Financial Planning When a Loved One Has Dementia

A Practical Guide for Families in India

Receiving a diagnosis of dementia or another progressive neurodegenerative condition — such as Parkinson’s disease — is a life-altering moment, not just for the person diagnosed, but for the entire family. Amid the emotional upheaval, there is an urgent practical reality that families must face: as cognitive abilities decline over time, so does the capacity to manage money, make informed financial decisions, and communicate healthcare wishes.

The earlier families begin planning, the more choices and control they retain. This guide walks you through the key financial and legal steps to consider — gently, systematically, and with your loved one’s dignity and interests at the centre.

Why Early Planning Matters

Dementia is a progressive condition. In its early stages, a person may still be largely independent and capable of making decisions. This window — however long or short — is the ideal time to put financial and legal structures in place. Waiting until the condition advances significantly can create serious complications:

• Legal documents such as a Power of Attorney require the individual to have mental capacity at the time of signing. Once cognitive decline is substantial, these documents may no longer be valid.
• Families may face difficulty accessing funds, making investments, or handling property transactions without the right authorisations.
• Disputes — even unintended ones — can arise among family members if roles and responsibilities are not clearly defined in advance.
• Healthcare emergencies can force rushed, costly decisions without a pre-established financial safety net.

Acting early is not about anticipating the worst — it is about ensuring your loved one’s wishes are honoured and their assets protected.

Step 1: Establish Joint Access to Bank Accounts

One of the most immediate practical concerns is ensuring that day-to-day banking remains uninterrupted. If your loved one is the sole account holder, their incapacity could leave family members unable to pay for essential care, household expenses, or medical bills.

What to do:

• Visit the bank together (while your loved one still has capacity) to add a trusted family member as a joint account holder with ‘Either or Survivor’ operating instructions.
• Set up an ECS (Electronic Clearing Service) or standing instructions for regular payments such as utility bills, insurance premiums, and SIPs.
• If multiple accounts exist across different banks, consider consolidating them for easier management.

Note: Joint accounts must be set up while the individual can still provide consent. This is time-sensitive.

Step 2: Update Nominations Across All Investments and Insurance

Many Indians have investments and insurance policies that were set up years ago with outdated nominations — sometimes listing deceased relatives, estranged family members, or no nominee at all. This is the right time to conduct a thorough review.

Assets to review:

• Fixed Deposits (FDs) — both bank and company FDs
• Mutual funds and Systematic Investment Plans (SIPs)
• Public Provident Fund (PPF) and Employee Provident Fund (EPF)
• Life insurance, health insurance, and term plans
• Demat and trading accounts
• National Pension System (NPS) accounts
• Post office savings schemes and government bonds

For each, ensure that the nominee is correct, alive, and willing to take on the responsibility. Consider appointing a secondary (contingent) nominee wherever the platform allows it.

Step 3: Set Up a Power of Attorney (PoA)

A Power of Attorney is one of the most powerful financial planning tools available to families in this situation. It allows a designated trusted person (the ‘attorney’ or agent) to manage financial and legal matters on behalf of your loved one.

Types of PoA relevant to this situation:

General Power of Attorney (GPA): Covers a broad range of financial decisions. However, a GPA typically becomes invalid if the principal loses mental capacity — which limits its usefulness in dementia cases.

Special Power of Attorney (SPA): Grants authority for a specific transaction or purpose, such as selling a property or managing a particular account.

Important: Unlike some other countries, India does not currently have a formal ‘Durable’ or ‘Enduring’ Power of Attorney that survives incapacity. This makes it even more critical to act while your loved one retains the capacity to sign. Consulting a lawyer experienced in elder law is strongly advisable.

Step 4: Prepare a Will — and Consider a Living Will

Financial Will

A Will ensures that your loved one’s assets are distributed according to their wishes after their passing. If they do not already have one, now is the time to create it — with full legal assistance and ideally with the input of a neutral family advisor.

• The Will should clearly list all assets: property, bank accounts, investments, jewellery, and personal belongings.
• It should name an Executor — a trusted person responsible for carrying out the Will’s instructions.
• The Will must be signed in the presence of two witnesses who are not beneficiaries.
• Consider registering the Will with the Sub-Registrar’s office to reduce the risk of it being contested.

Living Will (Advance Medical Directive)

A Living Will allows a person to document their healthcare wishes in advance — for example, preferences around life support, resuscitation, or palliative care. In 2018, the Supreme Court of India upheld the legality of Living Wills, making this a valid and important document for families dealing with progressive conditions.

Drafting a Living Will involves a conversation that many families find difficult — but it can spare tremendous pain and uncertainty in the future. It should be done with a doctor and legal advisor present, and ideally, with the full participation of your loved one.

Step 5: Create a Master Document Register

Families often discover, after a loved one loses capacity, that they have no idea where important documents are stored. Creating a centralised, organised document register is one of the most practical gifts you can give the family.

Documents to locate and organise:

• Identity documents: Aadhaar, PAN card, Passport, Voter ID
• Property documents: Sale deeds, title documents, encumbrance certificates
• Financial documents: FD receipts, mutual fund folios, Demat account details (DP ID and Client ID)
• Insurance policies: Policy numbers, insurer contact details, premium schedules
• Bank passbooks and chequebooks
• Will and PoA documents
• Medical records: Diagnosis reports, prescriptions, specialist contact numbers
• Pension and provident fund details

Store physical copies in a secure, fireproof location. Maintain digital scans in a password-protected folder — and ensure that at least two trusted family members know the access details.

Step 6: Build a Transparent System for Ongoing Expenses

Managing the ongoing expenses of a person with dementia — which often increase significantly as care needs grow — requires a clear, transparent system that all involved family members can see and trust.

Practical steps:

• Maintain a monthly log of all expenses: medications, doctor visits, nursing care, therapy, home modifications, and daily assistance.
• Hold regular family meetings (quarterly or as needed) to review finances and care plans together.
• If professional caregivers are employed, formalise the arrangement with proper employment documentation to avoid disputes or fraud.
• Consider establishing a contingency fund — a reserve covering at least 6–12 months of expected care costs — to manage sudden emergencies such as hospitalisation.

Step 7: Plan for Long-Term and Escalating Care Costs

Dementia care costs typically rise as the condition progresses. What begins as part-time home support may eventually require round-the-clock nursing care, memory care facilities, or specialised palliative services. Planning ahead financially is therefore not a one-time exercise but an ongoing process.

Financial planning considerations:

• Review existing health insurance policies for coverage of neurological conditions, cognitive disorders, and extended hospitalisation. Many standard policies have exclusions or limits in this area.
• Explore whether a critical illness or senior citizen health insurance policy can supplement existing coverage.
• Consider which assets could be liquidated if needed — and in what order — to fund care without destabilising the family’s broader financial security.
• If the family home is the primary asset and the loved one requires residential care, explore options such as a Reverse Mortgage — which allows senior homeowners to receive regular payments against the value of their property while continuing to live there.
• Speak with a certified financial planner who has experience with elder care to model different care scenarios and their financial impact.

Step 8: Protect Against Financial Fraud and Exploitation

Tragically, people with dementia are disproportionately targeted by financial scams and, in some cases, exploitation by those closest to them. Establishing safeguards is an act of care, not suspicion.

• Remove or reduce access to credit cards and online banking interfaces that could be misused or lead to accidental transactions.
• Set up transaction alerts for all accounts so that a trusted family member is notified of any withdrawals above a defined threshold.
• Regularly review account statements — together with your loved one initially, and then on their behalf as capacity declines.
• Be vigilant about unsolicited phone calls, emails, or visitors claiming to be from banks, tax authorities, or investment firms.
• If you suspect financial exploitation by a caregiver or family member, seek legal advice promptly.

A Final Word: Lead with Compassion

These conversations and preparations can feel daunting. Sitting with a parent or spouse to discuss Wills, Powers of Attorney, and care funding requires courage from every person in the room. But families who navigate this process early almost universally report that it brought them closer, reduced conflict, and — most importantly — ensured their loved one’s voice remained part of decisions made on their behalf.

The goal is not to plan for death — it is to plan for life, on your loved one’s terms, for as long as possible.

Work with a team of professionals: a geriatrician who understands the trajectory of the condition, a financial planner experienced with elder care, and a lawyer familiar with estate and elder law in your state. Together, you can build a plan that is both financially sound and deeply humane.

This article is for informational purposes only and does not constitute legal, financial, or medical advice. Please consult a qualified professional for guidance specific to your circumstances.