Issue 29: 2015

Family Wealth Services

Memory and Your Family

When memory goes, so goes the ability to manage everything from relationships to decisions on family wealth. What happens next?

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Charlie Collier has always been the kind of guy you could depend on. As a devoted family man and a senior philanthropic advisor to Harvard University, Collier spent his career helping families as they grappled with financial decisions. Down to his signature bow ties, he was always on point.

Things rapidly began to change. The veteran traveler was an hour late for a flight and missed his plane. He forgot he locked his car immediately after doing so, and after a lifetime of clean driving, he had two accidents. When he couldn’t summon a solid forehand on the tennis court, he knew something was wrong.

In 2009, at age 60, Collier was diagnosed with early-onset Alzheimer’s disease, so-called because it can affect people younger than 65. His symptoms — memory loss, lapses in judgment and difficulty recalling words — were initially thought to be the effects of a small stroke. In reality, they were signs of cognitive decline. Broadly, cognitive decline is the loss of specific memory and judgment skills, which can affect many individuals as they age. Those who exhibit symptoms early in life have an increased likelihood of developing specific diseases like Alzheimer’s or dementia.1 (See “Symptoms of Cognitive Decline,” below.)

Alzheimer’s: The word alone is enough to send shivers through any family. But instead of retreating from the world, Collier decided to use his diagnosis as a vehicle for change. He now devotes his life to raising awareness by working with an aide and holding small meetings with families and groups that are interested in learning about Alzheimer’s. He emphasizes the disease’s prevalence: One in three seniors die with some form of dementia.2 Although the condition is most associated with the elderly, early-onset Alzheimer’s affects about 200,000 Americans of all ages.3

Although not as sudden as a stroke or heart attack, the impairment can start as quickly as the flip of a switch.

While cognitive decline has been shown to begin as early as age 45,4 as people live longer, planning for the possibility takes on greater urgency. Coping with a loved one with cognitive decline will never be easy, but the right information can help empower families with real-time strategies and proactive steps to help with responsibilities, including the transfer of legal, financial and medical details to the next generation.

Talking about cognitive decline

Talking about what to do if a loved one becomes mentally incapacitated is crucial. Waiting to do so until a healthcare calamity occurs can be disastrous. “In crisis mode, judgment is clouded by emotion, and spur-of-the-moment decisions may lack clarity and intentionality,” says Cynthia Hutchins, director of financial gerontology at Merrill Lynch.

Keep up with key paperwork Read more
Keep Up with Key Paperwork

Your Personal Inventory Manager

 

“Paperwork can overwhelm, but it doesn’t have to,” says Chris Heilmann, chief fiduciary executive at U.S. Trust. “We assist clients in gathering and organizing critical financial, legal and medical information. That includes insurance policies, account ownership and trust documents, wills, healthcare directives, healthcare proxies and HIPAA waivers.

“To help with this process, we have created Your Personal Inventory Manager,” he says. This comprehensive workbook, sometimes called YPIM, can serve as a repository to help keep track of important data, from documenting the location of familial and financial records to compiling contact information for doctors and advisors and much more.

Says Heilmann: “The YPIM captures critical information, allowing a family or attorney to navigate documents quickly so they’re not scrambling during a crisis. Also, the process of compiling the data often helps to make clients and their families aware of important issues that they may not have considered before.”

Photo: LP/Plainpicture

But having these critical conversations about health — cognitive health in particular — is uncharted territory for many families, and of course there can be hesitancy or discomfort. But there doesn’t have to be if you know where to begin.

The aging person has to have a sense of participation in the process, says Hutchins. One way to help a family member facing cognitive decline feel in control is by asking if they’ve thought about what happens if they can’t care for themselves. Asking questions makes you a listener who is receptive to your loved one’s needs, and gives them an open floor to discuss the issue, which they may have been waiting for all along.

“Sit on the same side of the table with your parent or spouse,” says Hutchins. “Make sure they understand that you’re not trying to take away their independence. Your goal is to know what options you’ll need to put in place, when and if the time arises.”

Delving into the big picture immediately can be overwhelming, so once you’ve set the tone, start small and stick to details. Maybe they’re forgetting to shower or pay their bills. Put the conversation in context by mentioning an article you read on the subject. Discussing the prevalence of the experience of cognitive decline makes the conversation about a larger social concern.

A successful conversation will bring out empathy, openness and even humor, but one successful talk doesn’t equal immediate resolution. “You want to have the conversation early and regularly,” says Hutchins. That’s where your advisor may be able to help facilitate the process. Advisors can help make sure the needs of all stakeholders are addressed, and help the family members involved deal with these new types of stress.

Establishing a legal and financial strategy

In Health and Retirement: Planning for the Great Unknown, a retirement study conducted in 2014 by Merrill Lynch in partnership with Age Wave, more than half (54%) of survey respondents said that Alzheimer’s is the scariest disabling condition one can encounter later in life. “This fear is really about the loss of freedom,” says Surya Kolluri, a managing director for Global Wealth and Retirement Solutions at Merrill Lynch. “The closer a person is to an age where they feel that admitting they have a cognitive issue might equal a loss of dignity or independence, the more you’re going to see them try to hide their issues through defensiveness or denial.”

Avoid red tape with a Revocable Living Trust (RLT) Read more
Avoid red tape

With a Revocable Living Trust (RLT)

 

For continuity of management for your assets, consider a trust. “The benefit of putting property or assets in a Revocable Living Trust is that if you become incapacitated, a co-trustee may already be in place or a named successor trustee can step in and take care of the assets for you,” explains Mitchell A. Drossman, national director of wealth planning strategies at U.S. Trust. The RLT allows an individual to put property in a trust today while retaining broad powers over those assets — even the right to revoke the trust. In some cases, an RLT may help bypass any costs and delays associated with probate.

Photo: Anna Matzen/Plainpicture

Those who hold very public positions may be even more concerned about how decline will impact their reputation. Their work and self-image are often deeply intertwined, and behaviors that mask the loss of functionality help keep concerned loved ones at arm’s length. Yet by insisting on control and denying their decline, wealth creators may end up waiting too long to start planning and entirely lose their grip on the reins.

“If you do nothing and end up where you can’t take care of your assets, someone will be appointed by the courts on your behalf to manage your assets,” says Steven Lavner, a managing director at U.S. Trust. “Generally, that’s not a good idea.” When the court appoints a guardian or conservator, it could be someone you would not have chosen. Or a less-than-scrupulous relative may get appointed, and family members may not have a say. After someone is determined to be incapacitated and authority is taken away, getting control back can be a legal and financial mess.

“Ideally, people would talk to their advisors in advance of diminished capacity so they could work together,” says Mitchell A. Drossman, national director of wealth planning strategies at U.S. Trust. “That way they can tailor something that would work to help appoint the right people with the appropriate authority and the right kind of accountability and flexibility. Being proactive about planning can help avoid going to court.”

“If we look at the big picture, it’s clear that estate planning is a far more dynamic process than it once was,” says Drossman. With tax adjustments and longer lifespans, the estate planning conversation has shifted and “a lot more attention and detail is needed in terms of planning cash flow and investments,” he adds. What this means for families is that it has never been more important to put safeguards in place to legally and financially protect one’s assets.

The question is, how does somebody whose capacity is diminishing manage accounts in a proactive manner? Laws vary from state to state, but there are a few parameters that every family should keep in mind.

Consider a power of attorney

A power of attorney is a written authorization designating one or more “agents” — often a family member or others close to the family — to make financial decisions for you, the principal. The two most common types are:

  • Durable power of attorney: Effective immediately, this power will remain in effect during the principal’s incapacity.
  • Springing power of attorney: As its name suggests, this document springs into effect only if and when the principal becomes incapacitated.

Each has benefits, Lavner says. For some families, a durable power is preferable because the decision made early on will carry through indefinitely, while a springing power can be more tailored to changing needs and situations. “The drawback for the latter is that determining incapacity can be murky,” says Lavner, “and therefore so can timing for when the agent takes over affairs.”

After appointing an agent, there are still details to address in order to define the scope of authority:

  • Dividing personal and financial responsibilities. Do you want your agent just to be able to take care of your assets, or do you want them to have control over other aspects of your affairs? Naming different or multiple agents is fine, but make sure the people you choose can work well together.
  • Gifts. If you want your agent to be able to make gifts for you during your lifetime, it has to be carefully designated since there’s potential for abuse. Set up a system of checks and balances.

Get all medical documents in order

There are two primary designations for someone to take legal control of another person’s health decisions and well-being. Some people have one or both set up in advance.

  • A living will is an advance directive in which a person specifies their medical wishes regarding things like pain management and life support.
  • A healthcare proxy or healthcare power of attorney is a document that appoints an individual to make medical decisions for you should you become unable to do so. Their role may change as the loved one’s condition progresses.

It’s important to keep in mind that the person suited to managing financial affairs is not necessarily the right person to make medical decisions. Someone who takes care of expenses might not be the person you want to decide if your loved one should remain on life support.

Consider the family situation

When a wealth creator slows down, it can create a vacuum of power within a family, and understanding how this affects the family dynamic is crucial when delegating responsibilities. Decisions can bring up old or even childhood behavior patterns and tension, explains Kolluri. “Children are mindful if mom or dad trusts one of them to be either financial agent or healthcare agent, and not the other. They say, ‘Why wasn’t I also thought of as responsible enough to make those decisions?’ The stress and anxiety are higher if there’s a feeling of inequality.”

Prevent and plan

By 2050, the number of Americans age 65 and older with Alzheimer’s disease is expected to more than triple, to as many as 16 million.5

The reality is, many people over 65 don’t have significant memory loss. Yet there are typical age-related changes that are important to be aware of, as the mind does tend to naturally slow down as we get older. We tend to be less mentally flexible, processing information may take longer, and difficulty recalling names of people and places is common — though intelligence remains stable.6

Eldercare Planning Read more
Eldercare Planning

“We see our client relationships as family relationships, and this commitment is embodied by financial strategies for eldercare,” says Chris Heilmann, chief fiduciary executive at U.S. Trust. We offer comprehensive guidance for clients, including those planning care for themselves or for aging loved ones.

“In addition to wealth and estate planning,” says Heilmann, “we think about organizational and care coordination that can help you make the complex — and often difficult — decisions that you will face as you address later-life planning for your family.”

When the person we depend on most is no longer recognizable, or worse, no longer recognizes us, our world can feel turned upside down. The loss of self can tinker with our core sense of order and security. That’s why, even though preparing for cognitive decline is important for legal, financial and medical reasons, the sense of comfort it brings is something you can’t put a price tag on. A little bit of foresight, and a lot of communication and planning can go a long way.

Cognitive decline doesn’t have to be the end of a life. Charlie Collier still works and helps others plan their lives. “Since it is difficult to express myself, people look at me funny sometimes,” he says through his aide. “But since retiring from Harvard I have focused on getting people comfortable. We want people to have a conversation about the disease, ask questions, share stories and not be afraid or ashamed about family members who are afflicted with cognitive decline.”

1 Mild Cognitive Impairment, Alzheimers Association, alz.org, retrieved April 2015.

2 2015 Alzheimer’s Disease Facts and Figures, Alzheimers Association, 2015.

3 2015 Alzheimer’s Disease Facts and Figures, Alzheimers Association, 2015.

4 Cognitive Decline Can Begin As Early As Age 45, Warn Experts, The BMJ, Jan 5, 2012. (Latest available data.)

5 2015 Alzheimer’s Disease Facts and Figures, Alzheimer’s Association, 2015.

6 “Aging, Memory Loss and Dementia: What’s the Difference?” Alzheimers Association, 2014.

IMPORTANT INFORMATION

Some of the featured participants are not employees of U.S. Trust. The opinions and conclusions expressed are not necessarily those of U.S. Trust or its personnel.

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

OTHER IMPORTANT INFORMATION

Healthcare This material should be regarded as general information on healthcare considerations and is not intended to provide specific healthcare advice. If you have questions regarding your particular healthcare situation, please contact your health care, legal or tax advisor.

Charlie Collier has always been the kind of guy you could depend on. As a devoted family man and a senior philanthropic advisor to Harvard University, Collier spent his career helping families as they grappled with financial decisions. Down to his signature bow ties, he was always on point.

Things rapidly began to change. The veteran traveler was an hour late for a flight and missed his plane. He forgot he locked his car immediately after doing so, and after a lifetime of clean driving, he had two accidents. When he couldn’t summon a solid forehand on the tennis court, he knew something was wrong.

In 2009, at age 60, Collier was diagnosed with early-onset Alzheimer’s disease, so-called because it can affect people younger than 65. His symptoms — memory loss, lapses in judgment and difficulty recalling words — were initially thought to be the effects of a small stroke. In reality, they were signs of cognitive decline. Broadly, cognitive decline is the loss of specific memory and judgment skills, which can affect many individuals as they age. Those who exhibit symptoms early in life have an increased likelihood of developing specific diseases like Alzheimer’s or dementia.1 (See “Symptoms of Cognitive Decline,” below.)

Alzheimer’s: The word alone is enough to send shivers through any family. But instead of retreating from the world, Collier decided to use his diagnosis as a vehicle for change. He now devotes his life to raising awareness by working with an aide and holding small meetings with families and groups that are interested in learning about Alzheimer’s. He emphasizes the disease’s prevalence: One in three seniors die with some form of dementia.2 Although the condition is most associated with the elderly, early-onset Alzheimer’s affects about 200,000 Americans of all ages.3

Although not as sudden as a stroke or heart attack, the impairment can start as quickly as the flip of a switch.

While cognitive decline has been shown to begin as early as age 45,4 as people live longer, planning for the possibility takes on greater urgency. Coping with a loved one with cognitive decline will never be easy, but the right information can help empower families with real-time strategies and proactive steps to help with responsibilities, including the transfer of legal, financial and medical details to the next generation.

Talking about cognitive decline

Talking about what to do if a loved one becomes mentally incapacitated is crucial. Waiting to do so until a healthcare calamity occurs can be disastrous. “In crisis mode, judgment is clouded by emotion, and spur-of-the-moment decisions may lack clarity and intentionality,” says Cynthia Hutchins, director of financial gerontology at Merrill Lynch.

Keep up with key paperwork Read more
Keep Up with Key Paperwork

Your Personal Inventory Manager

 

“Paperwork can overwhelm, but it doesn’t have to,” says Chris Heilmann, chief fiduciary executive at U.S. Trust. “We assist clients in gathering and organizing critical financial, legal and medical information. That includes insurance policies, account ownership and trust documents, wills, healthcare directives, healthcare proxies and HIPAA waivers.

“To help with this process, we have created Your Personal Inventory Manager,” he says. This comprehensive workbook, sometimes called YPIM, can serve as a repository to help keep track of important data, from documenting the location of familial and financial records to compiling contact information for doctors and advisors and much more.

Says Heilmann: “The YPIM captures critical information, allowing a family or attorney to navigate documents quickly so they’re not scrambling during a crisis. Also, the process of compiling the data often helps to make clients and their families aware of important issues that they may not have considered before.”

Photo: LP/Plainpicture

But having these critical conversations about health — cognitive health in particular — is uncharted territory for many families, and of course there can be hesitancy or discomfort. But there doesn’t have to be if you know where to begin.

The aging person has to have a sense of participation in the process, says Hutchins. One way to help a family member facing cognitive decline feel in control is by asking if they’ve thought about what happens if they can’t care for themselves. Asking questions makes you a listener who is receptive to your loved one’s needs, and gives them an open floor to discuss the issue, which they may have been waiting for all along.

“Sit on the same side of the table with your parent or spouse,” says Hutchins. “Make sure they understand that you’re not trying to take away their independence. Your goal is to know what options you’ll need to put in place, when and if the time arises.”

Delving into the big picture immediately can be overwhelming, so once you’ve set the tone, start small and stick to details. Maybe they’re forgetting to shower or pay their bills. Put the conversation in context by mentioning an article you read on the subject. Discussing the prevalence of the experience of cognitive decline makes the conversation about a larger social concern.

A successful conversation will bring out empathy, openness and even humor, but one successful talk doesn’t equal immediate resolution. “You want to have the conversation early and regularly,” says Hutchins. That’s where your advisor may be able to help facilitate the process. Advisors can help make sure the needs of all stakeholders are addressed, and help the family members involved deal with these new types of stress.

Establishing a legal and financial strategy

In Health and Retirement: Planning for the Great Unknown, a retirement study conducted in 2014 by Merrill Lynch in partnership with Age Wave, more than half (54%) of survey respondents said that Alzheimer’s is the scariest disabling condition one can encounter later in life. “This fear is really about the loss of freedom,” says Surya Kolluri, a managing director for Global Wealth and Retirement Solutions at Merrill Lynch. “The closer a person is to an age where they feel that admitting they have a cognitive issue might equal a loss of dignity or independence, the more you’re going to see them try to hide their issues through defensiveness or denial.”

Those who hold very public positions may be even more concerned about how decline will impact their reputation. Their work and self-image are often deeply intertwined, and behaviors that mask the loss of functionality help keep concerned loved ones at arm’s length. Yet by insisting on control and denying their decline, wealth creators may end up waiting too long to start planning and entirely lose their grip on the reins.

Avoid red tape with a Revocable Living Trust (RLT) Read more
Avoid red tape

With a Revocable Living Trust (RLT)

 

For continuity of management for your assets, consider a trust. “The benefit of putting property or assets in a Revocable Living Trust is that if you become incapacitated, a co-trustee may already be in place or a named successor trustee can step in and take care of the assets for you,” explains Mitchell A. Drossman, national director of wealth planning strategies at U.S. Trust. The RLT allows an individual to put property in a trust today while retaining broad powers over those assets — even the right to revoke the trust. In some cases, an RLT may help bypass any costs and delays associated with probate.

Photo: Anna Matzen/Plainpicture

“If you do nothing and end up where you can’t take care of your assets, someone will be appointed by the courts on your behalf to manage your assets,” says Steven Lavner, a managing director at U.S. Trust. “Generally, that’s not a good idea.” When the court appoints a guardian or conservator, it could be someone you would not have chosen. Or a less-than-scrupulous relative may get appointed, and family members may not have a say. After someone is determined to be incapacitated and authority is taken away, getting control back can be a legal and financial mess.

“Ideally, people would talk to their advisors in advance of diminished capacity so they could work together,” says Mitchell A. Drossman, national director of wealth planning strategies at U.S. Trust. “That way they can tailor something that would work to help appoint the right people with the appropriate authority and the right kind of accountability and flexibility. Being proactive about planning can help avoid going to court.”

“If we look at the big picture, it’s clear that estate planning is a far more dynamic process than it once was,” says Drossman. With tax adjustments and longer lifespans, the estate planning conversation has shifted and “a lot more attention and detail is needed in terms of planning cash flow and investments,” he adds. What this means for families is that it has never been more important to put safeguards in place to legally and financially protect one’s assets.

The question is, how does somebody whose capacity is diminishing manage accounts in a proactive manner? Laws vary from state to state, but there are a few parameters that every family should keep in mind.

Consider a power of attorney

A power of attorney is a written authorization designating one or more “agents” — often a family member or others close to the family — to make financial decisions for you, the principal. The two most common types are:

  • Durable power of attorney: Effective immediately, this power will remain in effect during the principal’s incapacity.
  • Springing power of attorney: As its name suggests, this document springs into effect only if and when the principal becomes incapacitated.

Each has benefits, Lavner says. For some families, a durable power is preferable because the decision made early on will carry through indefinitely, while a springing power can be more tailored to changing needs and situations. “The drawback for the latter is that determining incapacity can be murky,” says Lavner, “and therefore so can timing for when the agent takes over affairs.”

After appointing an agent, there are still details to address in order to define the scope of authority:

  • Dividing personal and financial responsibilities. Do you want your agent just to be able to take care of your assets, or do you want them to have control over other aspects of your affairs? Naming different or multiple agents is fine, but make sure the people you choose can work well together.
  • Gifts. If you want your agent to be able to make gifts for you during your lifetime, it has to be carefully designated since there’s potential for abuse. Set up a system of checks and balances.

Get all medical documents in order

There are two primary designations for someone to take legal control of another person’s health decisions and well-being. Some people have one or both set up in advance.

  • A living will is an advance directive in which a person specifies their medical wishes regarding things like pain management and life support.
  • A healthcare proxy or healthcare power of attorney is a document that appoints an individual to make medical decisions for you should you become unable to do so. Their role may change as the loved one’s condition progresses.

It’s important to keep in mind that the person suited to managing financial affairs is not necessarily the right person to make medical decisions. Someone who takes care of expenses might not be the person you want to decide if your loved one should remain on life support.

Consider the family situation

When a wealth creator slows down, it can create a vacuum of power within a family, and understanding how this affects the family dynamic is crucial when delegating responsibilities. Decisions can bring up old or even childhood behavior patterns and tension, explains Kolluri. “Children are mindful if mom or dad trusts one of them to be either financial agent or healthcare agent, and not the other. They say, ‘Why wasn’t I also thought of as responsible enough to make those decisions?’ The stress and anxiety are higher if there’s a feeling of inequality.”

Prevent and plan

By 2050, the number of Americans age 65 and older with Alzheimer’s disease is expected to more than triple, to as many as 16 million.5

The reality is, many people over 65 don’t have significant memory loss. Yet there are typical age-related changes that are important to be aware of, as the mind does tend to naturally slow down as we get older. We tend to be less mentally flexible, processing information may take longer, and difficulty recalling names of people and places is common — though intelligence remains stable.6

Eldercare Planning Read more
Eldercare Planning

“We see our client relationships as family relationships, and this commitment is embodied by financial strategies for eldercare,” says Chris Heilmann, chief fiduciary executive at U.S. Trust. We offer comprehensive guidance for clients, including those planning care for themselves or for aging loved ones.

“In addition to wealth and estate planning,” says Heilmann, “we think about organizational and care coordination that can help you make the complex — and often difficult — decisions that you will face as you address later-life planning for your family.”

When the person we depend on most is no longer recognizable, or worse, no longer recognizes us, our world can feel turned upside down. The loss of self can tinker with our core sense of order and security. That’s why, even though preparing for cognitive decline is important for legal, financial and medical reasons, the sense of comfort it brings is something you can’t put a price tag on. A little bit of foresight, and a lot of communication and planning can go a long way.

Cognitive decline doesn’t have to be the end of a life. Charlie Collier still works and helps others plan their lives. “Since it is difficult to express myself, people look at me funny sometimes,” he says through his aide. “But since retiring from Harvard I have focused on getting people comfortable. We want people to have a conversation about the disease, ask questions, share stories and not be afraid or ashamed about family members who are afflicted with cognitive decline.”

1 Mild Cognitive Impairment, Alzheimers Association, alz.org, retrieved April 2015.

2 2015 Alzheimer’s Disease Facts and Figures, Alzheimers Association, 2015.

3 2015 Alzheimer’s Disease Facts and Figures, Alzheimers Association, 2015.

4 Cognitive Decline Can Begin As Early As Age 45, Warn Experts, The BMJ, Jan 5, 2012. (Latest available data.)

5 2015 Alzheimer’s Disease Facts and Figures, Alzheimer’s Association, 2015.

6 “Aging, Memory Loss and Dementia: What’s the Difference?” Alzheimers Association, 2014.

IMPORTANT INFORMATION

Some of the featured participants are not employees of U.S. Trust. The opinions and conclusions expressed are not necessarily those of U.S. Trust or its personnel.

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

OTHER IMPORTANT INFORMATION

Healthcare This material should be regarded as general information on healthcare considerations and is not intended to provide specific healthcare advice. If you have questions regarding your particular healthcare situation, please contact your health care, legal or tax advisor.