Journal of Financial Planning: August 2017
As financial planners, we help our clients with investment management, insurance needs, estate planning, budgeting, retirement and income planning, saving for college, tax planning, and other financial topics. All are critical areas in which we serve our clients to help them stay on track with their financial goals and needs. However, as clients age, other issues related to life and finances arise—especially in later life.
These issues include planning for the practical matters of growing older, such as determining when they need help, identifying who will help, making the decision whether to move, where they will move, and even making final arrangements. Often financial planners are unwilling or reluctant to address these issues as there have been few, if any, financial planning courses teaching us how to address these questions. The complexity of life, cultural bias about discussing death and disability, and family dynamics often leave families to deal with these issues in crisis mode.
Helping our clients and their families plan for and live late life well has a place in our offering as financial planners. When done well, it encourages families and fosters healthy relationships between children and their parents during their life and after the parents are gone. It also allows our clients to live this later season of their lives in a manner of their choosing, and to pass on their wealth, their values, and their family history in the way they desire.
Late-life planning adds depth to our planning services and positions us as true family advocates. Heirs will often see the value of retaining our services. This life-changing service can greatly benefit our clients as well as add value to our practice.
The following two case studies provide insight into how an adviser can bring additional value to the client relationship in the later years of a client’s life.
Case Study No. 1: Bill the Widower
Bill is an 80-year-old widower of 10 years with two grown sons. His older son has a successful career and is self-sufficient. His younger son has life-long health issues and requires some financial support.
Bill has met a woman whom he plans to marry. His soon-to-be bride is four years younger than him, and even though she owns her home outright, she lives on Social Security and has no other financial resources. She has two daughters who are financially stable.
His sons are gravely concerned about the upcoming marriage. They have an uncle who married later in life after his wife of many years passed away, and it turned out that his new wife was only after his money and left him almost destitute. They are also unclear as to their role in taking care of their father should he become ill as the family has never discussed who or how they would care for their father if he needs assistance.
Bill wants to bring about clarity, understanding, and agreement with his sons on his plan to remarry, how he will handle his finances during life, and the distribution of assets when he is gone. To facilitate this, his financial planner could suggest a review of his current financial and legal documents and upon completion of this review and any recommended changes, a family meeting with his sons.
During the review, the planner may discover several things, including:
- Bill’s late wife’s brother is named his financial power of attorney, but he lives in a different state and is of similar age. There is a high probability that he will not be able to help when the time comes;
- All control after Bill’s death for estate settlement is given to his older son;
- Financial and medical powers of attorney are set up between both sons, but Bill feels that his younger son is more aligned with his attitudes about end-of-life care; and
- Bill has given a disproportionate amount of financial support to his younger son over the years.
With Bill’s input, the planner’s suggestions could be:
- Change his financial power of attorney to his older son;
- Change his medical power of attorney to his younger son;
- Make his older son executor of his will;
- Split his investable assets 50/50 between his two sons;
- Change the beneficiary on his life insurance policy to his new wife so she can pay for his funeral and burial expenses;
- Move in with his new wife when they marry and invest the proceeds from the sale of his home in his wife’s name so she has financial resources should he die before her; and
- Make a provision to pay for his older son’s granddaughters’ college education—this will even things out between his two sons.
Once these changes are made, the planner could facilitate a family meeting between Bill and his sons where Bill can disclose the information that he wants to share—his net worth, investments, beneficiaries, and powers of attorney. Such facilitation could include preparing a booklet for each son with the stated information.
Case Study No. 2: Shirley the Widow
Shirley is a 75-year-old widow with four adult children. She wants to ensure that her children are aware of her plans and that her personal and financial affairs are in order. Her desire is to communicate her plans and wishes to her children in such a way that it builds strong family relationships that last long after she is gone.
The information she wants to share includes: her financial situation, her legal documents, her funeral and burial plans, and her personal property allocation. She also wants to pass on her and her late husband’s values and family history. To accomplish this, the planner could suggest a process to help her gather information in all these areas. Once this is complete and ready for presentation, the planner could facilitate a family meeting with her and her children.
The questionnaire the planner provides Shirley guides her in gathering the information regarding assets, income and expenses, review of her legal documents, beneficiary designations for all accounts, long-term care and life insurance documents, a list of personal property, and funeral and burial plans.
From her responses to the questionnaire, the planner can create a report showing the information she wishes to share. She is also writing a family values legacy and family history that she would like included.
From a review of her responses, the planner could make several recommendations, including:
- Work with an attorney to create a living trust;
- Name a successor trustee;
- Update financial and medical powers of attorney; and
- Purchase a burial plot and plan funeral arrangements.
When the family meeting is set, Shirley will pay the travel expenses for her children, who all live out of state, to attend—that’s how important this meeting is to her. At the meeting the planner would:
- Provide a positive, calm, and neutral environment where all can be comfortable;
- Provide a booklet to each family member with the information Shirley wants to share;
- Facilitate reviewing the information in the booklet with the family members;
- Answer any questions that come up; and
- Guide the process in a constructive, positive manner.
Family meetings can at times become emotional and intense, but more often than not they are rewarding and fun, with very positive outcomes. As financial planners, providing this late-life planning service to our clients can reap big rewards for them and adds depth and value to our practice.
J. Lynn Hinds, CRC®, CKA, is founder and managing partner of Lighthouse Financial LLC, an RIA located in Broomfield, Colo. She started her career in financial services in 1986, and serves clients worldwide in the areas of retirement planning, retirement income planning, estate planning, and investment management.