How is Cognitive Decline a Risk for Fraud?

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KS and MO Attorney Kyle E Krull

Written by Kyle Krull

Attorney & Counsellor at Law Kyle Krull is president of the Law Offices of Kyle E. Krull, P.A., an Estate Planning Law Firm located in Overland Park, KS. Estate Planning Attorney Kyle Krull has provided continuing education instruction to attorneys, accountants, and financial professionals at local, state, and national programs.

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POSTED ON: May 2, 2024

Vigilance of loved ones and estate planning protections are key to safeguarding those with cognitive decline from financial exploitation and fraud.

Individuals with dementia are vulnerable to fraud and exploitation.

Integrity is valuable precisely because not all people can be trusted.

Many individuals do not care how their actions impact others as long as it benefits them.

These people are predators and often seek out targets to use for their own financial gain.

While anyone can become a victim of fraud or exploitation, those who experience cognitive decline are frequently targeted.

According to a recent article by The National Institute on Aging (NIH) titled Managing Money Problems for People With Dementia,” estate planning can help protect against financial exploitation when steps are taken before or at the first signs of dementia.

Financial fraud is devastating at any age.

Seniors are common targets for financial fraud.

Understanding the Risks: Fraud and Financial Exploitation

Cognitive decline clouds judgment.

Whether the decline is associated with natural aging, dementia, Alzheimer’s, or another medical condition, it increases the risk of becoming a victim of financial fraud.

Those who have dementia or another mental condition can find it challenging to identify whether someone is trustworthy, may have difficulty managing bills, and often struggle to comprehend complex financial transactions.

These realities make those with cognitive decline optimal targets for financial abuse or fraud.

What are common types of financial exploitation?

Multiple Payments

Individuals who have dementia, Alzheimer’s, or other forms of cognitive decline have a greater likelihood of accidentally making the same payment multiple times.

When this happens, money can be easily lost.

Misuse of Power of Attorney

When signing a power of attorney document, it is essential to select trustworthy agents who understand the scope of the authority.

Family members or other individuals with access to financials may abuse this authority by mismanaging assets or making unauthorized cash transfers.


Undervalued Property Sales

Older adults may take poor advice about the value of their property.

If the property is sold under market value, the estate will lose significant compensation for the property.

Protecting against Fraud: Legal Safeguards and Capacity Assessment

Preventing cognitive decline from dementia or Alzheimer’s is not possible, but steps can be taken to provide protection.

For this reason, it is essential to understand the legal safeguards available.

Legal Capacity

For legal agreements and contracts to be valid, both parties must have the legal capacity to make such arrangements.

Those who have Alzheimer’s, dementia, or significant cognitive impairment may be found to lack this capacity, making such arrangements void.

Capacity Assessment

It is insufficient for a family member to claim someone lacks or has capacity.

Physicians, family members, and legal experts are all involved in providing evidence or testimony regarding cognitive decline.

The Role of Estate Planning Role in Protecting Our Aging Loved Ones

Dementia can progress slowly, making the signs challenging to detect.

According to the National Institute of Aging, financial management is one of the first recognizable signs of cognitive decline.

Through estate planning, you can have documents to protect property and money from fraud or exploitation when the first signs of dementia appear.

Trusts and financial powers of attorney can both provide avenues for trusted individuals to manage bank accounts and pay bills for a loved one with cognitive decline.

What are the Key Estate Planning and Cognitive Decline Takeaways?

It is important to recognize signs of cognitive decline early and take steps to protect assets.

Having an estate plan in place before any symptoms are present is critical.

When creating estate planning and incapacity documents, you should work with an experienced estate planning attorney to ensure your plan will be effective when you need it and that it addresses complex financial management and estate planning issues.

Family members should be vigilant and supportive of aging loved ones to recognize signs of financial fraud and exploitation quickly.

These steps can better protect yourself and your loved ones from financial exploitation and fraud.

Just like the Boy Scouts, we should always Be Prepared.

This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.

Reference: National Institute on Aging (NIH) (Oct. 3, 2023) Managing Money Problems for People With Dementia

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