The news was not good: Greg Plechner, a CFP in New Jersey, learned from an accountant earlier this year that a mutual client had only three months to live. Before this revelation, Plechner had known that the client, a doctor, had inoperable cancer, but he was unaware of the gravity of his situation because the client and his spouse had been guarded about the details.
Many financial planners routinely tell their clients to prepare to live into their nineties, but clients diagnosed with a fatal illness represent a whole other extreme. Getting full disclosure about fatal medical conditions is often difficult, according to Plechner and other planners who have faced such circumstances.
Given the significant roadblocks established by the Health Insurance Portability and Accountability Act of 1996, planners should never count on getting information about a client's medical condition directly from doctors. Even if a client wants his planner to talk to his doctors, federal rules make this difficult and time-consuming. Instead, a planner often must get information directly from a client and his or her family, and then help them to face it and its consequences for their finances.
Plechner, a principal at Modera Wealth Management, which has offices in Westwood, N.J., and Boston, and more than $900 million in assets under management; and Martin Shenkman, a Paramus, N.J., estate planner, a Financial Planning contributing writer and the author of 35 books, including Funding the Cure, have worked together advising fatally ill clients and their spouses.
Both say many fatally ill clients and their spouses are in denial about their bad news. So even if a planner has learned of a diagnosis, he or she must continue to push for openness and realistic responses from clients who often are resistant.
Shenkman encourages planners helping such clients to read the books of psychiatrist Elisabeth KÃ¼bler-Ross, even though they are somewhat dated. In her masterwork, On Death and Dying, published in 1969, the author identified five stages of reactions to death: denial and isolation, anger, bargaining, depression and acceptance. "I favor talking about death and dying with the patients long before it actually happens if the patient indicates he wants to," KÃ¼bler-Ross writes in the book.
But she warns that denial can ebb and flow. A dying client can want to face his fate and then revert to avoiding that discussion. Until you get beyond the denial, Shenkman says, "it becomes difficult to deal with a lot of other stuff."
In these delicate situations, planners should engage in "hand-holding and some pushing," Plechner says. Sometimes, this can require innovation. He recently arranged, for instance, to conduct a webinar for a dying client and his spouse to help them complete tasks that, in less-stressful times, they could have accomplished on their own. Plechner, who's also an accountant and an attorney, stayed on the phone and online with the pair while transferring documents electronically, waited while they uploaded and printed the paperwork, and then had them fax the signed copies - all to make sure the clients took the necessary steps before it was too late.
Shenkman recommends that planners get contact information for a client's other advisors and build a team consisting of an accountant, an estate lawyer, a financial planner and a medical care planner, who helps the others understand the costs of treatment. Shenkman says the existence of such a team sets up safeguards for the dying client's heirs since the professionals on the team will remain responsible - and watchful of each other, if such a need arises - when a client can no longer protect assets.
J. Patrick Collins, managing director of Greenspring Wealth Management in Towson, Md., which has $600 million in assets under management, says the fatally ill clients he has advised did not react so much with denial, but rather with "a certain hesitancy" and "dragging of their feet." He was somewhat surprised by their lack of urgency. "As a non-emotional outsider," he recalls, "I thought they should be walking out of the office and getting these things done, moving a little faster."
For clients with a fatal diagnosis, financial planners are advised to immediately pursue a checklist of important steps to save the client and his or her heirs future expenses and taxes. "You jump all over the planning and tell the client, 'Get this off your plate and focus on getting better,' Shenkman says. "It's a clarion call."
This to-do list should include updating all important documents, including a living will or medical directives, assigning immediate (not springing) power of attorney, and making sure any trusts are documented properly.
Collins also encourages planners to take care of simple tasks: Take an inventory of assets; check for accuracy of the designations of title ownership, trustees and beneficiaries, and make sure the individuals are prepared to step into those roles; and address in writing any letter, comment or directive that the client knows might be a matter of dispute, particularly in cases where clients have remarried. To head off potential litigation among heirs after a client dies, "make sure all the intentions are known, especially a disinheritance," he says.
Regarding more sophisticated financial actions, Shenkman recommends giving consideration to having a spouse transfer highly appreciated assets to the fatally ill client to get a stepped-up basis for tax purposes. Such a strategy should be pursued as soon as possible. It represents an effective way under the tax law to avoid paying capital gains tax, but only if the individual has owned the assets for at least one year before he or she dies.
For a very wealthy dying client, there is another way to save on taxes for his or her heirs: Make gifts of $5million. The federal exemption on gift and estate taxes is currently $5.12 million, but Shenkman says that amount will drop unless lawmakers act.
Do some dying clients - like Jack Nicholson's character in the 2007 movie The Bucket List- want to pursue longtime goals before time runs out? That is rare, in Plechner's experience. Usually, the focus turns to others, he says.
Andrew Miceli, president of Miceli CastellÃ³n in Boca Raton, Fla., which has more than $175 million in assets under management, says he believes most clients, even before death is imminent, are most concerned about providing for those they are leaving behind. But when advising clients facing death, Miceli believes the financial planner is obliged to dig deep and find out what they want out of life.
"Some want trips to Europe," Miceli says. "Others have taken all those trips and they just want to be sure that their kids don't turn out to be monsters. What's really important to understand is what drives them to make those decisions."
Generally, Miceli and Collins ask all of their clients to assess meaningful goals. Typically, Collins says, those lists dwell on experiences and relationships rather than on material possessions. "They want, for instance, to reconcile with a son," he says. But if clients faced with fatal illnesses can accomplish long-standing goals without bankrupting the estate, Collins says, they should be encouraged to do so.
Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.