By FPA member, Carol Khouri, CFP®
Last Updated: April 8, 2013
It is easy to put off end-of-life planning. After all, no one wants to think about their own mortality. But death is inevitable, and people who don’t plan properly risk losing control over their healthcare decisions and their financial assets when unexpected illnesses occur, or when death becomes imminent. So it is important to organize your records so that you and your heirs will have an easier time when important decisions need to be made.
What are the risks? The most serious revolve around your healthcare. If you have an accident or unexpected illness, do you want someone else deciding what type of care you’ll receive, or whether you’ll receive care at all? The financial implications are just as dire. Do you want the financial legacy you’ve built for your loved ones to be imperiled by runaway healthcare costs? Fortunately, with just a little forethought, it is easy to protect yourselves and your loved ones.
End-of-life planning begins with four crucial steps: having an estate plan, having a long-term care plan, creating a formal medical plan, and communicating your plans to loved ones.
Estate planning is a basic element of financial planning, and it is also the first step in end-of-life planning. Your estate is your legacy after a lifetime of hard work, reflecting who are and what you have accomplished in life. Everyone should have a plan that will ensure control over how that estate is distributed upon death.
Every estate plan should include a will and/or trust, as well as instructions for charitable giving and other distribution of assets. This is the only way of assuring that your financial legacy will live on even after you are gone. Finally, your estate plan should be reviewed every five to seven years, and amended as needed, to assure that it continues to reflect your wishes and values.
Long-Term Care Planning
The longer we live, the more likely it is that we will require some form of long-term care, whether in a nursing home, assisted living community, or home-based healthcare. On average, we can expect to live 10 years longer than our parents, and our children will live 20 years longer than we will. While everyone wants to live as long as possible, longevity does create challenges later in life. Foremost among these is the likelihood that we will require specialized, costly, and sometimes invasive care as we approach the end of life.
Everyone should have a formal long-term care plan indicating what type of residential and senior living care is desired, where it should be provided, and how it will be paid for. Long-term care planning is part of retirement planning, and should begin as early in life as possible. The earlier planning begins, the more time there will be to accumulate the necessary funds to pay for long-term care, or to acquire affordable long-term care insurance.
The simplest way to make the necessary arrangements is to talk with the financial planner who is handling the rest of your financial planning and ask him or her about your options. Your financial planner should be able to build long-term care provisions right into your financial plan.
Having a medical plan is an essential element of planning that many people ignore. Everyone should have a plan outlining how medical care should be handled if there is an accident or unanticipated medical illness. Do you want to be put on life support if necessary? Do you wish to be placed in hospice? Do you want to designate a Health Care Proxy, and who should that be? The answers to these questions can have an enormous impact on how you live out your final days, and they shouldn’t be left to others.
Finally, it is important to communicate these plans to your family and loved ones so they are aware of your wishes. Loved ones should be brought together to discuss and understand your point of view. If everyone is on the same page, it will make the process much less stressful for everyone.
No one likes to think about dying or becoming incapacitated. But we owe it to ourselves and our loved ones to have a formal plan in place dictating what will happen to our assets, how we will be cared for if something happens to us, and what types of care we will receive when we finally reach the end of life.
Carol Khouri, CFP®, is a Certified Divorce Financial Analyst™ and a principal with Wingate Wealth Advisors in Lexington, MA