Forever Young - Part II
“I just don’t think of age and time in respect of years. I have too much experience of people in their seventies who are vigorous and useful and people who are thirty-five who are in lousy physical shape and can’t think straight. I don’t think age has that much to do with it.” This quote comes from actor Harrison Ford who is now 80 years old and is still cracking whips with the release of the fifth Indiana Jones movie.
As I wrote a couple weeks ago, most people carry a subjective picture of their own age with them. Those under twenty-five tend to see themselves as a bit older, those over forty see themselves as somewhat younger. There’s lots of research about this phenomenon but little consensus about why people think this way.
Regardless of how old our clients consider themselves, we always encourage them not to put off important things until ‘later’ but to deal with them now. Risk management underlies everything we do at WWA, so we often find ourselves being the ones to introduce difficult topics such as making a will as I discussed in my last article. Today, I’d like to mention some additional estate planning topics for your consideration.
When I was in high school, my best friend’s father had a stroke. He was a physician, so when he awoke and realized he was partially paralyzed, he immediately began trying to reconnect his brain with his muscles. He eventually made a reasonable recovery but was no longer able to practice orthopedics. This unfortunate episode provides the opportunity to delve into a couple of different issues.
First, disability insurance. I wasn’t privy to the family’s financial situation. What I do know is that without disability coverage for the mid-career sole breadwinner, this family could easily have lost everything. While most people see the need for life insurance, disability somehow seems more distant even though people are 3 ½ times more likely to become disabled than die. This is a topic we discuss with all of our employed clients, especially those with dependents.
Second, life-altering illness or accident. My friend’s dad was lucky in the sense that his stroke was not nearly as bad as it might have been. He worked hard at his recovery but what if the stroke had been more severe? What if he had been completely paralyzed, awake but unable to move or communicate? What sort of life would that have been?
We’ve all seen a news story from time to time about someone who suffered a debilitating stroke or devastating injury and was kept alive for years via significant medical intervention. For many people, this would be a nightmare scenario but it’s one that can be avoided through planning. Along with a will, most attorneys include an Advanced Directive (an improved version of a Living Will) as part of an estate planning package. It allows you to provide specific directions about the application (or not) of what are known as heroic measures or the provision or withholding of nutrition and/or hydration.
Because you may not be able to make medical decisions for yourself toward the end of life, it’s important to name a Health Care Representative. This can be done with a stand-alone document often provided by your attorney. This person provides a single source for health-related decisions when they must be made. Obviously, your HCR should be someone you know well and have discussed the issues with. Medical professionals have become more accustomed to the concept of allowing their patient a peaceful death by avoiding the introduction of heroic measures. However, without a specifically named representative, there’s potential for confusion at the bedside. A physician with conflicting directions is likely to err on the side of prolonging a life that the patient might have preferred to end simply and peacefully.
Another part of a complete estate planning package is a Durable Power of Attorney, a document which allows a designated person to make business decisions when you become unable to do so. Perhaps money is needed for medical care and you’re no longer able to decide which asset to sell. Your PoA can make the decision and take care of the details for you. Of course, this too is an arrangement that must be discussed in advance with someone you trust implicitly. In this case, the word durable means that the document continues to be in effect once you become unable to handle such decisions yourself. Prior to that time, a DPoA can be revoked whenever you wish, so if the loss of financial control bothers you, please remember these documents are easily altered or even nullified.
We are regularly asked about the necessity of establishing a Trust, often as ‘a way to avoid probate’. We don’t think probate is necessarily a process to be avoided but it does make estate settlement public. If that’s an issue to you or if there are any individuals in your family with special needs, then a Trust could very well make sense. You might think of a Trust as a PoA with extra powers. For one thing, it survives not just your incapacity but your death, offering you the opportunity to continue to guide the use of your assets. For clients with younger children, we sometimes say that a Trust allows them to ‘parent from the grave’. The Trustee will be empowered to make any decisions that you cede to them and to continue doing so until a specified end point. Many banks offer trust services but something that complicated and/or expensive may not be necessary. We can refer you to one of several retired attorneys who are willing to serve as a trustee, something that might seem more palatable in a family situation.
One document that attorneys don’t always include is a Personal Property Memorandum, sometimes called a Letter of Intention or Letter of Instruction. These can be used to add any reasoning involved in a specific bequest. Especially when an item might be of potential interest to more than one heir, this document allows you to state exactly why you are making the specific gift.
Once these documents are prepared, they must be accessible at the time of need. Having all the proper documents locked up in a safe deposit box will do no one any good. We provide clients with access to digital vaults where they can store estate planning and other important documents. We also supply business card-size CDs containing the same information and we’ll be happy to prepare one for anyone who asks.
Let’s turn to best-selling author, speaker and unheralded financial planner Stephen Covey for a closing remark. He says: ‘I am not a product of my circumstances. I am a product of my decisions.’ Although Covey died over ten years ago, his comments continue to make their way into our client conversations as we try to help people make good planning decisions for their own and their families’ futures.