One in three seniors will die with dementia, according to a 2023 report from the Alzheimer’s Association. It’s a sobering statistic, and when you consider it alongside increasing longevity, it’s easy to see why planning for the potential impact of diminished capacity on your or a loved one’s future finances is critical.

The Alzheimer’s Association report also reveals that an estimated 6.5 million Americans ages 65 and older are living with Alzheimer’s, and more than 11 million Americans are providing unpaid care for someone struggling with dementia.

Numbers like these prove that planning for the possibility of long-term care and considering who will make decisions if you can’t is not simply smart; it is necessary. Planning now — before you have the need or are unable to share your wishes — is essential to protecting your Social Security payout and other assets.

Protecting yourself

People who are unable to manage their finances and take care of themselves need extensive help. In many cases, it makes sense to prepare a power of attorney (POA) for someone who is no longer able to take care of himself or herself. A POA is a legal document that gives an individual, called the “agent” or “attorney-in-fact,” the authority to take action on behalf of another person, called the “principal.”

An attorney will define the terms of the POA based on the principal’s needs. The agent can have either extensive or limited authority to make legal decisions about the principal’s property, finances or health care. There are several types of POAs, including conventional, also known as a limited power of attorney; durable, which lasts for a lifetime unless you cancel it; springing, which comes into play only for specific events; and medical, also known as a durable power of attorney for health care.

Protecting a college-aged child

Most people know the benefit of getting a POA in place for an older person who is in declining health, but did you know that it is a good idea to have a POA for children over the age of 18 as well?

Once your child reaches the age of 18, he or she is legally considered an adult. If your over-age-18 child were to get into an accident and had to be hospitalized, it is likely that you will not be authorized to obtain information about his or her medical status because, after age 18, that child is considered an adult, and the Health Insurance Portability and Accountability Act (HIPPA) will protect the confidentiality of that information.

You can avoid the frustration inherent with this type of emergency simply by getting a durable POA for your college-aged child. This document will make it possible for you to assist him or her, even from a distance. In addition to accessing his or her health records, you can help handle important legal issues on your child’s behalf, ensuring that matters are dealt with appropriately.

Protecting a disabled senior

Yet when it comes to handling Social Security payments for a disabled senior, establishing powers of attorney, medical directives or guardianship arrangements may not be enough. The Social Security Administration (SSA) requires a special designation known as “representative payee.”

A representative payee is someone who acts on behalf of another person who is incapable of representing himself or herself and is responsible for directing payouts exclusively to meet a beneficiary’s needs. If the SSA determines that an individual is incapable of managing his or her benefits or directing someone else to do so, the Administration will appoint a representative payee. Family members may consult the SSA if they believe their family member necessitates a representative payee.

Generally, a family member or friend serves as representative payee. If friends or family are not able to serve as payees, the SSA will look for qualified organizations to fill that role.

The SSA requires that all legally incompetent adults and most minor children (a disabled child or young adult entitled to Supplemental Security Income, for example) have a representative payee. In most cases, the person in this role cannot be paid for the work he or she does on behalf of the incapacitated person, and the SSA requires that person to keep careful records.

A critical thing to keep in mind about the responsibilities of someone acting as a representative payee for you is that the permissions that accompany the role do not extend to other facets of your affairs. Someone who makes medical decisions or signs legal documents on your behalf needs to be granted a power of attorney or guardianship.

If you assume the role of representative payee for a loved one, the SSA offers a range of resources via ssa.gov, including a series of training videos, a downloadable guide and a frequently asked questions (FAQs) page. The process of applying to be a representative payee will likely require a trip to a Social Security office and a completed SSA-11 form explaining why the beneficiary needs assistance and why that person has selected you for the job.

Recall, too, that this designation will be in addition to any other legal or medical role you might be playing for your loved one. It’s just one piece of the larger whole that, with forethought and planning, can help ensure that your loved one’s — or you – have confidence in your financial future.

As with most financial issues, planning ahead can help you avoid potential problems and protect the financial future you’ve worked so hard to earn. Please reach out to us if we can be of assistance with any aspect of your financial planning, whether Social Security or otherwise. We are here to guide you to your long-term vision.

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Randy Carver, CRPC^®, CDFA^®, is the president and founder of Carver Financial Services, Inc., and is also a registered principal with Raymond James Financial Services, Inc. Carver Financial Services, Inc., was established in 1990 with the vision of making people’s lives better — clients, team and community. With this mission, Carver Financial Services has grown to be one of the largest independent financial services offices in the country, managing $2.6 billion in assets for clients globally, as of March 2024. You can reach Randy directly at randy.carver@raymondjames.com and in the office at (440) 974-0808.

Any opinions are those of Randy Carver and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.