How to plan for the unforeseen
Even thinking about an unexpected, life-changing event can be unsettling. But death or illness can happen at any time.
Unfortunately, people do not plan for such events. And statistically, most younger people could go years without planning and not really worry.
Of course, the unexpected does happen, and without proper planning, the consequences can be magnified. So what does it take to get people to lay out their wishes concerning their finances, health care and possessions, plus any emotional messages, to loved ones? A lot, advisers say, but persistent nudging does work.
What people think is unexpected varies. To give a nod to former Defense Secretary Donald H. Rumsfeld’s known unknowns and unknown unknowns, there are unexpected events that cannot be prepared for — like the mass shooting in Las Vegas on Oct. 1.
But there are also unexpected events that can be blunted or
“The best way to plan for an event you can’t control is to put your own plan in place. Otherwise, someone else is going to be putting a plan in place for you.” SHARON KLEIN, PRESIDENT OF THE NEW YORK METROPOLITAN REGION FOR WILMINGTON TRUST.
controlled with some planning.
Take the desire to ensure that your family is cared for if you die unexpectedly. Parents are advised to buy relatively inexpensive term life insurance to provide money to care for their children, just in case.
Another option is disability insurance, which is intended for healthy working-age people, who are more likely to become disabled than die.
Disability insurance is more expensive than life insurance, but these two planning solutions require comparatively little effort. Most people understand they should have both forms of insurance, though not everyone chooses to buy it.
The planning becomes more complex with the softer issues: the questions to which there are multiple but sometimes conflicting answers. Who should be contacted if something goes wrong? How do I want my personal possessions divided? What are my thoughts about going into a nursing home? Do I want to be resuscitated if I go into cardiac arrest? Any thoughts on a funeral?
“The best way to plan for an event you can’t control is to put your own plan in place,” says Sharon Klein, president of the New York metropolitan region for Wilmington Trust. “Otherwise, someone else is going to be putting a plan in place for you.”
Clients of a firm like Wilmington Trust are wealthy and receive a higher level of attention from advisers. But there are plenty of web-based services that aim to help anyone plan.
Everplans is one site. It guides users through a list of documents and discussions that need to be considered: wills, insurance, a health-care directive, passwords for email and social-media accounts, funeral planning. But it also has sections for storing keepsakes like family recipes or for leaving instructions about pet care or how things work in the home.
“We want to help people think of the unexpected,” says Abby Schneiderman, co-founder and co-chief executive of Everplans. “It could be anything unexpected. Natural disaster, flood, fire, illness, a death — you don’t know. The idea is: Don’t wait until it’s too late.”
The service, which costs individuals $75 a year, prods users to do more. It offers a 10-minute “just in case” plan that asks people to put down as much information as they know from memory, Schneiderman says.
“We want to be a onestop shop, but we also try to get people to take it a piece at a time,” she says. For instance, the service sends out electronic reminders to prompt users to take one more step.
Final Roadmap is another such site. It was born out of a nurse’s frustration with families being unprepared for the decisions and logistical considerations that happen at the end of life.
Steve Byrne, a co-founder of Final Roadmap, says the website, which charges a one-time fee of $249, held legal and financial documents, instructions for death and messages for loved ones.
“All of those notifications can prevent problems that supersede money problems,” he says. Without proper instructions, those decisions “can blow up and result in siblings not ever talking to each other.”
Not planning for the expected can also cause unnecessary confusion and stress.
“There’s a growing emphasis placed on how do you want to live the end of your days,” says Rachel J. Sherman, vice president of client service at Market Street Trust Co., which began as the family office for the founders of Corning Glass Works. “It needs more attention. People don’t want to be a burden.”
Monette Booth, 73, who lives in the Virgin Islands, says she had learned from her mother and aunt to keep her affairs in order. They “stressed to us children that life is never guaranteed and one should always plan for the future,” she says.
After her husband, Peter, a retired Corning executive, died in 2011, she stepped up her planning to ensure that she could grow old where she wanted, that she would not burden her relatives and that her assets would eventually be disposed of as she wished.
“For practicality and having no children, I recognized that at some point in my life, I will need help,” she says. “It’s taken a load off my mind to have made the decision.”
Booth says she had become part of a “circle of friends” in which she and others shared information that someone would need if one of them became incapacitated.
She says the planning was not difficult to contemplate. “I thought it made a lot of sense,” she says. “Otherwise, one is being an ostrich and not paying attention. This is part of an inevitable process.”
Most people are not this pragmatic, let alone proactive and organized. One solution for affluent people is a revocable trust, which can be used as a repository for financial assets but also documents to guide the family.
Klein of Wilmington Trust says many clients had revocable trusts drafted so that they became irrevocable in the event of disability or death. She says they could then function as a more sophisticated power of attorney; they could also help avoid the probate process of a will that delays access to the assets.
Yet deciding what to do to prepare, for example, for the possibility of becoming incapacitated by illness is a test of managing expectations around the unexpected. Jeffrey Maurer, chief executive of Evercore Wealth Management, says he presented the case rationally.
“My major concern for clients, friends and family, for myself, is what is the likelihood, if one were a gambling person, that I’m going to outlive my current cognitive abilities?” he says.