ELITE ADVISOR BEST PRACTICES

How Health Care Decisions Factor into Comprehensive Wealth Planning

What advisors need to know about advanced medical directives, guardianships and durable powers of attorney

By Robert G. Alexander

Key Takeaways:

  • Age, accidents or illness can prevent even the most well-organized and financially astute clients from handling their own finances or health care decisions.
  • Thanks to advances in medicine, health and longevity, your clients realistically face the prospect of living 30 to 40 years after their wealth accumulation phase has ended.
  • Advanced medical directives deal with personal care and medical issues, including surgery, placement, medication, assisted living, full skilled-care living and end-of-life decisions.
  • If your client does not have the necessary documents in place, unfortunately these decisions will have to be made under a court-supervised process.


Many clients and their advisors are diligent about planning for and protecting themselves against personal, legal, tax and financial problems. But health care, or the ability to make important decisions about long-term care, often gets overlooked.

Life insurance statistics show that a 50-year-old now has at least a 50/50 chance of living to 110!

Assuming the average retirement age is somewhere between ages 60 and 65, that means many of your clients realistically face the prospect of living 30 to 40 years after their wealth accumulation phase has ended. In estate planning, we often talk about preserving wealth and passing it on to the next generation. But given the demographics of aging, inflation, health care needs, etc., it is quite possible that your wealth will run out before you do.

It is critical for you and your client to have in place appropriate estate planning documents, including wills, trusts, appropriate beneficiary designations and designations of guardians.

Unfortunately, because of age, accident or illness, clients may face the prospect of being unable to take care of their own finances or to make their own health care decisions. Therefore, proper documents need to be put in place to allow someone else to make appropriate decisions on behalf of your clients.

Long-term health care costs

Because of health and aging, everyone faces the prospect of financing long-term health care needs, including the possibility of assisted living and full skilled-care living. If these costs are not planned for, they can be financially devastating.

We can’t fight the aging process or prevent unexpected events that impact our quality of life. However, proper planning and documentation can go a long way toward creating peace of mind for all clients when they know that they have put in place appropriate planning to eliminate, to the extent possible, financial, legal, tax, health care and other problems that, one way or the other, are bound to occur during a lifetime.

Appropriate lifetime powers of attorney

Regardless of age, health, assets and income, every client needs to have in place a well-drafted “financial durable power of attorney” and appropriate advanced medical directives.

An advanced health care (or medical) directive is a set of written instructions that people use to specify the actions they want to be taken for their health in the event they are no longer able to make their own decisions due to illness or incapacity. The instructions appoint someone, usually called an agent, to make such decisions on the person’s behalf.

Advanced medical directives normally include health care powers of attorney, living wills and more. If a client is unable to attend to his or her financial, personal care, or health care matters because of age, accident or illness, no one can make these decisions for the client unless the decision-making authority has been specifically designated in writing.

Financial durable powers of attorney concern assets, income, other financial matters and dealings with government agencies. Advanced medical directives deal with personal care and medical issues, including surgery, placement, medication, assisted living, full skilled-care living and end-of-life decisions. If your client does not have these documents in place, unfortunately these decisions will have to be made under a court-supervised process known as a “guardian of the person” (for personal care and medical issue decisions) or a “guardian of the estate” (for financial matters). Guardianships are expensive, personally intrusive and perhaps the worst way to manage any of the decision-making processes.

The proceedings can be very traumatic and expensive. Guardianships of the estate or person are easy to avoid if the appropriate documents are put in place. A final word of caution: Be careful about using simple forms. Simple forms often ignore many of the decisions that will have to be made throughout the course of a lifetime; the decisions that may be critically important to the family need to be specifically addressed in the documents.

Conclusion

Clients have six major types of estate planning needs—health care is one and avoiding guardianships another. You need to be aware of these issues and of the significant dangers caused by insufficient planning. There is simply no better way to add value to your services and to cement a trusted relationship with your clients.


About the Author

Robert G. Alexander, JD, LLM, (414-698-4933) is the president of Alexander Law SC in Milwaukee, Wisconsin, where he concentrates his practice on wealth transfer, asset protection and family business planning. Alexander is the president-elect of the National Association of Estate Planners & Councils and is on the board of directors of the Estate Planning Law Specialist Board.