Tack­ling a Tough Topic

With more than a mil­lion peo­ple re­ceiv­ing can­cer di­ag­noses each year, ad­vi­sors should be ready to of­fer strate­gic and car­ing ad­vice.

Financial Planning - - CONTENT - By Martin M. Shenkman

With 1.6 mil­lion peo­ple get­ting can­cer each year, ad­vi­sors need to of­fer strate­gic and car­ing ad­vice.

CAN­CER IS A DIF­FI­CULT RE­AL­ITY THAT WILL con­front many clients, ad­vi­sors and their staff mem­bers.

Roughly one in two men and one in three women will de­velop can­cer in their life­time, ac­cord­ing to the Amer­i­can Can­cer So­ci­ety. Statis­tics com­piled by the Na­tional Can­cer In­sti­tute in­di­cate that more than 1.6 mil­lion cases of can­cer are di­ag­nosed in the U.S. an­nu­ally and roughly 600,000 peo­ple die of the dis­ease.

Given th­ese fig­ures, it is a grim re­al­ity that most of us are likely to be touched by can­cer, di­rectly or in­di­rectly.

For ad­vi­sors, all of this means that we need to be pre­pared to be there for clients when they re­ceive a can­cer di­ag­no­sis, and we should be in a po­si­tion to re­spond skill­fully when clients fall ill.


In car­ry­ing out their pro­fes­sional du­ties, plan­ners rou­tinely ad­dress the un­cer­tain­ties of dis­abil­ity and en­cour­age clients to plan for it. This skill set in­cludes re­tire­ment plan­ning, cre­at­ing a rainy day fund, buy­ing dis­abil­ity in­come re­place­ment in­sur­ance, ar­rang­ing for long-term care and more.

This same level of plan­ning should go into pre­par­ing for life-threat­en­ing ill­ness.

Too of­ten, af­ter any neg­a­tive health di­ag­no­sis, clients panic and take im­pul­sive ac­tions that harm their fi­nan­cial se­cu­rity. Plan­ners should com­mu­ni­cate to clients that they are avail­able to as­sist the client and client’s fam­ily as they cope with the com­plex chal­lenge be­fore them.

Rec­om­mend a meet­ing with your client to pre­pare an in­ven­tory of mat­ters and a pri­or­i­tized list of steps. By cre­at­ing such a list, the client can be as­sured they will devote the least amount of time and men­tal en­ergy pos­si­ble to fi­nan­cial mat­ters un­til af­ter they have ad­dressed med­i­cal is­sues, but also not make any de­ci­sions that may harm their fi­nan­cial stand­ing or miss crit­i­cal dead­lines.

For ex­am­ple, the client may con­tinue all ex­ist­ing in­sur­ance in force un­til there is time to meet and eval­u­ate it. How­ever, if there are op­tions to con­vert a life in­sur­ance pol­icy that might ex­pire, th­ese should be ad­dressed.


Con­sider the fol­low­ing when meet­ing with your client re­gard­ing a can­cer di­ag­no­sis or the pos­si­bil­ity of one: Should gifts be made to fam­ily mem­bers, or should all gifts cease be­cause the funds may need to be pre­served to pay for treat­ment?

Are there re­port­ing re­quire­ments un­der dis­abil­ity, longterm care or other in­sur­ance poli­cies?

Are there waivers of pre­mium for life, dis­abil­ity or other poli­cies that might be ac­ti­vated?

Does the client have a tax­able es­tate? Might the client’s es­tate be tax­able if there is a change in the lead­er­ship in Wash­ing­ton in 2020?

Depend­ing on the di­ag­no­sis, es­tate tax plan­ning and in­come tax plan­ning will have to be tai­lored care­fully. For

ex­am­ple, if client as­sets in­clude a fam­ily busi­ness, it might be ad­van­ta­geous to sell the as­sets to a trust to re­duce the value of the client’s tax­able es­tate. But that must be weighed against the pos­si­bil­ity of re­tain­ing the busi­ness in the es­tate to ob­tain a step-up in ba­sis.

Sell­ing as­sets to a trust for an an­nu­ity can be a valu­able plan­ning tech­nique. If an an­nu­i­tant has a short­ened life ex­pectancy, the IRS can ar­gue that the ta­bles nor­mally used to cal­cu­late the an­nu­ity amount are in­ap­pro­pri­ate. If the client’s life ex­pectancy has not been sub­stan­tially re­duced, a sale for a pri­vate an­nu­ity could re­sult in a neg­a­tive wealth trans­fer if the pay­ments that the trust must make back to the client con­tinue for a long pe­riod. Re­view and re­con­sider all busi­ness and pro­fes­sional prac­tice suc­ces­sion plans. What might have to change?

What mag­ni­tude of med­i­cal and re­lated costs might the client in­cur per­son­ally, and how does that af­fect their plan­ning? What im­pact might the can­cer di­ag­no­sis and treat­ment have on the client’s abil­ity to work now and into the fu­ture? How should plan­ning be mod­i­fied? Whom will the client rely on for care, and what will the cost of that as­sis­tance en­tail?


All ex­ist­ing le­gal doc­u­ments should be re­viewed and eval­u­ated. Here are some key mat­ters to con­sider:

Are ben­e­fi­ciary des­ig­na­tions cor­rect? If heirs were left in­ter­ests in re­tire­ment plans di­rectly, sug­gest in­stead that clients des­ig­nate a trust, per­haps struc­tured as a see-through trust, to pro­tect those as­sets. Re­view all ir­rev­o­ca­ble trusts un­der which the ill client may have been given the right to des­ig­nate who re­ceives the trust as­sets. In many in­stances, th­ese pow­ers may be ap­plied to al­low trust as­sets to be in­cluded in the power holder’s es­tate, thereby qual­i­fy­ing those as­sets for a stepup in tax ba­sis upon the ill client’s death. Be cer­tain the client has up-to-date es­tate plan­ning doc­u­ments. Dis­cuss with the client’s at­tor­ney what flex­i­bil­ity can be in­te­grated into those doc­u­ments if they are re­vised, in case the client will not have the abil­ity to mod­ify them in the fu­ture. Ad­dress­ing po­ten­tial fu­ture tax laws is im­por­tant for a client who many not be

If client as­sets in­clude a fam­ily busi­ness, it might be ad­van­ta­geous to sell the as­sets to a trust to re­duce the value of a client’s tax­able es­tate.

able to change pro­vi­sions in the fu­ture. It may be use­ful to give pow­ers to var­i­ous peo­ple to mod­ify terms of trusts, change dis­tri­bu­tion pat­terns or al­low as­sets to be in­cluded in the ill client’s es­tate (or not). Health care doc­u­ments, in­clud­ing the health care proxy des­ig­nat­ing an agent to make med­i­cal de­ci­sions, and a liv­ing will that sets forth the client’s wishes for health care mat­ters, should be up­dated. If doc­u­ments were set up be­fore the di­ag­no­sis was re­ceived, they should be re­vis­ited, as a client’s out­look can change dra­mat­i­cally depend­ing on the sit­u­a­tion.

All share­holder, part­ner­ship, em­ploy­ment and sim­i­lar busi­ness agree­ments should be re­viewed. What types of salary con­tin­u­a­tion pro­vi­sions are there? What hap­pens if a client is un­able to work dur­ing a pe­riod of treat­ment?


To plan ef­fec­tively once there is a di­ag­no­sis, the ad­vi­sor must un­der­stand the specifics as much as pos­si­ble.

Is there a rel­a­tively clear prog­no­sis? This can be a dif­fi­cult topic to broach with a client, but un­der­stand­ing any ex­pected time­line can be of great help to clients and their loved ones. Here are some con­tin­gen­cies to be con­sid­ered:

Much shorter life ex­pectancy. A very short life ex­pectancy prob­a­bly means that the client’s es­tate plan­ning doc­u­ments, ben­e­fi­ciary des­ig­na­tions and so forth should be re­viewed im­me­di­ately, even if this is in­con­ve­nient to the client. Mod­er­ate life ex­pectancy. A some­what longer life ex­pectancy than in the first case might mean that the up­dat­ing of doc­u­ments can be de­ferred, at least for a few months.

If the client is ex­pected to live more than one year, one strate­gic de­ci­sion that may be worth tak­ing is to have the client’s spouse trans­fer all ap­pre­ci­ated as­sets into the name of the ill spouse.

Then, if the ill spouse is able to sur­vive one year af­ter that ac­tion is taken, all ap­pre­ci­ated as­sets trans­ferred will re­ceive a ba­sis step-up on death, thereby elim­i­nat­ing any cap­i­tal gains that had ac­crued be­fore the trans­fer took place.. Rel­a­tively long or nor­mal life ex­pectancy. A longer life ex­pectancy might in­di­cate sig­nif­i­cant tax plan­ning op­por­tu­ni­ties. All the ro­bust es­tate plan­ning mea­sures any client might con­sider may be rea­son­able to dis­cuss and pur­sue.

Im­pact of treat­ment. Chemo­ther­apy, ra­di­a­tion, pain med­i­ca­tions and so forth may make it dif­fi­cult or im­pos­si­ble for a client un­der­go­ing ag­gres­sive treat­ment to make de­ci­sions or sign le­gal doc­u­ments. Thus, it is im­per­a­tive that ad­vi­sors un­der­stand the qual­ity of life the client might have dur­ing his re­main­ing time and the im­pact this may have on the client’s cog­ni­tive abil­i­ties. The client’s loved ones may have to step in to han­dle the com­mu­ni­ca­tions.

Re­vise as­sump­tions. In light of amaz­ing ad­vances in can­cer re­search and treat­ments for cer­tain scat­tered forms of can­cer, the ini­tial in­for­ma­tion con­cern­ing the client’s con­di­tion may change as treat­ment pro­ceeds.

Ad­vi­sors should try to stay in pe­ri­odic com­mu­ni­ca­tion with the client or the client’s fam­ily to ob­tain med­i­cal up­dates, as re­vised prog­noses could have a sig­nif­i­cant im­pact on plan­ning.


To prop­erly ad­vise a client, the ad­vi­sor will need ac­cu­rate in­for­ma­tion. They should ob­tain client per­mis­sion to dis­cuss rel­e­vant plan­ning data with key fam­ily mem­bers in case this is nec­es­sary.

Of­ten, be­cause of the emo­tional stress or the im­pact of treat­ments, clients will be ac­com­pa­nied to med­i­cal meet­ings by a friend or fam­ily mem­ber. En­cour­age this friend or fam­ily mem­ber to take notes so they can help con­vey ac­cu­rate in­for­ma­tion to the client and plan­ner.

Many can­cer pa­tients will have a pal­lia­tive care team as­sist­ing them. Th­ese teams of­ten in­clude a so­cial worker or other pro­fes­sional who is trained and charged with com­mu­ni­cat­ing with the pa­tient about fi­nan­cial mat­ters. In many cases, this in­di­vid­ual may be the ideal per­son with whom the ad­vi­sor should com­mu­ni­cate.

In some in­stances, it might be nec­es­sary for the ad­vi­sor to com­mu­ni­cate di­rectly with the client’s physi­cians. This will re­quire an ap­pro­pri­ate au­tho­riza­tion, likely in the form of a Health In­sur­ance Porta­bil­ity and Ac­count­abil­ity Act (HIPAA) re­lease.

A can­cer di­ag­no­sis can un­der­stand­ably be very dis­tress­ing for a client. Even dis­cussing the pos­si­bil­ity of such a di­ag­no­sis can be chal­leng­ing for ev­ery­one. A proac­tive, sen­si­tive and in­volved ad­vi­sor can help clients un­der­stand how they can best man­age this dif­fi­cult life event.

Is there a rel­a­tively clear prog­no­sis? Un­der­stand­ing any ex­pected time­line can be of great help to clients and their loved ones.

The au­thor, his wife Patti (who has mul­ti­ple scle­ro­sis), and their ther­apy dog Elvis travel across the coun­try for two months ev­ery sum­mer to ed­u­cate plan­ners, CPAS and lawyers on ways to bet­ter ad­vise clients liv­ing with chronic ill­ness and...

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