Making difficult choices now, and making your wishes known, can help protect the finances and ease the concerns of you and your family.
It’s natural to assume that estate planning begins and ends with issues such as naming beneficiaries and transferring wealth after you’re gone. Yet one of the most important considerations is what happens during your life if an illness or accident leaves you or your spouse incapacitated. As longevity increases, nearly 70% of Americans who reach age 65 will eventually need long-term care, and 20% will require such care for more than five years†.
Incapacity planning is about taking control, and it involves everything from long-term and end-of-life medical care to strategies that help to ensure that your family has the financial resources to carry on through the major expenses those things can entail, says Jill Garvey, senior wealth strategist at Huntington Private Bank®‡.
“If you don’t take control, somebody else, including the courts, could wind up making choices for you.”
For your family, failure to plan could mean fighting red tape to have a say in your care, or financial disruptions and uncertainty at an emotionally devastating time.
The need for such planning isn't restricted to older people. Dan Griffith, senior vice president and director of wealth strategy at Huntington Private Bank, recalls the tragic story of a man who developed a terminal illness at the age of 40§. In this case, the man had time to plan, making sure his wife could direct his medical care when the time came, had full access to his financial assets, and understood his end-of-life wishes. Griffith says,
“As he became less and less capable, she had the tools necessary to make crucial decisions on his behalf and for the family.”
But catastrophic events don’t always afford that time. Garvey says she’s seen cases where a sudden accident leaves families not just grieving but in a state of upheaval over who is prepared and authorized to make such decisions. That’s why planning ideally starts when everyone’s healthy, she says. Garvey notes that planning covers three vital and interrelated areas: personal preferences, health wishes, and financial needs.
The process starts with some basic questions. Garvey suggests considering: “If a situation leaves you alive but unable to communicate, what health care do you wish to receive, or refuse to receive?” Wishes should be spelled out in a living will, she adds. But don’t stop there. Detailed conversations with a spouse may not be easy, but the more information you share, the better you’ll be able to look out for one another’s wishes if one of you becomes incapacitated.
Don’t assume family members will automatically have a say in your treatment, or that doctors will even allow them to review your medical records. A health care directive grants someone of your choosing the authority to make medical choices on your behalf. This may be a spouse, grown child, or close friend. If you authorize more than one person, be sure they’ll be able to work together, Garvey advises. You should also sign a Health Insurance Privacy and Portability Act (HIPPA) release, granting them access to your medical records, she adds.
With a better understanding of your personal and health-related wishes and needs, now’s the time for careful financial planning to make sure you can cover your own care and meet the financial goals you have for your spouse or family members.
“You’ll need to review any government benefits or health care and disability you may have from an employer,” Garvey says.
Next, think about financial tools that could be used to meet additional expenses. Would this be a good time to contribute to a health savings account, or to explore options for long-term care?
Another key consideration is who will have legal authority to make financial decisions if you’re no longer able to. Financial obligations such as taxes or mortgage payments don’t go on hold, Griffith notes.
“If you’re a business owner, you might ask bigger questions: Who can sign lending documents, execute tax returns, or consent to a sale of the business?”
While the planning process may seem daunting, the hardest part is often the decision to set things in motion, Garvey says. As the leader of a skilled team of advisors, which may include your attorney, a CPA, and an insurance specialist, your Huntington Private Bank advisor can help you create an incapacity plan that works with your other financial strategies and goals.