Impact of Dementia on
Capacity to Manage Finances and
Prevention of Financial Exploitation
Daniel Marson, J.D., Ph.D.
Professor of Neurology
Director, Alzheimer’s Disease Center
Department of Neurology
University of Alabama at Birmingham
dmarson@uab.edu
The Aging Population, Alzheimer’s and Other Dementias:
Law and Public Policy
National Health Law and Policy Resource Center
University of Iowa, Iowa City, Iowa
March 1, 2012
Disclosure

Financial Capacity Instrument (FCI)

Semi-Structured Clinical Interview for Financial
Capacity (SCIFC)
 Owned
by UAB Research Foundation
 Inventor
 No

Dr. Marson
royalty income
No relationships with pharmaceutical companies
Outline 1:
Dementia and Financial Capacity

Capacity Assessment in an Aging Society

Dementia and Functional Change

What is Financial Capacity?

Warning Signs of Diminished Financial Capacity

Research on Financial Capacity in MCI and AD

Financial Capacity and the Alzheimer Brain
Outline 2:
Prevention of Financial Exploitation

The $18.1 Trillion Problem

Contractual/Transactional Approaches to Prevention

Familial Approaches to Prevention

Legislative Approaches to Prevention
Capacity Assessment
in an Aging Society
Definitions—Oxford Universal Dictionary

Capacity ~1480
 Mental
[selected definitions]
receiving power; ability to take in impressions, ideas,
knowledge. 1485
 Active power of mind, talent. 1485
 The power, ability, or faculty for anything in particular. 1647
 Law. Legal qualification. 1480
Definitions—Oxford Universal Dictionary

Competent ~1483
 Law.

[selected definitions]
Legally qualified or sufficient. 1483
Competence ~1594
 Sufficiency
[selected definitions]
of qualification, capacity. 1700
 Especially law—legal capacity. 1708
“As our society ages, clinical assessment of higher order
functional capacities has become increasingly important.
In areas like financial capacity, medical decision making
capacity, medication compliance, and driving, society has
a strong interest in accurately discriminating intact from
impaired functioning.”
Marson et al. (2000) Archives of Neurology, 57: 877-844
Capacity Assessment and Aging

Unprecedented aging society

Older population vulnerable to cognitive disorders
affecting decision-making ability

Persons with diminished capacity vulnerable to
poor decision-making and exploitation
Capacity Assessment and Aging

Individualistic society

Intergenerational transfer of wealth--$16B - $18B

Breakdown of traditional family structure

Family disputes over care of elderly
 control
 use
of health care & financial decisions
of estate and inheritance
Civil Capacities/Competencies

Financial capacity:
manage financial affairs

Treatment consent capacity:
make medical decisions

Research consent capacity:
research participation

Testamentary capacity:
make a will

Driving capacity:
operate a motor vehicle

Voting capacity:
capacity to cast a ballot in election

Capacity to live independently: global
Multiple Professions Must Deal With
Older Adult Capacity Issues

Clinicians:
can patient consent to treatment?

Researchers:
can subject participate in research?

Attorneys:
can client enter into a contract? make a will?

Accountants:
can client contract for services? understand tax return?

Real estate:
can client enter into listing agreement? contract of sale?

Brokers:
can client enter into financial service contract?
understand different forms of risk/return? enter into simple
or complex investment vehicles?

Adult protective:
can client manage finances and own affairs?
does client need protection?
Dementia
and
Functional Change
Pathological Time-line for AD
Cognitive Signs of Emerging Dementia

Short term memory loss

Disorientation

Communication problems

Comprehension problems

Lack of mental flexibility, inability to plan

Calculation problems
Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers, p. 14-15
CLOX 1: Normal Older Control
CLOX 1: Mild Cognitive Impairment
CLOX 1: Mild Alzheimer’s Disease
Emotional/Behavioral Signs
of Diminished Capacity

Significant emotional distress

Emotional lability

Social inappropriateness

Delusions

Hallucinations

Poor grooming/hygiene
Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers, pp. 15-16
Instrumental Activities of Daily Living

Instrumental activities of daily living are more complex
activities that are not essential to self-care, but that enable the
individual to live independently within a community
 Light
housework
 Preparing
meals and cleanup
 Shopping
for groceries or clothes
 Using
the telephone
 Using
transportation (community mobility)
 Taking
medications
 Health
management and maintenance
 Managing
money
Activities of Daily Living

Activities of daily living (ADLs) are "the things we normally do in daily living
including any daily activity we perform for self-care (such as feeding
ourselves, bathing, dressing, grooming), work, homemaking, and leisure."
~MedicineNet.com Medical Dictionary

Bathing

Grooming

Dressing and undressing

Eating

Transferring from bed to chair, and back

Voluntarily control of urinary and fecal discharge

Using the toilet

Walking (not bedridden)
IADLs As Early Functional Markers
in Dementia Research

IADLs are cognitively complex activities vulnerable to
cognitive aging, MCI, and dementia

IADLs like financial capacity show significant impairment
in MCI and the very earliest stages of AD

Are diagnostically important markers for research on
progression in MCI and conversion to dementia
Functional Change in Dementia
Mrs. Ethel C
69 year old white female
MMSE = 22/30
 Premorbid:
DRS = 120/144
Diagnosis = mild AD
“Ethel handled the family bank account for most of
our married life with little help from me--and balanced the
checkbook.”
 Current:
“Approximately 2 years back she could no longer
handle the family bank account--this happened very quickly--she
failed to make deposits and enter the checks she had written—
she now has no worry about finances.”
Financial Capacity
“everyday use of money will be highly
correlated with general success in
independent living”
Melton et al. (1987) Psychological Evaluations for the Courts, p. 249
An Important Construct

economic:
 maintaining

psychological
 critical

to self-perception of independence
clinical:
 marker

household and financial independence
of MCI and early dementia?
legal:
 financial
 elder
competency and conservatorship
abuse/undue influence
Defining Financial Capacity:
Two Key Perspectives

Performance Perspective:
 FC
as the ability to carry out financial activities
 Handle
money, understand concepts, pay bills, etc.
 Emphasizes

role of performance.
Best Interest Perspective:
 FC
as ability to identify and protect financial self-interest
 Emphasizes
role of judgment.
“the capacity to manage money and
financial assets in ways that meet a
person’s needs and which are consistent
with his/her values and self-interest”
D. Marson October, 2007
Conceptual Model of
Financial Capacity
Conceptual Model of FC
Clinically informed
Focus on functional abilities relevant to FC
Three levels:
 Tasks—specific
financial abilities
 Domains—broad
financial activities that each have clinical
relevance to independence (eg., managing checkbook)
 Global—overall
financial capacity
Financial Tasks








Naming coins/currency
Coin/currency relationships
Count coins/currency
Understanding concepts
Applying concepts
Conduct cash transactions
Making change for vending
Tipping in a restaurant









Understanding checkbook
Using checkbook/register
Understanding bank statement
Using a bank statement
Awareness of mail fraud
Awareness of telephone fraud
Prioritizing bills
Preparing bills for mailing
Making investment decision
Financial Domains

Domain 1 Basic Monetary Skills

Domain 2 Financial Conceptual Knowledge

Domain 3 Cash Transactions

Domain 4 Checkbook Management

Domain 5 Bank Statement Management

Domain 6 Financial Judgment

Domain 7 Bill Payment

Domain 8 Knowledge of Personal Assets/Estate

Domain 9 Investment Decision Making
Tasks by Domain


Domain 1 Basic Monetary Skills

Task 1a Naming coins/currency
Simple

Task 1b Coins/currency relationships
Complex

Task 1c Counting coins/currency
Simple
Domain 2 Financial Conceptual Knowledge

Task 2a Define financial concepts
Complex

Task 2b Apply financial concepts
Complex
Tasks by Domain


Domain 3 Cash Transactions

Task 3a 1 item grocery purchase
Simple

Task 3b 3 item grocery purchase
Simple

Task 3c Change/vending machine
Complex

Task 3d Tipping
Complex
Domain 4 Checkbook Management

Task 4a Understand checkbook/register
Complex

Task 4b Use checkbook/register
Complex
Tasks by Domain


Domain 5 Bank Statement Management

Task 5a Understand bank statement
Complex

Task 5b Use bank statement
Complex
Domain 6 Financial Judgment

Task 6a Detect mail fraud risk
Simple

Task 6c Identify telephone fraud
Simple
Tasks by Domain

Domain 7 Bill Payment

Task 7a Understand bills
Simple

Task 7b Prioritize bills
Simple

Task 7c Prepare bills for mailing
Complex

Domain 8 Knowledge of Personal Assets/Estate

Domain 9 Investment Decision Making
Warning Signs of Diminished
Financial Capacity
Slide provided by Dr. Marson, JD, PhD and UAB
Martin et al. (2003). Loss of calculation abilities in mild and moderate AD. Archives of Neurology. 60: 1585-1589.
Responding to
Warning Signs of Diminished
Financial Capacity
Financial Capacity in MCI and AD:
Clinical Interview Assessment
Clinical Interview Assessment

Potentially very useful approach

Combine clinical interview + direct testing of skills

Interview both patient and caregiver

Allows for clinical judgment

Categorical judgments: capable

Disadvantages:
marginally capable

Requires trained clinician

Time intensive for the clinician (~25 minutes)

Clinical subjectivity in evaluating performance
incapable
Semi-Structured Clinical Interview
for Financial Capacity (SCIFC)
 25-30
 Based
minute clinical interview
on conceptual model
 Semi-structured:
 Interview
 Includes
preserves clinical autonomy
format with some props:
interview of collateral sources
 Assesses
8 domains and global financial capacity
 Judgment
rating for each domain and global:

capable

marginally capable

incapable
Order of Financial Domains on SCIFC

Domain 2 Financial Conceptual Knowledge

Domain 1 Basic Monetary Skills

Domain 3 Cash Transactions

Domain 4 Checkbook Management

Domain 5 Bank Statement Management

Domain 6 Financial Judgment

Domain 7 Bill Payment

Domain 8 Knowledge of Personal Assets/Estate
Excerpted Domains on SCIFC

Domain 2 Financial Conceptual Knowledge

Domain 1 Basic Monetary Skills

Domain 3 Cash Transactions

Domain 4 Checkbook Management

Domain 5 Bank Statement Management

Domain 6 Financial Judgment

Domain 7 Bill Payment

Domain 8 Knowledge of Personal Assets/Estate
Who Is Ms. Y?
59 years old
African-American
Married
14 years of education
RN and director of adult day care
Financial Capacity
Training Video #1—040
Ms. Y
Who Is Mr. X?
74 years old
Caucasian
Married
9 years of education
Retired
Last occupation:
architectural design construction supervisor
Financial Capacity
Training Video #2—298
Mr. X
Who Is Mr. Z?
73 years old
Caucasian
Married
14 years of education
Retired
Last occupation:
nursing assistant at VA hospital
Financial Capacity
Training Video #3—326
Mr. Z
Research Findings Using
SCIFC Clinical Interview
SCIFC Study Sample at Baseline
Controls
N=75
MCI
N=58
Mild AD
N=97
Mod AD
N=31
p
Age
66.1 (7.7)
68.0 (8.3)
72.4 (8.4)
75.3 (8.4)
.0001
Educ
14.3 (1.6)
13.7 (2.0)
13.4 (2.1)
11.1 (3.7)
.0001
Gender (m/f) 24 / 51
18 / 40
52 / 45
10 / 21
.007
Race
65 W, 10AA
44 W, 14 AA
85 W, 12 AA
23 W, 8 AA
.12
MMSE
29.3 (1.0)
28.2 (1.9)
24.0 (3.1)
16.4 (4.2)
.0001
Physician Collaborators
Britt Anderson, M.D.
Neurology
Patricia Goode, M.D.
Geriatric Medicine
Cleveland Kinney, M.D.
Geriatric Psychiatry
Anthony Nicholas, M.D.
Neurology
Terri Steele, M.D.
Geriatric Psychiatry
Physician Capacity Judgments
• Study recruited 261 participants
• Study physicians made 11,118 financial capacity judgments
• Each physician made an average of 2,224 judgments
• 627 ratings missing of 11,745 possible: 94.7% completion rate
• Attests to effort/commitment of study physicians and staff
Basic Monetary Skills:
Judgment Outcomes By Percentage and Group
Percentage
Control, MCI, mild AD differ from mod AD at p < .01 using GEE
100
90
80
70
60
50
40
30
20
10
0
98
100
92
66
Capable
Marginal
Incapable
Control
Jts = 353
MCI
Mild AD
Jts = 282
Jts = 475
Mod AD
Jts = 155
Checkbook Management:
Percentage
Judgment Outcomes By Percentage and Group
100
90
80
70
60
50
40
30
20
10
0
95
85
Control differ from MCI at p = .06
Control, MCI differ from mild AD and mod AD at p < .01
Mild AD differ from mod AD at p < .01
Capable
Marginal
Incapable
32
10
Control
MCI
Mild AD
Mod AD
Jts = 356
Jts = 267
Jts = 446
Jts = 144
Bank Statement Management:
Percentage
Judgment Outcomes By Percentage and Group
100
90
80
70
60
50
40
30
20
10
0
All groups differ at p < .01 using GEE
93
72
Capable
Marginal
Incapable
33
4
Control
Jts = 357
MCI
Jts = 269
Mild AD
Mod AD
Jts = 435
Jts = 137
Global Financial Capacity:
Percentage
Judgment Outcomes By Percentage and Group
100
90
80
70
60
50
40
30
20
10
0
All groups differ at p < .01 using GEE
95
82
Capable
Marginal
Incapable
26
4
Control
MCI
Mild AD
Jts = 333
Jts = 282
Jts = 476
Mod AD
Jts = 155
Financial Capacity and
the Alzheimer’s Disease Brain
Normal Brain
AD Brain
Loss of Brain Tissue in Alzheimer’s Disease
Normal Aging
Mild Cognitive
Impairment
Alzheimer’s
Disease
Conceptual Model of Declining Financial Capacity in aMCI and AD
Angular Gyrus and Financial Capacity
Results of VBM Analysis of Financial Capacity Instrument Scores in Patients with Amnestic MCI
(A) The cluster with maxima at coordinates 54, 48, and 44 on the glass brain projection (P=.08 corrected) (the second
cluster was not significant after correction).
(B) The maxima of the above coordinates projected onto T1 MRI scans in each dimension for comparison.
Journal of the American Geriatrics Society, 58:265–274, 2010
Perhaps some day we will be able
to use MRI scans
to help identify older persons
at risk for loss of financial capacity?
“To those seniors and especially elderly veterans like myself, I want to
tell you this: You are not alone and you have nothing to be ashamed of.
If elder abuse happened to me, it can happen to anyone.”
Mickey Rooney
Testimony to Senate Special Committee on Aging, March 2, 2011
Outline 2:
Prevention of Financial Exploitation

The $18.1 Trillion Problem Facing Us

Contractual/Transactional Approaches to Prevention

Familial Approaches to Prevention

Legislative Approaches to Prevention
The $18.1 Trillion Problem
Percentage
% U.S. Households Across Age Group
100
90
80
70
60
50
40
30
20
10
0
23.2
< 35 Years
23.3
35-44
Years
19.2
45-54
Years
21.2
12.8
55-64
Years
65+
Years
Adapted from D. Laibson, Age of Reason Lecture, June 2011 Morningstar Conference
Percentage
% U.S. Household Wealth Across Age Group
100
90
80
70
60
50
40
30
20
10
0
34
24.1
22.8
45-54
Years
55-64
Years
14.4
4.7
< 35 Years
35-44
Years
Adapted from D. Laibson, Age of Reason Lecture, June 2011 Morningstar Conference
65+
Years
All U.S. Households Balance Sheet
[Federal Reserve Flow of Funds—2009]
Total = $53.1 Trillion
From D. Laibson, Age of Reason Lecture, June 2011 Morningstar Conference
U.S. Household Wealth
Across Age Groups (in $ Trillion Dollars)
53.1
$ Trillion Dollars
50
40
30
18.1
20
12.8
12.1
45-54
Years
55-64
Years
7.6
10
2.5
0
All Ages
< 35
Years
35-44
Years
Adapted from D. Laibson, Age of Reason Lecture, June 2011 Morningstar Conference
65+
Years
$18.1 Trillion is at Risk

Normal cognitive aging = the brain over age 65

Age related improvement:

Experiential pattern recognition

“Wisdom”
Age related declines in multiple cognitive functions:



Short term memory capacity

Processing speed

Executive/planning abilities

Numeracy and arithmetic skills

“Fluid intelligence”
Vulnerability to poor decisions and exploitation
100
90
80
70
60
50
40
30
20
10
0
78
76
74
72
67
s
Ye
ar
90
s
Ye
ar
85
s
Ye
ar
80
s
Ye
ar
75
s
Ye
ar
70
s
Ye
ar
65
s
51
Ye
ar
60
Ye
55
78
58
ar
s
% With Correct Answer
“If the chance of getting a disease is 10 percent, how many
people out of 1,000 would be expected to get the disease?”
Adapted from D. Laibson, Age of Reason Lecture, June 2011 Morningstar Conference
Normal Cognitive Aging and Financial Capacity

We have focused on impact of prodromal (MCI) and clinical
dementia (AD) on financial capacity

But in terms of overall impact, normal cognitive aging is the
greatest threat to financial capacity in the elderly:

2009: 39.6 million elderly in U.S.
5.2 million with AD over 65
2030: 72.1 million elderly in U.S.
7.7 million with AD over 65
--www.aoa.gov/aoaroot/aging_statistics/index.aspx--accessed 29Feb2012
--2011 Alzheimer’s Disease Facts and Figures, Alzheimer’s Association, p. 19
Prevention of
Financial Catastrophes
and Exploitation in Older Adults
Time Magazine
September 3, 2001
Approaches to Prevention: Contractual/Transactional
Beyond the Durable Power of Attorney for Finances

which authorizes a proxy to act financially for grantor
Explicit advance planning for diminished capacity as

part of specific banking, trust, investment transactions
“Diminished Capacity” clauses?


Explicitly recognize possibility of future diminished capacity

Authorize financial institution to contact designated family

Set forth an agreed general plan of action

Provide secure path of communication/action for institutions
Approaches to Prevention: Legislative

Increasing recognition that diminished financial
capacity is an inherent aspect of aging–both normal
and abnormal cognitive aging

Legislatures may wish to enact special protections for
older adults as consumers and contracting parties

Should there be a designated time period in which an
older adult and his/her family may unilaterally cancel
without penalty incurred contractual obligations?

Could potentially reduce scam transaction activity?
Approaches to Prevention: Familial

The best source of protection for a financially
vulnerable elder is usually an aware and caring family

“Family awareness” programs about financial
vulnerability of older loved ones?

Modeled after drug awareness programs in teens?

Templates for family conversations on these difficulty
topics, and for developing appropriate protections

Involvement of local banks, brokers, and other
financial professionals?
Collaborators
UAB Department of Neurology
Roy Martin, Ph.D.
Randall Griffith, Ph.D.
Kristin Triebel, Psy. D.
Ozioma Okonkwo, Ph.D
Lindy Harrell, M.D., Ph.D.
John Brockington, M.D.
UAB Department of Biostats
Alfred Bartolucci, Ph.D.
UAB Dept of Education
Scott Snyder, Ph.D.
UAB Dept of Psychology
Virginia Wadley, Ph.D.
David Clark, M.D.
Richard Powers, M.D.
Katherine Belue, B.S.
UCSD Department of
Biostatistics
Rema Raman, PhD
Ron Thomas, PhD
NIH Support
Studies of Financial Capacity in Alzheimer’s Disease
(1 R01 MH55247)
Alzheimer’s Disease Research Center
(1P50 AG16582)
A Longitudinal Study of Loss of Financial Capacity in
Alzheimer’s Disease (ADRC Project 2)
Functional Change in Mild Cognitive Impairment
(1 R01 AG021927)
Questions?
Financial Capacity in MCI and AD:
Psychometric Testing
Psychometric Assessment of FC

Direct assessment of performance in a controlled setting

Standardized, objective scoring, norm referenced

Finely grained measurement versus vague informant report

Verify patient and family report of financial abilities

Useful clinical addition to traditional NP test battery

Disadvantages:

May lack ecological validity—difficult to replicate community setting in clinic

Requires trained administrator and are time consuming

Tests of financial capacity not commonly available
Financial Capacity Instrument (FCI-9)
 Standardized
 Directly
measure with scoring system and norms
tests performance on:

18 financial tasks

9 financial domains

global (overall) financial capacity
 Needs
a trained administrator
 Takes
about an hour to administer to dementia patients
FCI Video:
Domain 7—Bill Payment
Task 7a: Understanding Bills
Task 7b: Prioritizing Bills
Task 7c: Preparation of Bills for Payment
Research Findings Using
Financial Capacity Instrument
FCI Study Sample
Controls
MCI
Mild AD
p
N
26
30
34
Age
66.2 (7.7)
67.6 (8.9)
73.4 (8.4)
.05
Educ
14.5 (2.4)
14.6 (2.3)
14.6 (2.7)
ns
Race
73% W
77% W
94%W
ns
Gender
69% F
57% F
60% F
ns
MMSE
29.2 (1.1)
28.5 (1.2)
24.0 (2.9)
<.001
DRS
137.1 (4.6)
130.9 (5.7)
113.9 (10.2)
<.001
1.0 (0.8)
5.1 (1.3)
<.001
CDR sum box 0.0 (0.1)
Group Differences on FCI Total Score
p = .0001
C > MCI > AD
300
250
282
263
247
Raw Score
203
200
Max Score
Control
MCI
Mild AD
150
100
50
0
Domains 1-7
Task 7c: Preparing Bills for Payment
C, MCI > AD
30
Raw Score
25
27
23.9
21.9
20
15
p = .0001
13
10
Max Score
Control
MCI
Mild AD
5
0
Preparing Bills for Payment
Controls=36, MCI=35, Mild AD=53
Task 7c: Preparing Bills for Payment
Time (in seconds)
C < MCI < AD
300
p = .0001
300
250
Raw Score
208.6
200
Max Score
Control
MCI
Mild AD
150.9
150
115.9
100
50
0
Preparing Bills for Payment (time in seconds)
Controls=36, MCI=35, Mild AD=53
Raw Score/Time Dissociation

MCI patients can perform many financial tasks about as
well as controls

But it often takes MCI patients significantly longer to
complete these tasks

Tasks are no longer as automatic and routine

At some point increasing task time = impairment