Financial planning for the possibility of incapacitation

Planning for the possibility that you could become incapacitated can be daunting. While many may have their estate planning documents squared away and have end-of-life plans carefully laid out, they may not have planned adequately for the possibility of incapacitation. Incapacitation, or the physical or mental inability to make or communicate your decisions, often caused by illnesses like stroke or cognitive disease, is a real threat for retirees.

Incapacitation presents a unique challenge, in that your family members, designated POAs (powers of attorney), doctors, or lawyers will need to make decisions for you, and will need access to your documents and accounts in order to make financial transactions on your behalf.

Say you fall into a coma for six months. How is your mortgage going to get paid during that time? Will your insurance premiums lapse from lack of payment when you need insurance the most? To make things easier on yourself and your beneficiaries, have a solid plan in place that’s accessible in case of an emergency.

Below is a simple checklist to ensure you have all the information your representatives might need to assist you in the event of incapacitation:

  1. Ensure your powers of attorney (POA) designations are updated.
  2. Work with a financial planner and estate planning professional to build a solid foundation of the basics:
    1. Insurance policies (life, LTC, disability, etc.)
    2. Will
    3. Trusts, if necessary
    4. Medical directives
    5. HIPPA privacy forms
    6. ICE contact(s) in your cellphone (In Case of Emergency) — simply type “ICE” before or after their name
  3. Get organized!
    1. Make a list of all your financial accounts, including bank accounts, retirement accounts (401(k)s, IRAs, pensions, etc.), brokerage or investment advisory accounts, insurance products (life/LTC/disability insurance, and any annuities), and family accounts (529 education savings plans, UTMAs, etc.)
    2. Include the following information in the list:
      1. Custodian or financial institution (Fidelity, Schwab, Lincoln Financial, etc.)
      2. Account numbers
      3. Name and phone number of your account representative (or the 1-800 number, if you do not have an advisor for that account)
      4. Registration (is it in the name of a trust, your individual name, is it a joint account, Roth, pre-tax, etc.)
      5. Account value (as of a certain date)
      6. Beneficiary information (including primary and contingent)
      7. Login credentials to any online platforms necessary to access the accounts
      8. Any other information that you would like your successor (or power of attorney) to know

Communicate with your family and/or trusted advisors

Even when you’ve gathered and organized every bit of information your family or successor may need, implementing a good communication plan is essential to ensuring that information gets put to good use. That means designating a trusted person or persons to be your representative(s). At least two people need to know where to find your information and what to do with it. For example, if you keep everything in a safe, make sure at least two people know the combination to the safe and what they can expect to find there.

How do you frame this conversation? Just as important, how often do you have the conversation? Here are a few tips:

  • Find the right time for the conversation. You may not want to have the conversation while everyone’s gathered around the table at Thanksgiving. It might be helpful to schedule time to help focus the conversation.
  • Talk to trusted representative on their terms. You know them — how do they like to communicate? Your 75-year-old mother may prefer a different approach than your 25-year-old daughter. For example, would they prefer information digitally or in paper form?
  • Bring a resource packet. This provides a tangible framework for the flow of the conversation and gives your trusted representatives concrete information to refer to. If they become uncomfortable with the conversation, ensuring they have the resource packet is a good first step.
  • Force yourself to move past the discomfort. Try framing it as a worst-case scenario, reassuring your family that while you hope they don’t ever need to use the information, it’s best that they have it just in case. In times of stress, the emergency file will be important for peace of mind.
  • Update your trusted representatives (and information) regularly. Having check-in conversations on an annual basis may be a good idea to ensure that your family is up to date. This also forces you to refresh your information once a year, ensuring accuracy.

Although it can be uncomfortable to plan for these situations, taking a few simple but important steps can help protect you, your beneficiaries, and your legacy against the financial risk inherent in incapacitation. Your financial advisor is a good resource throughout the process to guide you through the steps to gather resources, as well as assist your family or trusted representative in handling your financial accounts should the need arise.

Bronfman E.L. Rothschild, LP is a registered investment advisor (dba Bronfman Rothschild) and wholly owned subsidiary of NFP Corp. Securities, when offered, are offered through an affiliate, Bronfman E.L. Rothschild Capital, LLC (dba BELR Capital, LLC), member FINRA/SIPC.

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

CHARTERED RETIREMENT PLANNING COUNSELOR SM and CRPC® are registered service marks of the College for Financial Planning®.

This information should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The commentary provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Bronfman E.L. Rothschild, LP cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. © 2019 Bronfman Rothschild

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