The Sixth Sector

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.