[PB Notebook] Dementia Money Trust Solutions to Safeguard Your Assets and Your Future

Jang Juri, Tax Accountant, Comprehensive Asset Management Team, Kyobo Life Insurance

Jang Juri, Tax Accountant, Kyobo Life Comprehensive Asset Management Team. Kyobo Life

As society continues to age, the incidence of dementia is steadily increasing. Last year, there were approximately 1.05 million dementia patients. This number is expected to rise to 1.42 million (10.9%) by 2030 and 3.15 million (16.6%) by 2050. Many people come to realize that dementia is not someone else’s problem as they grow older, but preparing for it amid the pressures of daily life is not easy.

Dementia is not simply a medical issue; it also causes a loss of an individual’s decision-making capacity, which restricts their legal ability to manage their own assets. The problem arises the moment a patient loses decision-making capacity, as it becomes virtually impossible to manage their assets, leading to what is known as the “money freeze” phenomenon. This is a protective measure designed to prevent the indiscriminate outflow of a dementia patient’s assets or damages such as family disputes and fraud. Under current law, even family members cannot freely withdraw deposits or sell real estate. If necessary, they must go through a separate guardianship process to use the assets in a limited way.

One of my acquaintances, Mr. A, ran a manufacturing-related sole proprietorship in a rural area. He married a foreign wife later in life and had three children, but began showing symptoms of dementia at a relatively young age, in his late 40s. Over time, his memory and cognitive abilities declined to the point where he could no longer perform basic banking transactions. Some people with whom he was not particularly close exploited this by learning his account password and attempting to withdraw money, resulting in his account being locked and making it impossible for him to use his own funds for medical expenses.

To address the gap in asset management for dementia patients, the adult guardianship system is in place. However, this system requires a court ruling to commence, as well as the appointment and supervision of a guardian. Essentially, it is a public system that substitutes for the patient’s legal actions, but the procedures are complex and can take a significant amount of time to initiate.

In this context, trust arrangements have recently attracted attention. This system allows individuals to designate a trust company as trustee and predetermine how their assets will be managed and used, while they are still fully competent. Legally, this serves as a preemptive asset management tool. Even if decision-making capacity is lost in the future, the intentions expressed at the time of the contract remain valid, and the assets are managed and disposed of according to the terms of the trust agreement.

If you clearly define the purpose for which your money can be used through a trust in advance, you can avoid the risk of your assets becoming “dementia money” that is frozen and inaccessible. Even in illness, you can avoid burdening your family, and family disputes can be prevented. Since family members receive funds from your account specifically to pay for your medical expenses, gift tax issues do not arise. Your funds can also be used smoothly in the event of acute, serious conditions such as cerebral infarction.

The advantages of trusts are as follows. First, even if dementia develops, living and medical expenses can continue to be paid, ensuring continuity in asset management. Second, complicated legal procedures such as guardianship applications can be minimized, allowing families to focus on care and reducing their burden. Third, you can set in advance how you want your assets to be allocated and used, ensuring your wishes are respected. Fourth, misunderstandings and conflicts among heirs or family members over asset use can be reduced.

Therefore, it is advisable for individuals to establish a direction for asset management while they are healthy and put in place safeguards for situations such as dementia. This allows you to use the assets you have worked hard to accumulate throughout your life at critical moments without burdening your children or spouse. Even if you are no longer in this world, you can create a concrete and systematic inheritance plan according to your wishes. To achieve this, it is important to seek comprehensive solutions and plan ahead with experts from various fields.

Jang Juri, Tax Accountant, Comprehensive Asset Management Team, Kyobo Life Insurance

This content was produced with the assistance of AI translation services.