by Ben L. Jennings, Director of Planning Research, CPA/PFS, CFP®
In a August blog post, I introduced the concept (and benefits) of proactive aging: preparing well for the typical transitions we (or our parents or other loved ones) face as we get older. These transitions include where we live, how we handle driving and transportation, how we make and share financial decisions, and how to negotiate health and medical choices. Last month, Kevin Slater discussed preparing for the unexpected situations in life (by the way, the likelihood of those “unexpected things” increases as we age!). How’s that for a punch in the face?
As I've been broaching this topic in client conversations, often the initial reaction may be that “the planning is done” because “I have estate planning documents” (a will, durable power of attorney, etc.) in place. I want to point out that this is necessary, but insufficient preparation. Sorry.
For each of the transition areas I noted above, I contend there is a process of at least six steps to follow (and having legal documents in place is only a partial aspect of one of the steps!). Here’s what I mean:
Clarification. This whole endeavor is about maintaining as much control as you can, and to do that, you have to be clear on your philosophy on the subject, your personal goals, and your preferences. You may need to do some research and reflection.
Authorization. Here is where you get those legal documents in place. You may also benefit from formalizing agreements among your family about what you want to have happen in various scenarios.
Organization. You (may) have your life arranged in a way that it’s easy for you to take care of (if you don’t, that’s another great reason to tackle this). Think also of ways you can arrange things so they not only work well for you now, but can be comfortably maintained as life changes for you, and even would be relatively easy for someone else to pick up if needed.
Information. Once you have things 80% organized (don’t let the perfect be the enemy of the good!), it’s time to take a first pass at showing others how to access data and documents they may need to help you manage your financial life at some point.
Simulation. Test your progress by practicing your plans to make sure your preparation is complete. If you plan to use public transportation when you limit your driving, can you get to the nearest transit stop? Can your spouse figure out how to pay your monthly bills? Would your health care agent make the choices you want in particular medical scenarios?
Continuation. Maintain your plans over time. You can probably continue to simplify things to make it easier for others to help you. Your preferences for who to have in what role may change. You may be able to work on that other 20% of your organization.
Following this kind of process will put you well on the way to having your house in order. Be proactive and put in the effort now, you’ll be glad you did when the time comes.