Aging in America: precautions to take with elderly clients: one of the growing concerns people are facing these days is how the onset of aging will affect decision-making and the way we handle our finances as we grow older.
One of the biggest issues planners who work with elderly patients are encountering is mental competence. It is imperative to the future of the working relationship to establish and maintain current written proof that the client is mentally competent.
A recent study conducted at Texas Tech University found that after the age of 60, financial decision-making ability drops about 2 percent every year; it's just a normal product of aging. As you approach age 80, a gap begins to grow between reality and perception. I see a lot of 80-year-olds who come into my office, 100 percent confident in their decision-making capabilities because they were a financial wizard in their hay day. However, they never took the time to put a proper estate plan into place, never filled out their designations correctly on their beneficiary plans, and now their mental competency is coming into question. It's important to put the following processes in place so that you, as a planner, are protected and, most importantly, so your client and their family will receive everything they are entitled to.
Planners don't always think this way from the beginning of the relationship because when clients start working with you, they are still of sound mind. But a lot can change, even in the course of a year. I highly encourage my peers to follow the steps below to ensure the financial planning process is as fluid as possible.
1. Have a letter from the client's general physician--When the client starts the financial planning process with you, make it a mandate that they provide a letter from their doctor stating they are mentally sound. Every year that you meet with the client, they should be required to produce a new letter from the doctor outlining their current mental competency. Planners may receive push back from clients because of the inconvenience of making another appointment, but insist on it.
2. Have power of attorney established--A financial power of attorney should be established while the client is mentally sound.
3. Next of kin waiver--If one is not established, you should require a signed document from your client giving you permission to notify a family member or other trusted friend or contact and allowing that person to act on the client's behalf in the event your client is no longer physically or mentally capable of making sound financial decisions.
4. Maintain detailed documentation--Ideally, the client should sign an acknowledgement every time he or she refuses to follow the planner's recommendations. This puts some safeguards in place in the case of manipulative relatives or other persuasive associates who may seek to gain control over the client. Of course, there is no way
a planner can completely safeguard against a third party attempting to gain control; however, documenting all protests, including the planner's concerns and having them signed by the client can certainly help any planner protect themselves against future liability.
5. Handling family disputes--The involvement of family members during the financial planning process is an added stress that can cause significant issues if not handled correctly. This can be especially difficult if your client is widowed or single. In this case, adult children or other close family or friends will typically step in to assist in the planning process. Family involvement may also be necessary if the elderly client is limited due to mental or physical health challenges. In that case, the children may step in to manage the needs of the parents and assist with the financial planning aspect. In order to avoid these sometimes sticky situations, the first question to ask is: Who exactly is the client? The client must give permission to share any personal information. A letter should be created stating specifically who the client is, who should be contacted in case the client lacks the necessary mental capacity, and it should state who should receive copies of all planning information. It should also identify one person who can contact you as the planner. If this is made clear from the beginning, it should remove you from any family squabbles.
As a financial planner or advisor, you want to service your clients to the best of your ability and make certain they are receiving expert advice. Don't hesitate to refer your clients to other elder care experts or networks in order to ensure your clients' peace of mind and well-being. Make it a priority to network with other elder care professionals in different fields, such as health care, assisted living and long-term care, in order to stay up-to-date on what is going on in the area and industry. Another great benefit would be to create your own elder care network so you can provide your clients with an avenue for other needs as they come up. A planner that has a reliable group of associates to refer can come to be viewed as an important resource within the local retirement community. In showing that you really have
your clients' best interest at heart, you are only adding value to your services and therefore ensuring a long and trusting relationship with your client and their family.
The way I always look at an elderly client is to view them like my own parents. You want to protect everything that they have worked so hard for over many years and be sure that they are provided for in the way they have provided for their families. The years of hard work shouldn't be unnoticed, undervalued, or ever taken advantage of.
Patrick Simasko, founder of Simasko Law, is one of the most successful elder law attorneys in Michigan and has been in the industry for 25 years.