Health & Your Finances: Planning for a Declining Health Situation
It’s not easy to talk about the deterioration of your health, or what you’ll do at the end of your life. For these reasons many people avoid having the conversation altogether -- which also means they avoid necessary planning. Yet, it’s best to handle logistical details in advance of a health event or decline.
The more you do now, the easier it will be to respond when a health event occurs. And the perspective of preparation you have today is better than scrambling or reacting down the road. Particularly if you hold primary responsibility for your family’s finances, start by introducing your family members to your financial team and acquainting them with your overall financial picture. This includes sharing the types of accounts you have and the institutions where they are held. Start on legal documentation early, including your power of attorney, will, and possibly establishing a trust. Once these documents are in place, you can put them on file with your financial institutions in the event they are needed sooner than expected.
Choose Your Roles
Choosing who will fill important roles related to health and financial decisions can be a challenge. If you don't have children or your children aren’t the right people, consider other relatives or family friends that are younger and can fulfill the steps throughout your lifetime. There are also professional services, or care management companies, that can serve this role. In either case, it’s best to start making introductions, building relationships and sharing knowledge now. That way when an event occurs everything is set up and simply needs to be put into action.
As a wealth advisor, these are determinations we regularly help our clients consider. For example, one client recognized that one of her children would be better suited to take on the role of financial power of attorney while the other would be better in the medical power of attorney role. We helped facilitate the conversation with the children to ensure that each understood his or her responsibilities and how their mother expected them to work together to resolve any difficult decisions.
Have Tough Conversations
It’s essential to have conversations with those assigned important roles. When you start early (as mentioned above), the conversations tend to be easier because they are proactive rather than reactive. An upfront conversation will reduce surprise and help your trusted team members feel more comfortable and confident. It also gives them permission to tell you if they notice changes in your health, and opens the door to discuss those concerns. Explain your wishes as they relate to your healthcare in a letter, video, or in person. Also, make sure the people you choose are prepared to carry out your wishes how you want; although they are legally bound, there can be different ways to execute a fiduciary duty. To avoid situations of disagreement, it’s often recommended to choose a single executor or power of attorney. Keep your relationships and documents fresh by meeting annually, and consider inviting a third party to facilitate tough conversations.
Monitor Your Health
Be aware of indicators that your health may be on the decline. Look for subtle signs in your day-to-day life. If things that were once easy to keep track of, such as compiling tax information or paying bills, seem more difficult, it may be a sign you need help. We recommend setting up a regular cognitive baseline test with your doctor to objectively assess your health.
Simplify Your Finances
Simplifying your financial life is also important. If you have accounts scattered at different institutions consider consolidating them to as few as possible. Eliminate unnecessary accounts to minimize complications. Also, don’t forget to document less mainstream assets, such as cryptocurrency, that may need administering.
In a recent experience, we helped a client with stocks held in approximately 20 different accounts in multiple financial institutions to consolidate down to a single institution. The previous accounts also had many beneficiary designations that no longer matched her current wishes. During the consolidation process, we also ensured the titling and beneficiaries coordinated with her current estate plan.
If you already have a wealth manager, this is a good place to start. Ask your wealth manager for direction and invite them into the conversation as soon as possible. They will understand the scope of your financial picture, including what documents are relevant and when to initiate them. They’ll also set up and facilitate family meetings. Having a neutral, expert third party present to walk through hard topics can reduce the emotion of difficult conversations.
At Richard P. Slaughter Associates, accounting for declining health is part of our process when we take on a client. We’ll look over the legal documents you have and discuss potential updates as applicable to your current location. We can also introduce you to attorneys in your area and provide background and context to your selected attorney.
Above all, we recognize that these are hard discussions to have and wanting to avoid them is normal. No one wants to talk about their death or disability, but recognizing that it’s difficult and that others also feel the same way can make it easier. While there is no easy time and you may wish to put it off, having these conversations in advance of an emergency and when you are in good health is the best approach.