Morgan Stanley
  • Wealth Management
  • Apr 23, 2021

The One Conversation You Should Be Having

Take these steps to ensure you have trusted decision-makers in place should you—or your parents—become incapacitated.

Compile a list of uncomfortable hot button topics, and no doubt health and money would be near the top of the list. Combine the two and it’s suddenly clear why so many people fail to lay the groundwork for financial planning in the event of incapacity. After all, who wants to address the difficult realities of old age or debilitating illness, particularly as it relates to finances?

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As hard as it is to swallow, old age can rob one of hard-won independence. And at some point in time, we’ll all be faced with the reality that we’re unable or unfit to make important calls about finances and medical care.

Too often, though, these topics go unaddressed. So what prevents many of us from preparing for outcomes that, intellectually, we know we're all going to face?

Facing the Fear of Planning

“It's painful for people to confront the limits of their own mortality," says Thomas Mierswa, an Executive Director in Morgan Stanley's Legal and Compliance division. For the most part, we recoil at the thought of ceding control to the debilitating forces of old age, so we choose not to plan for it.

Another reason for delay is what’s has been dubbed “the positivity effect."

“People begin to enjoy their retirement—their 'Golden Years'—and they want everything to be perfect. They don't want to recognize unpleasantness," Mierswa explains. “They're enjoying themselves, but as they're faced with the onset of physical and mental limitations they begin to feel it all slipping away, and they don't want to address it. It holds true whether facing one's own incapacity or that of a parent."

Indeed, for the Baby Boomer generation, denial applies not only to themselves but to their parents as well. “They tend to think they have all the time in the world," says Mierswa, “and they think it will never happen to them, and they will never be like their parents."

It's a Matter of Planning—and Paperwork

Preparing for incapacity boils down to having the right documents in place that address the need to handle future financial and medical matters if your ability to do so deteriorates.

More simply, it's about identifying people you trust—while you are still able—who can make decisions for you.

According to Rocco Procopio, Head of Field Compliance for Morgan Stanley's Wealth Management business, one tool your advisor can use is an Account Opening Application and/or Trusted Contact Authorization Form, through which a client identifies a person or persons who may be contacted if the client displays certain behavior that indicates decreased capacity for making important decisions.

By designating a Trusted Contact, you authorize a financial advisor to discuss your account with someone you trust. Importantly, designating a Trusted Contact does not authorize that person to act on your behalf, though. That requires designating a Power of Attorney, which gives your advisor greater ability to work with an authorized person who can take action on your account.

Without a Power of Attorney in place, your Financial Advisor—upon identifying diminished capacity—may be unable to act in the event of a severe market event or account-threatening situation. Instead, the Financial Advisor will have to wait for the court system to establish legal authority to act on a client's behalf.  Needless to say, such a scenario is less than ideal: “Once we've learned there is incapacity, we have to act cautiously—and oftentimes quickly," Procopio warns.

Take These Steps, Too

Procopio recommends identifying people that you trust to know about your assets and other personal information. And he stresses that planning for incapacity is not entirely about financial assets; it's about planning for an entire estate, as well as for healthcare concerns.

It's equally important to identify someone who knows where all of your vital documentation is located—insurance policies, bank account information, military records, and so on—so that it's easily accessible in a pinch.

Also, once you have identified the key individuals who will manage your assets, make health care decisions and administer documentation, make sure to share this information with key family members. In many cases, family members are hurt or surprised by the choice of a key individual. Sharing this information early helps avoid potential conflicts.

Finally, make sure to have all of your other documents in place, including:

  • A standard will
  • A Revocable Living Trust which is a legal entity created to hold ownership of an individual's assets
  • A Medical Power of Attorney for health care decisions
  • A Living Will to state your wishes for end-of-life medical care
  • A HIPAA Authorization so a loved one can view your medical records
  • A “Durable” Power of Attorney to allow your chosen representative to act in your place for medical care and finances

Protecting yourself and family from an incapacitating event can be a complex process. Your Morgan Stanley Financial Advisor can help further explain all of the steps you should be taking in the event of incapacity. Talk with your Morgan Stanley Financial Advisor today or find one here. Don’t wait to get the conversation started on this important topic.

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