WealthManagement Magazine

Preparing for the End

The Terry Schiavo case incited passionate debate about a number of different issues. While opponents squared off on emotionally charged topics like quality of life and the government's proper role in such an event, there was unanimous support for a very practical aspect of the tragedy the importance of advance directives, such as living wills and health care proxies. The family dispute and subsequent

The Terry Schiavo case incited passionate debate about a number of different issues. While opponents squared off on emotionally charged topics like “quality of life” and the government's proper role in such an event, there was unanimous support for a very practical aspect of the tragedy — the importance of advance directives, such as living wills and health care proxies.

The family dispute and subsequent legal battle in the Schiavo case was ignited by the lack of written advance directives — which unfortunately is not unusual, even among affluent households. The Phoenix Wealth Management Survey 2005 shows that only 32 percent of individuals with over $1 million net worth (excluding their primary residence) have enacted an estate plan within the past five years.

Clearly, here is a place astute financial advisors can help protect their clients from unnecessary emotional and financial pain.

The Doctors-Eye View

The Schiavo case is a special one in a lot of ways — not the least of which was the media microscope that attached itself to the family through the end of her saga. It nonetheless featured some experiences common to all families going through similar ordeals.

Take, for example, the frightful real-life scene from the bedside of another incapcitated patient. A devoted family surrounded this elderly gentleman, who was in the last stages of severe cerebrovascular disease. They had visited him regularly and were quietly reconciled to losing their father as he became progressively moribund. Suddenly, a daughter who lived in another state stormed in, loudly demanding heroic measures that would do no good. Ironically, she had never visited her father since he entered the hospital and was obviously driven by guilt. Her inappropriate behavior created needless rancor and futile stress for everyone.

At the center of this example sits the issue of advance directives — or more specifically, the absence of one.

Living wills and health care proxies are relatively new, of course. The Patient Self-Determination Act of 1991 was designed to increase patient involvement in decisions about life-sustaining treatment. Implemented in all institutions reimbursed by the federal programs Medicare and Medicaid, the act sought to provide patients the right to refuse any and all medical interventions — even life sustaining actions. The Act requires health care providers to accommodate their patients' directives by developing internal policies and training programs.

For financial advisors, the Act is an important document. It gives them the ability to help clients mitigate what could be the worst financial and emotional event of their lives.

The Advisor's-Eye View

As with most health care events, the key is to provide awareness — and a strategy to help willing clients reduce risk.

There are two primary forms of advance directives — both legally binding documents executed by currently competent individuals to establish what medical treatments they would want should they become incompetent in the future. State laws govern the use of advance directives, so you should be familiar with your local statutes.

Living Will — this document usually permits a terminally ill patient to have life-sustaining treatments withheld or withdrawn if the patient himself is unable to so instruct the physician. Health care providers also are typically provided legal immunity when they execute the living will.

Health Care Proxy — this document, also known as a durable power of attorney for health care, allows another person to act on behalf of the patient if the patient is unable to act or speak on his own. Unlike a traditional power of attorney, the health care proxy is not invalidated when the individual becomes incompetent. The proxy is designated by the patient with the assumption that the named proxy will make decisions consistent with the patient's values.

Given these documents, here is what an advisor can do to add value to their relationships with still-healthy clients.

Use the living will issue to support a broader discussion about long-term care. Ask clients about their current plans, the nature of their directives and whether they would like assistance in executing or modifying one. One wirehouse advisor, who requested anonymity because of complaince-related politics at his firm, says advance directives are especially important during the recovery period following a serious health care event. He recommends long-term-care policies that will help cover in-home or nursing home care after the assigned waiting period of the policy, which typically runs 20 to 120 days. Only 27 percent of millionaire households say they have long-term-care insurance. After stocks, bonds and mutual funds, both living trusts and LTC were ranked highest among millionaires as the products they are most interested in obtaining in the next three years, according to the 2005 Phoenix Wealth Management Survey.

Have each of your key client households evaluated the risk of care issues? Do all parties know and agree with your clients' preferences? As in the Schiavo case, many disputes take place between generations and it is not uncommon for a couple to have discussed issues and not shared the same information with the kids — or the parents.

With advance directives and long-term care in place, complete estate planning is next. The first step is to determine how you will provide estate planning — direct through your firm, through a strategic alliance or by straight referral. Once this is decided, the question is whether your solution remains appropriate, given the potential wave of new clients hailing from the baby boom generation.

If you have 150 client households and just half your clients do not have long-term care, living wills or estate plans, you are a fountain of referral value to professionals that specialize in these products. If a full estate plan with a couple of trusts and living wills costs $5,000, 75 clients represent $375,000 in legal fees. There is real value here to be captured, so be organized and make a plan. But be sure to solve your clients' problems first; your success will follow from theirs.

In the end, the point of preparing families for the unthinkable is this: The best advisors continue to surprise their clients with ideas and strategies to improve their lives. No service is more highly valued than that which brings a family together and avoids the calamity of a major health crisis.

Writer's BIO: Stephen D. Gresham is executive vice president of Phoenix Investment Partners.

Glen E. Gresham, M.D., is professor emeritus of rehabilitation medicine at the University at Buffalo, The State University of New York.

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