13 Wealth Management Issue #7: Planning for Incapacity

Our 13 Wealth Management Issue #7 is the first of a special three-part sub-series on basic protection strategies that every reader (and their family) should take very seriously in the COVID-19 era. Many of the other 13 Wealth Management Issue articles deal with your goals, your investments, your insurance coverage, or retirement. In this special sub-series, we are going to focus on preparing for the unexpected. In part one, we will address on common concern that has impacted thousands and thousands of families: incapacity. If you haven’t read our #6 Issue covering Business Succession Planning, check it out here.

Planning for Incapacity

Number 7 out of 13 in our Wealth Management Issues Series

*Special Protection Strategies Edition part 1 of 3*

You’d be hard pressed to have imagined what we have gone through and experienced with regards to the novel COVID-19 virus during the first few months of 2020. This was not on the radar of the average citizen at the beginning of the year, let alone last year when many readers likely last had their annual reviews with their advisors. Now that we are coming to terms with the first wave of COVID-19 and businesses are forced to start operating differently and people are interacting differently, it is the right time to think about something else differently; financial planning. What can we learn? What should we do differently?

Prior to the COVID-19 virus, the common response to the suggestions of any discussion about the planning of one’s personal incapacity sounded something like this:  “Whoever wants to talk about this?”. As the virus spread, it became “The odds of catching that are so small!” and “It won’t happen to us.” The sheer number of people impacted by the virus now should cause us all to take a brief pause. Too often, we all read or heard stories about people being admitted to the hospital and then remaining in isolation for the remainder of their life. For these individuals, it is not yet clear how many had their basic affairs in order. They saw no one ever again. But imagine if you were taken seriously ill today–as you read this–and were never allowed to see your spouse, your children, or even your business partner? What if you never were able to see anyone again?

The question to now consider is simple. “If that was you, do you have everything in order in your personal financial life and with your business?” If you never had the opportunity to speak to a business partner or your employees, would your practice survive long-enough to be sold? Did you have documents like power-of-attorney in place so that trusted family members or your business partner could make decisions based upon your best interests and intentions? You may have a plan, but is it written down, signed, and witnessed?

You don’t even need to be caught up by all of the media sensation and political sensation to take a few moments and make sure that your trusted family members and business partners have legal authority to make decisions on your behalf in the event that you can no longer make them yourself. There are reasons to do this well beyond anything related to COVID-19.

As people age, the reality of their situation begins to become more apparent. At some point, something might happen to us that may make us incapacitated. However, it is still a conversation that most people, regardless of the facts, do not want or care to have. All of that being true, planning for incapacity is a crucial component of any wealth management or financial plan. When gaining confidence that your wishes will be followed, once again, planning in advance rears its head. Our experience suggests (as does the data) that most people would prefer to choose someone to act on their behalf, rather than have that person appointed for them by a court. Since this is a significant decision, it’s important to bring up three issues with regard to a clients’ durable Power of Attorney:

  • Who is named?
  • Is this person knowledgeable of where the pertinent documents are located?
  • Who does the incapacitated person have confidence in to be consulted by the Attorney-in-Fact?

When considering planning for incapacity the common mistakes include:

  • Failure to draft a plan – Planning with advisors is key
  • Failure to designate responsible/legal parties – Nature of relationships
  • Not naming primary & secondary parties – POA, Successor, Trustee
  • Failure to disclose the document/plan – Notification of and location is key
  • Failure in communicating expectations, as well as the role of advisors

These same issues apply to business owners as well, except the impacts might be greater as employees, suppliers, and your clients might be impacted as well.

Naturally, there are other issues to consider when thinking about Incapacity Planning. Hopefully, this is a starting point for you (or members of your family) to begin the process to protect your family and your family’s wealth. It is important to make sure that you have a plan, you have shared your intentions and plans with family members and partners, and that you have a written this plan down and stored it in a safe location should the time come to use it.

A great place to start is sitting down with your advisor and drafting a plan for who will make financial and life decisions for you in the event you cannot. Tens of thousands of people found themselves in the situation of not ever being able to speak to their trusted family members and business partners again. It is hard to blame them when they really did not think anything like this was possible.

That was before. This is now. And now is different. Now we can learn from the experiences of others. Set up some time to talk with your advisor so that you can solidify your plan to make sure that your financial intentions and interests are protected and that decisions can be made that are in line with the way you intend.

When considering these issues, it’s important to ask yourself, how do any of these affect you, your family, and your goals? The following installments will cover each of these Wealth Management Issues in greater detail. Our hope is this series of chapters will provide not only an educational forum but also promote thought, leading to action…in a holistic manner, of course. Learn about our other 13 Wealth Management Issues here.

Watch our Whiskey & Wealth Wednesday video of this article:

If you would like to learn more about this subject please contact us and we’ll be happy to help.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisors LLC nor any of its representatives may give legal or tax advice.

By Anthony C. Williams, CWS, ChFC, MRFC, CLU | Investment Advisor Representative | President & Founding Partner of Mosaic Financial Associates & Orthopaedist Advisory Group | Securities and advisory services offered through Cetera Advisors LLC, Member FINRA/SIPC, a broker/dealer and a Registered Investment Advisor.  Cetera is under separate ownership from any other named entity.