Head of Tax, Retirement, and Estate Planning stresses the importance of setting plans in advance of a diagnosis
Nobody wants to think about neurodegenerative illness. The tragic indignity of diseases like Alzheimer’s is such that many people are more comfortable speaking of their own deaths than addressing the possibility of being diagnosed by an illness like Alzheimer’s. Yet, as advisors plan for clients to live longer than ever the prospect of a neurodegenerative illness like Alzheimer’s must be accounted for.
Hemal Balsara, Head of Tax, Retirement, and Estate Planning and Individual Insurance at Manulife notes that the medical and legal realities of a condition like Alzheimer’s are quite distinct. Where medically the illness is progressive and a diagnosis does not necessarily imply the immediate onset of symptoms or complete deterioration in mental capacity, for legal and estate planning purposes the disease is treated in a binary. Because the legal treatment of this disease is so much more hard line, Balsara explains that advisors must work to get clients prepared for the possibility of this illness while holding onto hope that they are never diagnosed.
“The moment a client has Alzheimer's it's going to impact their ability to change their documents,” Balsara says. “It also locks you into potentially having powers of attorney for both property and personal care kick in… It’s never too early to start planning and getting your infrastructure right from the get go.”
Despite the progressive nature of the disease, and the years that some people can live after a diagnosis with minimal impact to their mental capacity, Balsara says that lawyers will very rarely be able to execute on changes to an estate plan initiated by someone who has been diagnosed with Alzheimer’s. At the same time, the diagnosis has put an immense amount of power in the individual designated as power of attorney. Especially if that client has only designated one power of attorney for property who, generally, will default to also having power of attorney for personal care when not otherwise specified. If those designations weren’t updated in line with the client’s recent wishes around who would fulfill those roles, there could be estate issues that emerge. Moreover, the client would be unable to change their will or beneficiary designations after the diagnosis.
While estate planners and lawyers would be the ones responsible for updating these designations on a regular basis before a possible Alzheimer’s diagnosis, Balsara emphasizes that financial advisors can play a role. Most likely, they are the client’s most frequent contact regarding their overall financial plan, which often incorporates an estate planning dimension. They can encourage checks to the document and even refer out to experts, highlighting what can happen if an unfortunate diagnosis is found and the client hasn’t prepared adequately for it.
Balsara emphasizes the power of narrative in working to convince clients to take action. Stories of success or failure, of crises averted by timely action or crises entered into by inaction, can help motivate through real examples.
The Alzheimer’s diagnosis also comes with an immediate set of financial planning implications as well. Balsara explains that typically someone diagnose with Alzheimer’s will have a reduced life expectancy. There are also new costs that need to be accounted for, like the cost of long-term care, which could be in a subsidized facility, a private facility, or provided by hired personal support workers in the client’s home. Planners can help show the client how long they can support any of those arrangements, and offer them the best possible trajectory that maintains dignity in line with their goals.
Balsara stresses the importance of having and facilitating conversations about what dignity means to a particular client. Whether that means staying in their home as long as possible, staying close to family, or staying in a particular facility those conversations need to happen before the illness has progressed too far. These are not easy conversations to have. People don’t like to imagine this possibility and in many cultures there is a fear that speaking of such an outcome might manifest it. Despite that, Balsara says advisors have a responsibility to prompt their clients and prepare them for what many consider to be the worst-case scenario.
“We've got an aging society. Our clients with the money are the clients who are typically at the senior ages of the demographic spectrum,” Balsara says. “The other side of it is, is if you mismanage your assets or the assets of the client, you've got a big litigation risk as well… You want to be very, very cognizant of your responsibilities to clients in this situation.”
