The first problem dimension sufferers usually face is problems with finances. Dimension is a worldwide problem that is becoming more important and common as each generation tends to live longer than his predecessor.
Dimension is a term used to describe a series of illnesses associated with a decline in cognitive ability.
According to South Africa’s census of 2011 there was 2,2 million people with dimension and this number would have increased with global trends.
Despite the high probability that many of us will lose our cognitive capacity with age, very few of us plan for it.
Power of attorney
Many people mistakenly believe that they do not have to worry about the management of their finances as their cognitive ability declines, because they have signed a power of attorney to give a colleague, friend or family member the authority to manage their finances.
According to Hardi Swart, director of Autus Private Clients and the 2019/20 financial planner of the year, this is far from the truth. If you are diagnosed with a degenerative brain illness, the power of attorney expires immediately.
What can you do?
Unfortunately, the legislation and policy did not keep up with the growing need to look after the affairs of those with impaired mental capacity.
Most medical funds also do not recognise dimension as a chronic disease and therefore cover little in these cases.
Swart writes in the article, Financial planning for dementia that fulltime care, which is often required in the later stages of dimension, can cost more than R30 000 per month. While it is essential to include shares in your retirement portfolio to ensure growth above inflation, it is also essential that the portfolio contains a substantial medical emergency fund, consisting of low-risk liquid investments, such as a money market fund.
Also, discuss using a special trust with your financial planner for the management of your estate should you lose your brain function. A special trust is the same as a normal trust because, under certain circumstances, it is created by a founder (you) to your advantage. Where it differs from a normal trust in its tax benefits. In essence, a special trust is taxed as a “natural person”, not as a trust, and therefore the tax rates are lower.
You must appoint a curator or trustees to administrate the special trust. For a person with dimension the ideal combination would be a family member and a qualified financial advisor close to the family.
According to the webpage MoneyWeb there are a few options available to help loved ones diagnosed with a degenerative brain illness, although not one of them are ideal. Three actions that can be considered to help manage a loved one’s matters, include curatorship, administration and the establishment of a special trust, although these are all onerous, time-consuming and potentially costly solutions.
Appointing a trustee (or legal representative) to run an estate is an extremely expensive and cumbersome process. Since it requires an application to the Supreme Court, it includes the cost of a lawyer, advocate and two medical professionals, one of whom must be a psychiatrist. However, the reality is that appointing a curator can cost between R40 000 and R60 000 and is only accessible to those with a high net worth.
A more affordable and slightly less cumbersome option is to apply to the Supreme Court to appoint an administrator for the estate – a process that costs approximately R5 000. Such an appointment can only be made in terms of the Mental Health Care Act (2002) in the case where someone who suffers from a mental illness or deep intellectual disability and is therefore not available to persons with physical disability or aliments. The problem here is that you do not have control over who is selected as the administrator.
- Special trusts
A special trust with an older relative as the primary beneficiary is another option, although the trust must be set up before the person becomes mentally incompetent – making it a process that requires planning ahead. A special trust is created in the usual way between a founder and a curator where the assets are transferred into the trust. The curator is then authorised to administer the trust only for the benefit of the mentally incapable person.
Keep your brain fit
Do not ignore statistics and think that it will not happen to you. Of course, it is just as important to prevent the possibility of contracting dimension by looking after yourself. Mental fitness is just as important as physical fitness. Keep learning!
Financial planning for dementia: https://www.iol.co.za/personal-finance/guides/financial-planning-for-dementia-37020672
Planning for incapacity: dementia in focus: https://www.moneyweb.co.za/financial-advisor-views/planning-for-incapacity-dementia-in-focus/