From the November 2004 issue of Investment Advisor • Subscribe!

November 1, 2004

The Sixth Sector

In addition to the five traditional kinds of financial planning, helping clients prepare for end-of-life issues can be vital and rewarding. Here's how

Like most financial planners, I have been tutored in the five traditional facets of planning: retirement, estate, insurance, tax, and investment planning. Recent events in my personal life, however, made me realize I have been overlooking, and perhaps avoiding, an important aspect of my professional services that I call "endlife planning." I define endlife planning as anticipating the healthcare and living situation issues that are likely to arise as clients age, and preparing those clients and other family members, who are usually children or younger relatives, to deal efficiently and effectively with those issues. While endlife planning touches on the traditional facets of planning, I argue that planners need to educate themselves about its unique challenges so as to benefit current and future clients and their families. In addition, chances are good that it may help you and your family as well when you (and they) deal with a nearly inevitable stage in all our lives.

Here's how I came to this realization about planning's sixth sector; perhaps some of the circumstances will sound familiar to you.

As advisors, we urge our clients to take a long, hard look at the future and the potential endlife needs of parents and other family members. We encourage them to anticipate a broad array of contingencies as early as possible. The difficulty lies in knowing which questions to ask and which issues to consider. Circumstances change and endlife plans require constant readjustment. The challenge in endlife planning is a bit like buying a house for your future family to live in when you are 10 years old.

While every contingency cannot be anticipated, we should try to do all we can while we can to prepare for these end-of-life issues. Hold discussions and schedule follow-up sessions with clients and their family members now, while they are still able to articulate their wishes.

You are likely to encounter apathy or resistance to such an effort. Most people in their 60s and 70s defer planning for the end of their lives, and it's an uncomfortable subject for younger family members to broach. On a lighter note, it's the same dynamic typified by aging athletes, like golfers who recognize they will eventually lose distance on their shots but never think it will happen today, tomorrow, or even this year. It's always off somewhere in the distance.

Many Issues, Few Discussions

While the overwhelming majority of Americans still lack a formal estate plan, increased media coverage has helped heighten awareness of the problems that arise from not having such a plan, and many people are at least talking more about estate planning. Sadly, most of their conversations are taking place in a generational vacuum. Parents might talk to each other about their estate, but they tend to not include their children in these conversations, so the children are unaware of the problems that may arise. Family members need to talk to each other about endlife issues, such as preparing a "Do Not Resuscitate" form. Parents must inform their children of their priorities and wishes should they live long enough to suffer diminished capacity. Which kind of facilities and activities will they want? Which will they be able to afford? Discussions on these issues should take place in the open and between the generations. Planners can assume a vital intermediary role for families in facilitating those discussions.

Children can come under tremendous pressure and guilt if they are forced to make these decisions on behalf of their diminished-capacity parents. Unless the adult children have visited different facilities with their parents, they will be lost as to which living arrangement would be in their parents' best interests. Even deceptively simple decisions can become complicated, such as whether they prefer bright, sunny living quarters for long hours of reading or playing cards with other residents, or a cooler, darker environment for watching TV and solitary reading. There is also a broad variance in cost structures to consider, and without preplanning, you are likely to be under severe time constraints to make a score of decisions that will dictate how your parents spend the final years of their lives and whether they will be in an environment they would have chosen for themselves.

Another huge issue is whether the facility accepts Medicaid. Many do not, which can lead to the gut-wrenching experience of having to move your parents a second time to an alternate facility, one that may be less appealing. This and a score of other relevant issues should be discussed between parents and children well before any serious health concerns force a quick decision. A list of topics should be written down and discussed, just as in the estate planning process. Various facilities should be visited and compared. Costs should be projected. There is a significant planning element to all of this.

In families with more than one child, there may be divergent opinions as to which steps to take and how to fund the living arrangements. Unless you plan ahead of time, the legal system will not be much help.

I speak on these issues as a financial planner with a fair amount of experience, but I also speak as someone who had to struggle through these issues with my own relatives not once, but three times. I helped both my mother and her two sisters with their endlife situations, each of which involved the onset of dementia in varying degrees.

I am an only child. My mother was widowed 30 years ago. As a financial planner, I recognized the late-life issues that would eventually arise if my mother lived long enough. In anticipation, I did some traditional estate planning for her, including arranging a will, trust, powers of attorney, and long-term care insurance. However, I was unable to convince either of her sisters to do similar planning while they were still competent to make their own decisions.

While I had prepared my mother's estate plan, and she is under good care now, I did not do a great job with her endlife planning. I was not well prepared for the healthcare issues and was totally unprepared for the emotional impact making these decisions for my mom had on me. Endlife planning, if done properly, should go a long way towards reducing these emotional stresses and the stress of having to make major decisions in very short time periods.

Unaware and Unconcerned

My older aunt (now 91) deteriorated very quickly. One day, we found her lying motionless on the kitchen floor of her home. It turned out she had no major physical impediments; she simply had stopped taking care of herself and had dehydrated. After a few days in a hospital emergency room, she was moved into a facility designed for people who didn't have serious medical problems but who still needed care.

From a financial perspective, we were fortunate that her condition still required medical attention because Medicare covered the bulk of her expenses for her three- month stay in that facility. Since she was obviously incapable of going home and taking care of herself, the next step was to move her to a care facility for patients with dementia. Ultimately, she would be moved into an Alzheimer facility specializing in care for people with that illness.

Before doing so, however, I first had to petition the court to become my aunt's guardian. This meant finding an attorney specializing in elder care and geriatric issues, who collected personal data on my aunt from me and her doctors. The court appointed a "guardian ad litum," an advocate who protects the rights of people unable to make their own decisions, to visit my aunt to make an assessment of her condition and ensure we were accurately representing that she required special care. My attorney, the guardian ad litum, and I then met with a judge to confirm my aunt's needs and present paperwork stating that I was a suitable person to serve as her permanent guardian.

Becoming a dependent relative's guardian is the first step down a long and twisting road. There are a host of documents to attend to, including changing the title of anything of value in the relative's name. I was stunned by how many companies have no idea how to deal with the title transfer of a living person's assets to a court-appointed guardian. To this day, almost 15 months later, I have not been able to get her monthly pension fund payments switched into the new guardianship checking account.

Some years ago, my two unmarried aunts decided between themselves that they would put their personal checking accounts (in fact, all their assets) into joint tenancy. They figured if something happened to one of them, the other would take care of the finances. What they failed to anticipate was that they might both become incapacitated at the same time, which is not uncommon for people of a similar age. Because of this, I am unable to close my aunt's old checking account because my younger aunt, who was joint tenant, was fighting the family's efforts to help: She was also deteriorating but was not as far gone as my older aunt.

This situation illustrates how well-intentioned efforts by family members to provide for each other through joint tenancy agreements can backfire and also trigger an array of tax ramifications. I have encountered similar scenarios in my practice where a parent in her 60s or 70s makes her son or daughter joint tenant or executor. But when that parent reaches 90, her child may be in his 70s and facing similar issues.

Once appointed guardian for my older aunt, I faced an avalanche of accumulated financial, tax, and healthcare-related statements (and unpaid bills) from insurers, doctors, and pharmacies. Many were unopened. I didn't know who any of these people were and my aunt was unable to communicate anything to me about them. I didn't even know who her private insurance carrier was. She had worked for the Federal Reserve Bank of Chicago and had excellent health insurance, but during her illness, the bank changed carriers. My aunt's deteriorating condition left her unaware of the change; her healthcare providers were also in the dark, and continued to submit invoices to her old insurance carrier. Naturally, their bills were rejected. Her doctors and hospitals did not know she had a new carrier; they assumed she simply was no longer covered. I had to sift through two years of bills submitted by her providers to the wrong carrier.

It was an enormous snarl. Just getting all the physicians, hospitals, pharmacies, and labs to resubmit their bills to another carrier was a major headache. In addition, the new carrier did not accept invoices more than two years old, so some of the bills were too old to be resubmitted and the benefits were lost.

Aware but Resistant

My younger aunt is 87. Dealing with her condition was altogether different. Her mental faculties had not deteriorated to the extent of my first aunt. Although our family could see she was rapidly going downhill and that she needed assistance with everyday living, she resisted and wanted to remain in her home. That resistance became a major impediment to helping her get the care she needed.

Finally, we found help from a wonderful woman who worked at a senior advocate center. She instructed us that before I could be appointed guardian, my younger aunt would have to undergo a geriatric assessment--to determine if she was capable of making decisions for herself. The assessment, a battery of tests that took place over several weeks, evaluated my aunt's emotional, psychological, physical, and mental states. The tests were costly but legally necessary to confirm that her deteriorating condition could not be corrected through treatment or medication. Once all this data was collected, we planned to take my aunt to a meeting with her doctor and a social worker, present her with the evaluation, and let her know she was in trouble and needed care. But my aunt was suspicious and reluctant to leave the house. My cousin and I had to make up stories about where we were going every time we wanted to get her to go somewhere. She would sit in the various offices, totally perplexed. While people in this condition tend to be disoriented and not sure of what is transpiring, they evidently possess some "sixth sense" that tells them that whatever is happening is something they do not want.

While the family and her doctor agreed that my younger aunt needed a guardian, we had to come up with a strategy to convince her it was right. The immediate problem became what to do with my aunt while I went through the guardianship application process. The doctor decided to help us by having her admitted to a special geriatric ward attached to a hospital. A humorous aside to this process was that it took the doctor half a dozen phone calls to get through to the adjoining hospital; he spent another 10 minutes or so trying to navigate the automated answering system. Finally, he connected with a live person, who informed him my aunt could not be admitted because there were no beds available. I dreaded the thought of taking my aunt back home, not knowing how we would ever get her out of her house again. Then the doctor made some additional calls and found another hospital with an available bed some 30 miles away. He arranged an appointment for us and we raced across town to get there, only to be seated in a cramped little room where we waited over three hours to be admitted! Meanwhile, my aunt's anxiety level rose higher by the minute.

Finally, we were interviewed by a staff member who informed us that since our doctor was not associated with that facility my aunt would have to undergo another evaluation by a staff doctor. They admitted her, but that evaluation was scheduled for the next morning. When we left her there we literally had to sneak out the back door. It was a terrible feeling. In addition, we were told they could only keep her for three days: we would immediately have to find another, more permanent, facility to accept her.

The next day, my attorney was able to secure temporary guardianship status for me while the longer process of full guardianship unfolded. Meanwhile, we were on the phone, desperately looking for a facility that would accept my aunt. Due to her physical and mental condition, we had to find an assisted living facility that specialized in Alzheimer patients. Once we found the one we felt best suited her, we had to find a way to traverse the 30 miles from the hospital to the home. We were advised an ambulance service was the best way to take her there. Even that was not simple. We learned that only private ambulance services take a patient up to her room; public services would merely drop her off at the building entrance. It was just one more unexpected, time-consuming, and heart-wrenching obstacle.

At this time, I am still in the process of being appointed my younger aunt's permanent guardian. Until that happens, I can't even change her mailing address so the post office can deliver her mail to my home. Unlike my older aunt, who had some medical needs that required that she be kept in a medical facility, my younger aunt is not totally incapable of taking care of herself. But because she has no real physical problems, she cannot be placed in a medical facility. Unless I have her power of attorney or until I become her guardian, I am not authorized to place her permanently in a specialized facility, and without that authority, no facility is comfortable accepting her.

The fact that my younger aunt was not suffering from any major physical disabilities also made it more difficult to evaluate her condition and prolonged the guardianship process. In the case of my older aunt, she was virtually unaware of anything going on around her and so she had no preferences or objections to what happened to her or where she lived. My younger aunt, however, fought every effort we made to help her. This can be an agonizing situation for family members who want to do the right thing but feel like they are dragging a defenseless old woman around to doctors, psychologists, medical facilities, and social workers, foreclosing on her home, and forcing her into a "facility," all against her wishes.

Volunteering to take responsibility for family situations like these can be a thankless experience. The time and effort invested goes largely unnoticed by non-participating family members. Depending on the extent of deterioration, the relative in question likely will either be unaware of your help or resent your efforts and regard them as intrusive and unnecessary. Saddled with an ongoing search for documents and data, you do all the dirty work no one wants to do. Your relationship with other family members may also suffer.

On the other hand, there is some personal reward. You are helping loved ones when they are least able to help themselves. This is especially meaningful if the person has never married and has no children because the responsibility for assuming guardianship is not obvious. Choosing the family member who will make the hard decisions can become problematic. Who will accept the responsibility for the time, expense, and aggravation, not to mention the potential resentment of other family members?

Another obstacle is the guardian's personal frustration with family members who avoid dealing with the attendant problems. If the guardian does his job efficiently, the relatives benefit by not having to get involved; they can remain benevolently indifferent, be spared the emotional trauma, and perhaps even inherit a few extra dollars.

Practical Steps to Take

As difficult as it has been for me over the past 18 months, I can hardly imagine how someone without my planning background or lacking my aunt's financial resources might deal with situations like these. It has made me realize that endlife planning is as important and necessary as any other facet of our professional services.

I ask clients to keep an organized record of their medical history, insurance, will, trusts, late-life wishes, and related information in a diary or binder (see "Endlife Checklist" sidebar). This is a vital planning step, though hardly anyone does it. Advisors have an opportunity to provide the professional oversight needed to plan, organize, and maintain such a history. While we naturally associate this process with older family members, consider that younger people become incapacitated as a result of injuries or accidents; it may be an even more critical need for young adult family members.

The ideal planning scenario would be multigenerational; I recommend that my clients get together with their parents and children to openly discuss their endlife wishes and fears. It is only through candid dialogue that we can gain comfort in knowing we are carrying out our loved one's wishes.

Of course, a big problem for advisors is how to get paid for this. It is awkward to suggest that "We should get your family together for three or four hours and talk about this; it will cost you x number of dollars." People have a tough time seeing the benefits. The prevailing attitude seems to be "We really don't have to take care of this right now. When a problem arises, the family will come together and deal with it."

All you can do is relate the experiences of others who failed to preplan, and try to make your clients understand how much easier things will be, and how much better they will feel, when the time inevitably arrives. I would share with you my insights as to how best to charge for this service, but frankly, I haven't come up with a good way to motivate clients to do this yet. You might contact me if you have any ideas.

My experience taking care of the endlife needs of my relatives impressed on me the importance of preplanning for each generation, and has led me to encourage my clients to do so. I've also drawn up my own.

Frank Patzke, CFP, is founder and president of FP Financial Services, Inc., an RIA in Schaumburg, Illinois. He can be reached at 800-545-5110, or at frank.patzke@lpl.com

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