced financial planner will be able to assist you with the right solution.

Build the income plan in layers

A useful approach is to structure the financial plan in layers. First, secure the essential monthly income required to fund care and maintain dignity. This portion should not be exposed to unnecessary market risk. Some families choose to use part of the capital to secure a guaranteed income through an annuity so that the core care costs are ­covered for life.

Second, maintain a flexible pool of capital to deal with the unexpected, such as medical expenses, changes in care arrangements and the effects of inflation. This portion can remain invested in a diversified portfolio designed to balance liquidity and growth.

The answer is rarely to invest everything in an annuity or a flexible investment. A blended strategy often works best, where you secure the basics while keeping flexibility around the edges.

Review the basics

While your mother is still capable, you should review the basics such as the will and put together a proper list of assets and liabilities. Locate title deeds, bank account details, lease agreements and insurance schedules. Gather as much information as you can to ensure that as little as possible is left to chance.

The key is to act sooner rather than later. Dementia gradually removes a person’s ­ability to make decisions, but with the right legal structures, a clear income plan and proper documentation, families can still ensure that a parent’s finances are managed responsibly and their care and dignity remain protected for the years ahead. DM

Kenny Meiring is an independent financial adviser. Contact him at 082 856 0348 or at financialwellnesscoach.co.za. Send your questions to kenny.meiring@sfpadvice.co.za

This story first appeared in our weekly DM168 newspaper, available countrywide for R35.