As our company has grown over the years, we have added wonderful members to our CWA Family. Our advisors and operation team members work hard to provide exceptional service to our clients.
With over 50 people across our various business units, we have an opportunity to learn from each other as we each provide a unique background and perspective. Through Wisdom in Wealth, our team members will be joining me in sharing their insights and experiences in all aspects of planning.
Three years ago, John Walker, Executive Vice President of Private Wealth Management, joined CWA.
John has over 17 years of experience in the financial services industry. He began his career in Boston working with healthcare benefits. Following that, he served in various capacities for over a decade at Fidelity Investments. As a both CERTIFIED FINANCIAL PLANNER™ professional and an Accredited Estate Planner®, John has a commitment to thoughtful financial planning.
In this edition of Wisdom in Wealth, John shares his personal story and insights on important planning topics. I hope that you find the information helpful as you consider your own Estate Plan.
I love my mom. We usually text on Saturday mornings. Normally, we share the week’s comings and goings. Recently, she told me that she was at a blood bank getting some routine testing done as a function of her health insurance. She then told me that she and my stepfather planned to go from the blood bank to her regular bank so they could “go over the accounts”. The goal was to ensure that in case something happened they were prepared. I was happy to hear that they were doing this. She and I have casually discussed these matters in the past, but not with any great detail. I was further pleased by her asking, “While we are on the topic, is there anything else we should be doing?” I replied, “Mom, you should consider a durable power of attorney, health care surrogate, living will, preneed guardianship, and last will if you don’t have one”. Her response was naturally, “Can I just get those from the bank? Can’t we just keep this as simple as possible?” In a moment of introspection, I was a little saddened to have to tell her that these documents were the simple end of things. I explained that the state of the world is such that when our lives and our assets are in jeopardy, the assignment of critical powers can be a complex and confusing affair. How many of you reading this have wondered, “Am I covered? Do I have the right documents to ensure that my passing or incapacity will be simple on the ones I love the most?”
The purpose of this article is to cover some of the simpler more common questions, and solutions available to families today. This article will deal specific to the concerns of incapacity. It will have a second part that deals with death and some of its requisite documents.
It goes without saying that incapacitation is one of life’s worst outcomes. As human beings, both the body and the mind, can and will eventually fail. These outcomes are not the fodder for most family conversations or gatherings. Many families avoid the topic entirely. The main issue here is that once physical or mental infirmities occur, they can sometimes be sweeping and permanent. Both the federal and state governments have programs in place for folks who fall victim to these tragedies. If these programs exist, why worry about all this? Today’s world is not even close to the world that existed in the not-so-distant past. We have electronic everything, blended and non-traditional families have become commonplace, and people have differing opinions about everything. So, when incapacity occurs within a family there must be a plan to ensure smooth clear instruction can be given in relation to our money and our health, and that stress on the family isn’t exacerbated by a power struggle. Families must deal with at least two questions: “How do we deal with finances?”, and “How do we deal with the medical community?” In a perfect world, these would be simple enough items to address. The challenge is that humans are imperfect, and the family must have representatives who can instruct financial and medical professionals with specific authority. What if my kids don’t agree with my spouse or extended family? How do I ensure that my wishes are carried out and that I avoid adding a power struggle on top of the emotions that accompany a major medical event?
The answer lies in pre-planning. Families must have the tough discussions that address different kinds of disasters. We teach our children what to do in case of fire, flood, or robbery. We need to instruct our families just as clearly here. With gender fluidity, non-traditional families, and blended families, the wishes of the affected person must be pondered thoroughly and recorded legally. Otherwise, these wishes may give way to governmental statutes which may not be an optimal outcome. Once the discussion is had, execution must be found. The following is a list of things that I believe to be valuable to many families. The fabric of your family may require others in lieu of these or others not listed here. It bears mentioning that I am not an attorney and that you should seek appropriate legal counsel before creating or signing any of these documents
For financial matters, the Durable Power of Attorney has long been a great choice. It allows for an “agent in fact” to be assigned without commingling the ownership of the assets. These people can generally write checks in the name of the incapacitated person, pay bills, instruct advisors to some extent, and in some cases help to address creditors, or online entitlements. This power doesn’t succeed death. That is why the other option involves various types of revocable or irrevocable trusts, and the assignment of trustees and successor trustees to carry out the wishes of those who funded the trust to start with. I do not suggest replacing either of these with joint ownership in most cases. When you grant owner status, you may be giving a taxable gift which may or may not be the best idea for either party. You could be opening the door to legal attachments via lawsuit, and you may be creating unintentional liabilities of ownership for you both. Granting Durable Power of Attorney, preserves the separation between parties, while granting critical powers of support. Also, if the person you granted joint ownership is a beneficiary you may remove or partially remove a very valuable step up in cost basis upon your passing.
For health matters, there are a few documents that may be required. These documents are known by several names, so your team may not refer them in exactly this parlance. First is the Healthcare Power of Attorney, Healthcare Surrogate. This role deals specifically with your medical team. These agents are empowered to stand in your place and give instruction to your health care providers if you cannot. In close concert with that is the Living Will. This document informs your medical team how far to go to preserve your life in extreme circumstances. This document is totally and completely different from the last will and testament which is the instruction manual for how your probate property is to be handled. Third, is the Pre-Need Guardian. This is the person you recommend to serve as your legal guardian if you are declared legally unfit to manage your own affairs. The DNR (do not resuscitate) order is somewhat like the Living Will but is situational as opposed to over-arching.
All of these documents are widely available. Some may be easily procured at a bank, broker, or medical provider to cover just that institution. Also, the internet is rife with providers. My suggestion is to seek an appropriate attorney to create the documents your family requires. Online sources require a level of understanding I find rather rare. You must really understand the questions asked of you and understand what they are doing with your answers in terms of the documents. Qualified legal counsel can work alongside your family to craft a bespoke fit for your family. Whichever you choose, once you have these documents drafted you should store them securely once the appropriate parties have them on file.
At CWA we focus heavily on both the assets of the families who entrust us as well as the bigger financial plans that these assets fit into. Consideration of death and incapacity is a huge part of financial and legal planning. Using the quadrant approach, these two considerations follow the same pattern as any other. We must first examine the facts, circumstances, needs, and warmest wishes of your family. Once these have been discovered, we can help you partner with appropriate professionals to design a plan that ensures an elegant and peaceful resolution to a very difficult circumstance. After the plan is formed, bespoke documents for the family are drafted and implemented. It is our recommendation that after the documents are created and filed appropriately, that they be formally reviewed every two years. The relevancy review seeks to identify how the family and circumstances have changed since drafting the originals. Lessons are learned, family members come in and out of favor, divorces occur, and legal landscape changes with regularity. All of these things can influence the effectiveness and fit of even the best planning over time. Don’t let your documents become dusty tomes that no one in the family consults unless an emergency occurs.
If you find yourself unsure of your family’s preparedness or simply want to review the plans you have already made, we’d happily connect you with an appropriate professional who can help.