It is essential to draw up advance-planning documents while you still have the decision-making capacity to do so. These documents can help ensure that all your financial and medical wishes are carried out, which is especially important with Alzheimer's disease and dementia. If you don't have the appropriate documents, a court can appoint a guardian for you.
Power of attorney for finances. This legal document allows another person to manage your finances on your behalf. Naming a competent, trustworthy agent is essential. Many seniors designate a family member for this task. You can build in checks and balances by requiring that the agent provide a periodic accounting to a third party, such as another relative or a lawyer. Or you can require that another individual sign off on any gifts of your property.
Powers of attorney should state the agent's authority to handle specific investment accounts, annuities and other assets -- details that aren't included in some off-the-shelf documents. Make sure the power of attorney is "durable," meaning that the agent's powers continue when the person creating the power of attorney becomes incapacitated.
Living trust. This document can provide detailed guidelines on how your property should be managed if you become incapacitated. You transfer your investments, real estate and other assets into the trust and name yourself as trustee, so you maintain control of the property. You also name one or more successor trustees to manage the property if you become incapacitated, and you include detailed instructions on how the money should be used if you are hospitalized or need long-term care.
After you die, the trust allows the successor trustee to transfer your property to your beneficiaries without having to go through probate. If you have a living trust, you still need a financial power of attorney to manage transactions that may fall outside the scope of the trust, such as dealing with credit card accounts.
Health care directives. A living will documents your wishes regarding life-sustaining treatment. Some states combine the living will with a health care power of attorney in one form.
The health care power of attorney allows you to appoint someone to make medical decisions for you if you become incapacitated. You also can include specific instructions on how your agent should make your health care decisions.
Laws governing these documents can vary from state to state. Look at the American Bar Association's health care power of attorney guidance, titled Giving Someone a Power of Attorney for Your Health Care, at www.americanbar.org.
Also, those who wish to include more details in their advance directives might consider the Five Wishes form, which meets legal requirements in more than 40 states. The form, available at www.agingwithdignity.org, allows users to designate a health care proxy and outline the care they want under various medical scenarios.
Note: Because of the differences in state law and the complexities involved in ensuring that your instructions are airtight, see a lawyer for help in drawing up these documents.