Legal Steps to Take When a Loved One Is Diagnosed With Dementia

A dementia diagnosis is life-changing for the person affected and their entire family. While the emotional impact can be overwhelming, the legal steps you take early can make all the difference in preserving your loved one’s wishes, protecting assets, and avoiding future conflicts.

Time matters. Dementia is a progressive condition, meaning the ability to make legal decisions will decline. Acting sooner ensures your loved one can participate in the planning while they still have the capacity to do so.

Here’s a compassionate, step-by-step guide to help your family prepare legally, with clarity and care.

Confirm Legal Capacity First

Before any legal documents can be created or signed, your loved one must still have the mental capacity to understand the implications of their choices. This doesn’t mean perfect memory it means understanding what’s being signed and why.

Consult with their doctor: Get a formal written evaluation of mental capacity if needed.
Work with a qualified elder law attorney: They can assess whether your loved one can still legally execute documents and will guide the process sensitively.

Why it matters: If capacity is lost, the only way to make legal decisions may be through court-appointed guardianship a costly and time-consuming process.

Assign Power of Attorney While They Still Can

One of the most urgent steps is assigning Power of Attorney (POA) to someone they trust.

Types to consider:

Durable Financial POA: Allows someone to manage finances, pay bills, sell property, and make financial decisions.
Medical Power of Attorney (Health Care Proxy): Allows someone to make medical decisions when your loved one can’t.

Choose someone who is reliable, financially responsible, and emotionally stable, even in crisis. The person should understand your loved one’s values and be prepared to advocate for their preferences.

Tip: Make POAs “durable,” meaning they remain in effect even after mental capacity is lost.

Create or Update a Living Will (Advance Directive)

A living will lays out your loved one’s wishes for medical care if they become unable to express them especially for end-of-life treatment.

Include preferences such as:

Do-not-resuscitate (DNR) orders
Life support and ventilator use
Feeding tubes and hydration
Pain management

This document reduces family stress and avoids disputes in moments of crisis. Combine it with the medical POA to ensure both the what and the who are clear.

Protect Assets Through Estate Planning

Dementia can trigger long-term care expenses and make financial planning more urgent. Start with:

1. Updating the Will or Creating a Trust

If your loved one doesn’t have a will, help them create one with an attorney as soon as possible.
Consider setting up a revocable living trust to:
- Avoid probate
- Manage assets if they become incapacitated
- Maintain privacy
Trusts can also help direct assets for the surviving spouse, children, or special needs dependents.

Example: A parent with early-stage Alzheimer’s sets up a revocable trust and names their daughter as successor trustee. This allows the daughter to step in immediately if needed without court involvement.

2. Review and Update Beneficiaries

Go through all financial accounts, insurance policies, and retirement plans:

Remove outdated beneficiaries (e.g., deceased spouse or ex-partner)
Ensure beneficiaries align with the will or trust
Avoid naming the estate unless advised by an attorney

3. Start Medicaid and Long-Term Care Planning

Nursing home care can cost over $90,000/year, and Medicare doesn’t cover most long-term stays.

Consider long-term care insurance (if not already purchased and the loved one qualifies)
Talk to an elder law attorney about Medicaid planning strategies, like:
- Asset protection trusts
- Gifting under Medicaid’s lookback rules (currently 5 years)
- Spend-down planning

Why it matters: If you wait too long, your loved one could lose eligibility or be forced to spend down everything they own to qualify.

Secure Key Documents and Share Access

Gather all critical documents in one place secure but accessible to the responsible parties. These may include:

Birth certificate, marriage certificate, Social Security card
Driver’s license or ID
Health insurance cards and Medicare information
Existing wills, trusts, and POAs
Bank, investment, and retirement account details
Property deeds and vehicle titles

Digital tip: Set up a shared digital folder or secure cloud storage for quick access to scanned copies.

Consider Guardianship as a Last Resort

If dementia progresses and no POA was assigned, the family may need to petition the court for guardianship or conservatorship.

This process can be expensive, public, and emotionally taxing.
The court controls decision-making, which may not align with the family’s wishes.

Avoid this by acting early, while your loved one can still legally make choices.

Document Care Preferences and Financial Plan

Legal forms are critical, but so is capturing the human side of care.

Write down preferences for caregiving, living arrangements, and cultural or religious values.
Set expectations for how financial support will be used especially if adult children will step in.
Create a care budget to project costs and plan family contributions, if needed.

Seek Legal and Financial Guidance

Caring for a loved one with dementia is not something to navigate alone. Find professionals who understand the intersection of elder law, healthcare, and family dynamics.

Elder law attorneys can assist with estate planning, POA, trusts, and Medicaid strategy.
Financial advisors can help protect retirement income and align investments with care goals.
Social workers or care managers can coordinate services and connect families to community resources.

Real-Life Example

Maria’s father was diagnosed with early-stage vascular dementia at 72. Within two months, she helped him assign POA, set up a living trust, and file for long-term care insurance. Two years later, when his condition worsened, she was able to step in seamlessly—managing his finances and coordinating in-home care without needing court approval.

Final Thoughts

Dementia doesn’t just affect memory it reshapes a family’s future. But you don’t have to be caught off guard.

Taking legal steps early means your loved one can be heard, protected, and supported financially and medically through every stage of the journey.

You’re not just organizing paperwork. You’re building a plan rooted in dignity, stability, and love.

Next up: How to Legally Transfer Property Before Death — Learn the best ways to pass on a home or other assets while avoiding probate, taxes, or family disputes.