Estate planning tends to revolve around what clients leave behind after their death, but many people become incapable of managing their affairs long before they leave this world for good. One in eight Americans will contract Alzheimer’s at some point in their life. About 15 million people suffer a stroke every year, and dementia has become the No. 1 cause of disability worldwide.
Competency can become an issue for even the savviest, most high-functioning person. It’s not an easy issue for anyone to confront, especially the proudest and most accomplished of your clients. But it’s something that everyone has to plan for.
Here are some planning steps you should be taking with all of your clients:
Name decision-makers. All of your clients, regardless of age, should have official assignment of either a health care proxy or a power of attorney. A health care proxy, which some people call a springing power of attorney, gives another person the right to make health care decisions on behalf of your client should he or she become incompetent. This is the safest and least invasive such power. It takes effect only when the person is incapacitated, and there has to be a legal finding to confirm that.
There are other such powers, of course. A durable power of attorney gives a person authority to make all sorts of medical decisions on the patient’s behalf, while a general power of attorney grants those same powers but doesn’t extend past incapacitation. Some advisors find that the easiest way to broach this topic is to ask not whether the client needs to extend such powers to someone, but which form of proxy decision-making would be best-suited for them.
And then, of course, these plans should be revisited once a year or so. Sometimes clients lose confidence in their proxies or their proxies experience life changes that make them unsuitable for the task.
Review disability insurance. When reviewing the insurance needs of every client, disability insurance won’t be the first type of coverage that comes to mind, but it could be critical. Most people are covered by their disability insurance at work, so it tends to be something that’s far out of mind.
That makes retirement — or planning for an imminent retirement — a good excuse to bring up the subject. Most well-to-do people will want more coverage in case of incapacitation that requires care more costly than what Medicare will provide.
Make assisted living plans. Many people would strongly prefer to never leave their own home, no matter how dire their situation becomes. But a stroke or heart attack can leave anyone incapacitated at any time, and there’s often little time for decision making.
It’s important to have a conversation about where your clients think they would be best suited if the need for assisted living should arise — or better yet, to actually get an executable plan in writing. Too many people don’t even think about where they might go until they’re released from a hospital after a debilitating illness, at which point their options become very limited.