The following article was written by Elizabeth O'Brien and published in MarketWatch on May 21, 2015.

It's common for Courtney L. Smith's new clients to rebuff her services. A daily money manager, Denver-based Smith is often hired to help older adults manage their financial affairs.

Empathy helps her connect with people who initially don't want anything to do with her. "Everything is fear-based," she said of her clients. "They're afraid of being put in a facility, they're afraid of losing the car keys, they're afraid of losing the checkbook." She'll tell them she's there to help them stay autonomous and independent for as long as possible.

Problems handling money often emerge as an early sign of dementia. Today, more than 5 million Americans are living with Alzheimer's disease, the most common form of dementia, and that number is expected to rise to up to 16 million by 2050, according to the Alzheimer's Association. As the number of Americans with Alzheimer's continues to climb, so too will the number of caregivers helping their cognitively impaired loved ones with money matters.

It's a difficult role. For starters, many Americans don't have a full handle on their own financial lives, much less on an aging parent or spouse's, said Dave Paulsen, president of Transamerica Distributors, a provider of investment and retirement products. What's more, there are plenty of pitfalls that could land the caregiver in legal hot water and also complicate the sick person's eligibility for Medicaid to cover long-care expenses, if needed.

Last month, Transamerica released "The Caregiver's Guide to Financial Planning in the Shadow of Dementia" in partnership with MIT AgeLab. It covers steps that caregivers should consider during the three stages of dementia--mild, moderate and severe--along with resources that can help and ways to recognize and cope with caregiver stress.

The key, experts say, is advance planning. Ideally, people will have key documents in place before exhibiting any signs of cognitive impairment. If not, dementia offers a narrow window of time for families to get their affairs in order with the input of their afflicted loved one.

Getting documents in order

A financial power of attorney names a person, often called an "agent," to handle the affairs of someone no longer able to do so. While state law varies, the document generally can take effect immediately upon signing, or "spring" into effect when the person is determined to have lost the ability to act and make her own decisions, either due to accident or illness.

Some elder-law attorneys discourage these so-called springing powers of attorney, since family members and medical professionals can disagree among themselves on the degree to which a person has cognitive decline. This often leads to arguments about when the power-of-attorney document should go into effect.

Someone named agent on a power of attorney document that goes into effect immediately can take immediate action, even though the person signing the document--known legally as the "principal"--retains her full capacities. Yet if that possibility worries folks, "then you shouldn't be naming that agent," said Bradley J. Frigon, an elder law attorney in Denver and president of the National Academy of Elder Law Attorneys. In other words, an agent under power of attorney should be trusted implicitly.

Families shouldn't delay if a loved one is showing signs of slipping and has no documents in place, or wants to update an existing will, trust, or powers of attorney. State law varies on the definition of "capacity," a legal concept that refers to a person's ability to make decisions and take actions on her own behalf. Some states set a higher standard of mental acuity for entering into new contracts than for modifying existing documents.

While people can retain capacity into dementia, the disease progression varies by individual and the window can close without much warning, said Dr. James E. Spar, a clinical psychiatrist in the department of psychiatry and biobehavioral sciences at the David Geffen School of Medicine at UCLA.

Caregivers should also ask their loved one's preferences for long-term care and medical interventions as her disease progresses. "You've got to find a way to pull it out of them and document it even if they don't want to talk about it," Paulsen said.

Someone acting as agent under power of attorney has a legal responsibility to act in the best interest of the principal. Family members sometimes approach their duties more casually than they should, experts say.

For one, they might mix their money with their loved one's. This is a big no-no. Agents should always use the principal's funds to pay the principal's expenses and keep meticulous receipts to document where the money is going in case their efforts are ever challenged by a family member, an attorney, the court system or anyone else.

Agents should also be wary of making gifts on behalf of the principal. In the case of wealthy individuals -- those with at least several million -- smart gifting might make sense from an estate planning point of view, as long as the power of attorney document authorizes it, said Andrew Murdoch, president of Somerset Wealth Strategies in Portland, Ore. and a MarketWatch RetireMentor columnist.

Yet those with smaller estates who make gifts can compromise their loved one's ability to go on Medicaid. This state-run program pays the long-term care costs of those who have exhausted most of their assets and meet strict income and other criteria.

People can't hide or otherwise give away their assets for the purpose of going on Medicaid. The program's application asks if applicants have transferred any assets for less than fair market value over a "look back" period that can last as long as five years. People sign these applications under the penalty of perjury.

If a person will likely need Medicaid down the road, she must avoid any gifts or transfers during the look-back period. Those acting as her agent must avoid them, too, even if the agent knows that Mom would have loved to be generous.

The power of attorney ends upon the death of the principal. Therefore, in order for the agent to access the principal's funds to pay funeral and other expenses, the accounts have to have been designated as "transferable on death" or "payable on death" to the agent, said Kevin Houser, a certified financial planner in Allentown, Pa. and co-author of The Book on Retirement: Are You Ready for the Second Half of Your Financial Life?

Sometimes, establishing automatic bill payment and redirecting other key mail is all a long-distance caregiver needs to do to help an older loved one with finances. Depending on the circumstances, however, the responsibilities could become much more demanding.

Daily money managers can help those overwhelmed with their responsibilities as agent. Distinct from financial advisers or accountants, these professionals act as a personal assistant who will pay bills, review financial statements, negotiate with creditors, and, depending on their expertise, also help with medical claims. They typically do not act as power of attorney themselves. Smith is the president of the American Association of Daily Money Managers, whose web site allows consumers to search for a money manager near them (or their loved one).

Those with dementia slowly lose control over many facets of life where they once enjoyed autonomy -- their jobs if they were still employed, their checkbooks, their car. "Every milestone was another opportunity to grieve," said Mike Stanford, of Branchburg, N.J., whose wife Marcia had early-onset Alzheimer's and began to show signs of mental impairment in her late 40s. She died last month at 54.

Finances weren't that fraught for the Stanfords. While Marcia, a fitness instructor, had handled the family bill paying before her illness, Mike took over seamlessly when she lost interest in the computer. She retained a credit card, but since she never shopped alone, she always had someone looking over her purchases; her little splurges, on flip-flops and water bottles, were modest. (For those with dementia who are more likely to break the bank, or to fall victim to scams, True Link offers a prepaid Visa Card, which can block certain types of transactions, allow caregivers to review transactions and send caregivers alerts.)

Driving was another story. Marcia didn't want to give up driving and what it represented: her autonomy and ability to get out of the house. When the family delivered the difficult message that Marcia was a danger to herself and others behind the wheel, they had an alternative at the ready: they had already coordinated rides for her through the online care-coordination calendar Lotsa Helping Hands.

Marcia learned that she would still get out of the house as needed, and she'd have friends and family for company when she did. This delighted her and softened the blow that she could no longer drive herself.

For his part, Houser includes clients with dementia in his meetings even when financial control has passed to a spouse or adult child. Making them feel part of the team, he said, provides "dignity in the transition."