The news these days is full of warnings and concerns about inflation, interest rates, housing market corrections, and stock market fluctuations. There are many suggestions about what to do to protect ourselves if any of this comes to pass, especially protecting our retirement funds. But in truth, the biggest risk to most of us when it comes to protecting our assets is planning against incapacity, which is a gradual or sudden decline in our cognitive abilities.
How can a cognitive decline put us at risk for most of us?
An inability to manage our finances or health can seriously alter our quality of life in retirement or after a sudden medical event like an accident or illness. A car accident can render us incapable of managing our affairs, for example. So can a medical event like a stroke or heart attack.
There is also the slow decline of capacity that comes with age – this one is tricky, as it isn’t readily apparent at first, especially to people you see for routine things like bankers, doctors, or lawyers. The first people to notice cognitive decline is usually close family members, but since we have a routine it can be hard to pinpoint until it is too late.
If the decline has gone too far, paperwork can no longer be drawn up because the person can’t sign it. In the event of a sudden decline, like a stroke or head injury, there is no opportunity to have the paperwork drawn up.
In those cases, the family will have to apply for a Court order called Committeeship. That is a Court action to have someone appointed to act as the legal representative for a person’s health and finances. In the USA it is called a conservatorship – think Britany Spears – and we all know how messy that can get, especially if there is some issue in who is appointed. Also, the cost is high – two doctors have to give evidence and all of the person’s financial and medical information has to be gathered and provided to the Court and the Public Guardian & Trustee https://www.trustee.bc.ca/Pages/default.aspx has to be involved and stay involved throughout the Committeeship, which can be very onerous for the person appointed.
The other risk is that of being taken advantage of by people who have ulterior motives. They could cause you to invest or scam you into draining your assets or savings away. If you have already appointed someone and the correct paperwork is in place, any attempts to take advantage can be blocked. If they have noticed your cognitive decline, or it has been diagnosed, they can take steps to restrict access to investments or accounts to prevent anyone from taking advantage. The person you have appointed can then use their paperwork to step in and assist you or undo what has been done to you without your knowledge or understanding.
What are the main documents we need to protect ourselves?
There are lots of ways to plan for this without giving up control until necessary. A power of attorney is the document you make to appoint someone to manage your legal and financial affairs.
A representation agreement is a document you sign to appoint someone to assist you in making medical and personal care decisions and if you cannot make them for yourself or are making unwise decisions due to your illness, they can act as the substitute decision maker to make those for you. This can be helpful if we are unwell so they can act as your eyes and ears at medical appointments and help you sort out and remember what was said.
A power of attorney also can assist if you need to sell your house, sign paperwork for rental agreements or the paperwork at a retirement home, and if you need assistance due to a sudden event, they can help arrange for the things that you need to return home, like hiring care professionals or making alterations to your home to keep you safe.
A lawyer can help you get these documents in place and discuss all different scenarios you may not even have thought of to be sure what you have in place is exactly what you want and need. No matter what happens.
A great resource is a guide put out by the Ministry of Health called “My Voice”.
https://www.health.gov.bc.ca/library/publications/year/2020/MyVoice-AdvanceCarePlanningGuide.pdf
It is an advanced Care Planning Guide you can go through with your family and discuss all the different medical scenarios and what you would want or don’t want should those arise. You can access it online or they will mail you one. It has some basic forms and also you can create an advance care directive so your wishes are clear. These conversations can be hard to have, so having an outline and a booklet to fill out can help that move along and everyone needs these documents at every stage in life – people think they are too young to need this, but every day we hear about a motor vehicle or workplace accident that leaves someone in need of assistance for their care.
The truth is we just never really know what will happen but we do know what will happen if we aren’t prepared.
What else can we do to protect ourselves?
There are other things you can do to lessen your burden and the burden on your loved ones. Put beneficiaries on all of your registered investments and insurance. This puts funds in the hands of your loved ones right away if they need them.
Consider trust funds – these are not just for the rich and famous anymore. Or we are all arguably rich and famous if we own real estate with the average price being ½ million dollars. It is irresponsible to leave that much money to children or young adults – there needs to be a trust in place to protect them until they are mature enough to handle the funds responsibly.
You should let your financial advisor know what you want to be done and what you have in place should you be incapacitated. They can also help ensure you are not taken advantage of or direct the people you have appointed as power of attorney as to your wishes.
Finally, as we age, simplifying our products and procedures can go a long way to ensuring we are not scammed or taken advantage of or that we simply mishandle an asset and cause it to lose value.
Consolidate accounts, automate payments and err towards easy-to-understand (and manageable) products from companies you trust. Pop-up ads for products are usually a bad idea to simply click ‘buy’. There is usually a catch in the fine print – and it is called fine print for a reason! Lots of us can’t even see it.
In retirement, we all worry about decreasing markets and increasing expenses. But a risk that is ever-present as we age is the possible decline in our mental faculties. Rather than just accept the risk, you can take steps to get out ahead of this concern and have a plan. Even if you inevitably lose your ability to handle your health and wealth, you can have a process in place that assures your protection.
