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Alleviating the Anxiety of the Merely Well-to-Do Boomer

A slightly unorthodox approach for collaborative advisors.

It’s been three years since I wrote “Planning Today for Possible Dependency Tomorrow.” The article crafted an agenda for a webinar describing steps baby boomers can take to prepare for handling investments, insurance, long-term care and other matters before they lose the capacity to deal with those matters themselves.

I followed up with several other articles on selected topics along the common theme of helping merely well-to-do boomers become more well-informed consumers of the products and services associated with aging and planning for possible dependency. But there’s much more to be said, especially about how advisors, often working creatively and collaboratively, can play a more significant role in this critical aspect of their clients’ planning. Here are some thoughts about how they can do that.

The Biggest Risks

Ever the linear thinker, I’ll address planning topics in descending order of the risk that individuals and couples are taking by either not having a certain component of a plan in place or having one in place that’s not serving its intended purpose. Anticipating the question, note upfront that I won’t discuss the need for a basic estate plan. I will, however, propose a more expansive, multi-disciplinary working definition of a “basic estate plan.”

A Broader Memorandum of Instructions

I’ll start with the memorandum of instructions for the surviving spouse, which is a document that each spouse would prepare for the other. The memorandum contains key information for the survivor about where the couple’s investments and other accounts are and how they’re held, which advisors and institutions to contact, along with their contact information and much more. I revisited it recently in “Boomers Refocus Their Planning for the Home Stretch.” The more I’ve thought about the purpose and scope of the memorandum, the more I’m convinced that it can be given a more expansive purpose and a dramatically broader scope.

As vital as the memorandum is for the surviving spouse, a similar type of memorandum would be just as vital for the spouse who depended heavily on their now incapacitated spouse to manage important aspects of their affairs. Therefore, the memorandum should have three parts: (1) A list, suitable for framing in a matrix, of all contact information for advisors and services that the spouse will need in the event of the other spouse’s incapacity or death; (2) The instructions that would apply in the event of incapacity; and (3) The instructions that would apply in the event of the spouse’s death. That’s just my proposed base case for the layout of the document. However it’s done, the whole will be greater than the sum of its parts. I’ll return to this point when I talk about advance directives.

This memorandum is the one document most spouses would reach for first in a time of utmost stress. Yet, it’s missing from most plans. Why? Probably because it’s not the commercial or technical province of any single advisor. Instead, its composition and maintenance call for a team approach, led by a planning-oriented advisor who can speak enough of the other advisors’ languages to get the job done. That’s not an approach typically associated with planning for the merely well-to-do.

So, I’m hopeful that advisors who feel qualified to broach this topic with clients will do so, offering to collaborate with their other advisors to prepare the memorandum. I can’t think of a more valuable contribution to clients’ planning and peace of mind. Nor can I think of a more effective way for advisors to expand their services to clients while collaborating and networking with other advisors. Incidentally, I’d wager that any advisor who hasn’t done their own Memorandum will be a better advisor immediately after they’ve done it.

The Insured Estate Plan

Having just expanded the working definition of an estate plan to include a Memorandum of Instructions, here’s the next step in my expansion program.

I’ve never worked with a life insurance agent who didn’t ask if I had an up-to-date estate plan. But I can’t recall an attorney who asked if I had enough life insurance. Okay, maybe they assumed that I might have some idea of what I was doing in that department. But it’s not just about me. I’ve attended plenty of presentations and read plenty of articles on estate planning, and most stay within the boundaries of the usual documents and administrative steps that supposedly comprise an “estate plan.” Yet, ask the widow whose late husband had a full binder of documents but not enough life insurance if her husband had an estate plan. What do you think she’d say?

I urge advisors to consider the term “estate plan” in its broadest, most comprehensive sense. I urge them to think of the estate plan as a dynamic structure that goes beyond the documents to provide adequate resources for the survivor and guidance for the survivor to deploy those resources. That means that life insurance and financial planning must be considered integral components of the estate plan. The fact that they’re not is a real problem. Just ask that widow. For background on this topic, see “Life Insurance Planning for the Merely Well-to-Do.”

The “Say What?” Estate Plan

I’ve often heard clients describe their great relief after finally doing their estate plan. On the flip side, I’ve also heard plenty of surviving spouses lament, with varying degrees of anger and frustration, that they wished they’d paid closer attention when the attorney described the trusts in the estate plan. That’s because they now realize that they don’t have unfettered access to their “own” money. The lament continues, “So this is the price I’m paying to save estate taxes for the kids. I hope they appreciate it.” I’d appreciate it if someone would write an article in a widely circulated publication on “Key things to understand about your estate plan before it’s too late and what to do if you don’t like what you see.” I think it would send a lot of spouses scurrying to their documents and then maybe back to their attorneys’ offices.

Reasons to Keep or Sell Policy

Spend a few minutes sifting through the life insurance discourse today, and you’ll find no shortage of fair to partly planning-oriented “information” on why to buy a policy or sell one. But try to find objective, insightful and practical advice on the whole range of options for dealing with an existing policy. Give up? That’s because while there’s a lot of money to be made in selling new or existing policies, there’s little to be made in advising on how to handle vintage policies unless, of course, there’s a transaction in the offing, like an exchange or a life settlement.

I covered this topic in A Boomer at the Crossroads of a Vintage Policy,”Life Settlements - Planning Considerations Beyond the Offer” and other articles. I’d like to see more seasoned life insurance professionals, ideally those who’re also well-versed in LTC products, take a breather from praising or burying indexed universal life and set forth a process, depicted by a decision tree, that could help policyholders understand what they own, assess it against their needs and then explore the full range of options for retaining it for current or future use and so forth.

Working with Fiduciaries

However much estate planners like to talk about trusts, I’ve noticed that many don’t like to talk about corporate trustees and, for various reasons, are reluctant to make recommendations. They’re also not particularly interested in preparing clients to interview trust companies. In fact, trustees graciously provided most of the background for my articles on interviewing trustees. Those trustees sometimes voice their quizzical frustration with that reluctance.

The point is that merely well-to-do boomers are pretty much on their own when it comes to figuring out how to identify, interview, select, work with and monitor fiduciaries. So, I’d like to see some well-seasoned relationship managers from trust companies pick up the gauntlet, or maybe just the pen, and address this reluctance directly with estate planners and, indirectly, with the public. A key subset of that discussion would be how the more financially savvy spouse who has the principal relationship with the trustee, monitors the accounts and so forth, can create a framework to assure continuity of service, support and monitoring for their spouse if they lose capacity or die.

Advance Directives

For many boomers, the problem isn’t what advance directives to have, it’s whom to name in those documents. That’s because, aside from their spouse, they have no one to name who’s not as old as they are and not dealing with the same issues. That’s why, as part of the interview and selection process, elder care-conscious individuals should ask corporate trustees to describe their services in case of a client’s incapacity. It would be a good idea to include a geriatric case manager in that discussion. I wish the trust companies would be as expansive on this topic as they are about wealth transfer and legacy planning, which are topics of little interest to this part of the demographic. I’ll leave it to the experts to decide whether and to what extent the newly expanded Memorandum of Instructions could be useful to a trustee in this situation.

Cash Flow Projections

I’d add another segment to the usual discussion about investing in retirement, a segment intended for the merely well-to-do. Every client should see a projection of their cash flow and capital through life expectancy based on whatever assumptions they believe are reasonable. The projections should include the impact of such untoward events as a spouse’s death or incapacity. There’s nothing like a long-range cash flow projection to confirm one’s financial behavior or suggest some mid-course corrections to keep the plan on track. This is the province of the investment advisor or financial planner, with input from the tax advisor when appropriate.

The LTC Conundrum

Unlike the quality of the discourse in life insurance, the quality in LTC has improved markedly over the years. There’s a lot of good information on the spectrum of products that provide LTC benefits, though determining which, if any, is right for a given individual remains a challenge. I’d like to see seasoned life and LTC insurance professionals, elder care attorneys and geriatric case managers collaborate in presentations or articles on a holistic, commercial-free approach to integrating the planning, products and services that should form the basis of the LTC component of the estate plan.

These are just a few of the planning-related concerns causing boomers anxiety today. I’ll address more of them and offer thoughts on how planners can respond in future articles. 

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