THIS ARTICLE IS THE FOURTH IN A SERIES IN CELEBRATION OF NATIONAL FINANCIAL PLANNING MONTH DURING OCTOBER
Our first article discussed the importance of financial planning; our second article explored how middle-aged couples can benefit from a dynamic financial plan; and our third article delved into the benefits of having a flexible plan near retirement.
BY: David W. Russell, CFP®, CSA® VP, Trust Officer
(601) 707-0008
In our first two articles, we examined the financial transitions experienced during two stages of adulthood: young adulthood from age 30 to 45, and middle adulthood from age 45 to 65. The financial planning industry has done an admirable job of serving these two stages. It has, however, done a poor job of addressing the financial planning issues of the period from age 70 onward. Sure, advisors sell long-term care insurance to forty- and fifty-somethings for this period of life, and others sell annuities to seniors who are skittish about the financial markets. But these are product solutions aimed at the senior market, not financial planning discussions.
In this article, we examine the complex financial transitions that occur in the life of Jane, an 82-year-old widow who still can benefit from a dynamic financial planning relationship.
Year 1: Making the Adjustment
Jane is the client of an attorney familiar with Argent’s fiduciary work as an independent trustee and through our company’s eldercare service platform that handles a multitude of financial management roles for seniors who need special assistance. The attorney had assisted Jane after her husband’s death. Jane was mentally sharp and in good health, but was unprepared for the decisions that were being thrust upon her. She and her late husband, Boyd, had been married for 60 years, and it was clear when we met Jane that she felt alone and vulnerable. Jane and Boyd had started doing some extensive estate planning about four years earlier, but never finished it – and the terms of Boyd’s will simply left everything to Jane.
Boyd and Jane had three adult children, eight grandchildren and four great-grandchildren. Two of her children live nearby, but her middle son, Boyd Jr., has addiction and mental health issues and has been in and out of the family’s life for many years, surfacing occasionally when he needed financial support. Jane and Boyd had operated a business together for nearly 40 years and sold it 12 years ago for slightly more than $2 million. That nest egg, plus an individual retirement account (IRA) of around $600,000 and a house valued at $400,000, was the entirety of Jane and Boyd’s estate.
When working with widows, Argent’s professionals often advise few, if any, changes or major decisions in the first year of widowhood. Instead, we spend several months helping widows get organized and to understand where they are financially. Many older widows had little involvement in the big financial decisions of the household, so helping them feel supported and empowered is an important step in the financial planning relationship. If decisions are necessary because of a spouse’s death, we will also guide them on those decisions.
In Jane’s case, there were some immediate planning themes that needed to be addressed with specific project plans and tasks (see the accompanying table). Chief among them was consolidating the various online brokerage accounts and direct purchase mutual fund accounts that Boyd had at the time of his death. Over the next 18 months, we focused on the following themes and projects:
Years 2-4: Planning Forward
As we entered the second year of our financial planning relationship with Jane, she had adjusted as well as possible to widowhood and life without Boyd. She had more confidence than when we began working with her – and for the first time since Boyd died she felt truly independent. However, we knew that we needed to have a discussion with her around the possibility of age-related decline of independence. We had to empower Jane to make the planning decisions while she was able to – rather than waiting for an event to occur that might require others to make the decisions for her. This proved not to be as difficult as we thought. Jane had several friends who had experienced the positive results of planning ahead, as well as the negative effects of not doing so.
Thus, over the next couple of years we focused on creating a plan for Jane as she aged, faced potential dependence, and for the management and disposition of her assets at her death. We also included Jane’s two adult children in many of the conversations, allowing Jane to determine both the timing and the amount of disclosure to include in those discussions. These meetings allowed Jane to express her wishes regarding her care when the time came, as well as the important questions of “who-does-what-when.” There were also difficult decisions to be made about how to provide for Boyd, Jr.
Years 5 and Beyond: A Life of Dignity
By year five of our financial planning relationship with Jane, she had moved from her home to independent housing in the continual care facility she had visited the previous year. The sale of her home allowed her to pay the $300,000 entrance fee and an additional $100,000 that would cover the next three years of the facility’s monthly fee. This arrangement effectively prepaid for Jane’s future care regardless of the level of care or length of time that care is needed. Her two children who live nearby were happy to forego inheriting her previous home in return for the peace of mind that came from knowing she has guaranteed care for the rest of her life. In addition, several of her friends lived in the facility and the activities offered keeps her socially engaged.
The following year, her daughter Linda informed us that Jane had fallen and would be moving to the assisted living section of the facility. After we met Jane, she formally resigned as trustee of her living trust, allowing Argent Trust to take over as successor trustee and to pay her ongoing expenses. Shortly after, Boyd Jr. visited Jane and, not surprisingly, requested financial support to get him by for a few days. It was relieving for her to tell Boyd that she was not in position to make that decision and that he would have to approach us. Currently, we are working on a plan with input from Jane and the entire family that will address Boyd’s needs without enabling him to continue without getting help.
In the meantime, Jane continues to live with dignity and security, knowing that whatever happens, she will be taken care of financially, physically and spiritually for however long she has left.
Key Takeaways:
1| When a major life event occurs, it is important to have a team of advocates who will take the time needed to help you adjust to the changes these events bring about.
2| Financial planning is a life-long process of adjusting to financial life transitions and does not end at retirement.
3| Your financial planning team should seek to empower your decision-making and independence regardless of your age or experience.
Next Step:
If you or a loved one are experiencing the financial transitions of advanced age, please contact me or any one of our professionals at 800.375.4646 to learn how we can guide you through them with honor and dignity.
