August 13, 2019
Originally published on Advisor Perspectives
The most thoughtful and comprehensive financial plans will be derailed by an extreme, but unfortunately common event: when both spouses simultaneously display dementia.
That scenario doesn’t have to be a nightmare if advisors take the proper steps as part of their advance planning process. Every advisor offers comprehensive financial planning services in addition to investment management. Here’s now a local planner helps avoid this disaster.
It’s fairly easy to measure the value of investment management. Including financial planning in the mix is much more daunting.
Advisors are fond of saying they give clients “peace of mind.” With many advisors, I suspect that’s true. Nevertheless, many Americans are either uninsured or underinsured, and too many retirees are still saddled with mortgages on their homes. The use of immediate or deferred annuities to protect against longevity risk is underutilized.
It’s difficult to envision how these people have “peace of mind.”
These issues pale in comparison to a financial planning nightmare that recently came to my attention. Let me explain.
I’m aware of several cases where a husband and wife became afflicted with dementia at almost the same time. I wondered how those couples coped and whether their advisors had planned for that event.
I interviewed George Wilson and his executive assistant, Trish Gadaleta, at their office in Naples, Florida. Wilson is a well-known and highly respected estate planning attorney.
He raised another twist on simultaneous dementia I had never considered.
He is presently dealing with three families where there was simultaneous dementia and no relatives available to look after the couple or the surviving spouse. In each instance, when the couple had mental capacity, they elected to appoint Wilson’s firm as trustee of their trusts, after full disclosure (required by Florida law) of the potential for conflicts of interest.
At the time, neither Wilson nor his clients contemplated the events that would transpire.
When the first of his clients required total care, Wilson used an agency to provide 24-hour in-home care. He learned the agency paid the caregivers $13 per hour, but charged his clients $26 per hour. He was shocked by the level of care his clients were receiving, so he came up with a creative solution.
He formed his own agency. He charged the trusts of his clients $26 per hour, but paid the caregivers the full amount ($26 per hour). The quality of the caregivers improved dramatically. “No one ever leaves us,” he said.
He is committed to keeping his clients in their homes for as long as possible because, he said, “that’s the way I would want to be treated if it was me instead of them.” The yearly cost of this level of care ranges from $200,000-$300,000.
I asked if these expenses caused the ultimate beneficiaries of the trust to raise objections. He said he provides regular accountings, as provided by law, and no one has raised an issue.
These experiences raise a number of financial planning issues. Initially, the trust should contemplate the possibility that both spouses suffer cognitive decline and give guidance to the trustee for how to deal with this contingency.
Selecting an appropriate trustee takes on more importance in these circumstances. There are obvious benefits to having a corporate trustee. But individual trustees like Wilson bring a level of caring, compassion and dedication that would be difficult to replicate with an institutional trustee.
For advisors, alerting your clients to this issue and discussing it candidly should be a part of your financial planning services.
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