[Exclusive] Government to Investigate Outflow of 'Dormant' Dementia Money

Dementia Money Should Be Used for Care and Nursing
Revision of the Trust Act and Special Legislation Needed

The government is launching an initiative to investigate the outflow of so-called "dementia money"?assets held by elderly dementia patients, estimated at 154 trillion won?and to establish a system to protect these assets. The aim is to track how assets change at each stage of dementia, to identify the risks of asset misuse, and to specifically assess how care and nursing needs evolve as the severity increases. The government is also considering measures such as revising trust laws, enacting special legislation, or utilizing reverse mortgages for real estate, to ensure that this vast amount of dementia money can be used for the treatment and care of the elderly themselves.

Analysis of 154 Trillion Won in Dementia Money: When Does It Decrease, and Where Does It Leak?

According to relevant ministries on May 27, the Presidential Committee on Low Fertility and Aging Society is discussing the launch of follow-up research on dementia money, focusing on these issues. The committee has determined that a quantitative analysis is necessary to identify blind spots where the outflow of dementia money occurs, based on confirmed data. On May 6, the committee announced the results of the first comprehensive government survey on dementia money, revealing that as of 2023, 1.24 million elderly dementia patients held assets (income plus property) totaling 153.5416 trillion won.

The committee plans not only to confirm the scale of dementia money, but also to use this as a basis for tracking changes in the assets of dementia patients at each stage of the disease (mild → moderate → severe). By analyzing how asset flows change as dementia progresses, the committee aims to determine whether the risk of misuse of dementia money is frequent, and to examine changes in expenditure structures such as nursing and hospital costs. Although it is known that there are frequent cases where third parties?such as children or caregivers?obtain financial information of elderly dementia patients and withdraw assets without authorization, there has yet to be concrete data confirming this.

The government is also considering measures, including revising the trust law or introducing special legislation, to ensure that dementia money can be smoothly used for the elderly's own care expenses. Under current law, once a person is diagnosed with dementia and loses legal capacity, their assets are effectively frozen. This means it is virtually impossible for the patient to use their own assets for treatment. While the adult guardianship system (where a court-appointed guardian helps manage not only the property but also the personal care and treatment of someone unable to make independent decisions) allows for future claims on medical expenses, the use of this system among dementia patients in Korea remains low due to the complexity of the appointment process and a lack of trust.

Although some financial institutions offer dementia trust products, these too are not widely used. This is largely due to ambiguities in the current trust law, which create several limitations in preparing for dementia through such products. The trust law stipulates that a trust contract can only be concluded "while the person has legal capacity." If, at the time of the contract, a guardian or child claims that the parent with dementia already lacked capacity, this could lead to legal disputes, hindering the wider adoption of the system. The law does not clearly define what constitutes "legal capacity," nor does it specify the criteria or evidence (such as medical certificates or expert opinions) required to make that determination.

Guardians Cannot Touch Trusts: Legal Inconsistencies Tie Up Assets

The inconsistency between the guardianship and trust systems is another obstacle to the effective use of dementia money. Under the Civil Act, guardians are supposed to protect and represent the assets of dementia patients. However, the Trust Act does not clearly recognize a guardian's authority to execute or manage trusts. As a result, even if a trust contract was set up prior to the onset of dementia, if the contract no longer fits the current situation, the guardian cannot change the assets or intervene in how they are managed. This leads to situations where, despite having a trust, the assets of dementia patients remain tied up and cannot be used for necessary purposes.

The committee believes that revising the Trust Act or enacting special legislation for dementia is necessary to ensure that the assets of dementia patients can be used for their own care. It is seen as essential to clearly define "legal capacity" in trust contracts and set criteria for its determination, as well as to grant guardians limited legal authority to adjust trust contracts. Since a trust is a pre-arranged contract, specifying the use of assets and the authority for execution in the contract could serve as a way to institutionally prevent misuse by family members or others after the onset of dementia. Additionally, the committee suggests that enabling elderly dementia patients to liquidate real estate assets for their own care expenses is also needed.

Japan Combines Guardianship and Trust Systems

Since 2012, Japan has institutionalized the "guardianship trust" system, bridging the gap between the Civil Act guardianship system and the Trust Act. The Trust Act in Japan includes clear provisions allowing guardians to place the assets of their wards into trust. It is reported that about 10% of all adult guardianships in Japan operate in the form of guardianship trusts. There is also a system in place for constant supervision of trustees by supervisory guardians. This approach helps prevent family members from misusing assets and ensures that the assets of dementia patients are reliably used for care purposes.