Over six million Americans suffer from dementia, and by 2060, as the population ages, that number is expected to double.
Unfortunately, dementia impacts cognition, with sufferers often experiencing memory loss, confusion, and impaired judgment. These symptoms can make caring for a dementia patient difficult, as the patient may make choices that put their safety at risk.
But what happens if a caregiver needs a dementia patient to make a decision? Say, for example, that Alexa is caring for her 90-year-old mother, Beatrice, who has dementia. Beatrice has a $200,000 stock certificate, and Alexa wants Beatrice to sign it so the certificate can be sold.
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So, what can Alexa do in this situation?
Can you get a dementia patient to sign a stock certificate?
A stock certificate is a document that shows you own a specific number of shares in a company. When someone holds a physical stock certificate and wants to sell or transfer shares, the certificate holder often must sign it and have their signature "guaranteed" by a financial institution participating in a Medallion Signature Guarantee program.
Unfortunately, Alexa can't just make her mom sign, because her mom may no longer be able to under the law.
"The first thing you need to do is determine if she still has the legal capacity to understand what she is signing, as well as the consequences of the transaction," Andrew L. Hope, an estate planning attorney and founder of Hope Law Firm, told Moneywise.
Hope explained: "You can’t simply have someone with dementia sign a document because you need access to the funds. If someone lacks the ability to make this kind of decision, signing on their behalf without the proper legal authority will create serious consequences."
The key question is whether Beatrice has legal capacity, which Scott Rahn, founding partner at RMO Lawyers, told Moneywise is based on the specifics of the transaction. This would likely mean Beatrice must understand what stock is, the implications of holding versus selling, and who will receive the proceeds. If she doesn't have this understanding, Rahn said that "neither a notary nor a medallion guarantee can cure a lack of capacity."
This may be a big problem for Alexa, as trying to force the signature could get her into legal trouble. "Attempting to obtain a signature from an elderly person who does not have capacity can be considered elder abuse," said Somita Basu, partner & co-founder at Norton Basu LLP.
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The signer needs the right authority and motivation
Fortunately, there are options for Alexa and Beatrice. However, Alexa must make sure she has the right motivation.
"Don't forget the stock and its proceeds still belong to Mom," Rahn said. “'Unlocking' the asset means protecting it and using it for her benefit."
The good news is, Alexa may already have authority to act.
"In a situation like this, an existing durable power of attorney can be very important," said Hopel. "A power of attorney allows someone the parent trusts to handle their financial matters if they become unable to do so."
If Beatrice had created a durable power of attorney and designated Alexa as her agent before becoming incapacitated, this would grant Alexa the right to act. Alexa could likely sign the stock certificate on her mother's behalf under the grant of authority, as long as she was acting in her mother's best interests rather than her own.
If she doesn't have power of attorney, then Basu recommends that Alexa "consider applying for a conservatorship, which will allow you to officially manage your loved one's assets and care legally and with the authority granted by the court."
A conservatorship is also sometimes called a guardianship, and while state laws can differ slightly in terminology and the process for obtaining one, both a conservatorship and a guardianship would ultimately require Alexa to ensure she's truly putting her mom's needs first.
"The most important thing in this situation is to avoid working around your mother’s incapacity," Hope warned. "Instead, have an estate-planning attorney review her existing documents and decide what legal authority is available."
Alexa should work with a lawyer to understand her authority and should decide if selling the stock benefits Beatrice. If not, then Alexa needs to wait and leave the stock certificate alone, unless or until she inherits it if she's entitled to it as part of her mom's estate plan.
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Christy Bieber is a US based personal finance and legal writer who has 15 years of experience. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
