Compile a list of uncomfortable hot button topics, and no doubt health and money appear near the top of the list. Combine the two, and it’s suddenly clear why so many people fail to lay the groundwork for financial planning in the event of incapacity. After all, who wants to address the difficult realities of old age or debilitating illness, particularly as it relates to finances?
As hard as it is to swallow, old age can rob you of hard-won independence. And at some point, we’ll all may face the reality that we’re unable or unfit to make important calls about finances and medical care.
Too often, though, we don’t proactively address these topics until it’s too late. Only 38% of investors have appointed a Trusted Contact whom their Financial Advisor can contact in the event of diminished capacity.1
So, what prevents many of us from preparing for outcomes that, intellectually, we know we’re all going to face?
Facing the Fear of Planning
“It's painful for people to confront the limits of their own mortality," says Thomas Mierswa Managing Attorney for Morgan Stanley’s Branch Advisory Legal Group. “For the most part, we recoil at the thought of ceding control to the debilitating forces of old age, so we choose not to plan for it.”
Another reason for delay is what’s has been dubbed “the positivity effect."
“People begin to enjoy their retirement—their 'Golden Years'—and they want everything to be perfect. They don't want to recognize unpleasantness," Mierswa explains. “They're enjoying themselves, but as they're faced with the onset of physical and mental limitations, they begin to feel it all slipping away, and they don't want to address it. That holds true whether facing your own incapacity or that of a parent."
Indeed, for the Baby Boomer generation, denial applies not only to themselves but to their parents as well. “They tend to think they have all the time in the world. They think that it will never happen to them and that they will never be like their parents" says Mierswa.
It's a Matter of Planning—and Paperwork
Preparing for incapacity boils down to having the right documents in place to address future financial and medical matters if your ability to do so deteriorates.
More simply, it's about identifying people you trust—while you are still able—who can make decisions for you.
Your Morgan Stanley Financial Advisor can assist with a Trusted Contact Authorization Form, to identify one or more persons to contact if their client displays behavior indicating decreased capacity for making important decisions.
When you designate a Trusted Contact, you authorize a Financial Advisor to discuss your account with someone you trust. Importantly, designating a Trusted Contact does not authorize that person to act on your behalf. Naming a Trusted Contact is not the same as designating a Power of Attorney, which gives your Financial Advisor the ability to work with an authorized person who can act on your account.
Without a Power of Attorney in place, your Financial Advisor—upon identifying diminished capacity—may be unable to act during a severe market event or account-threatening situation. Instead, the Financial Advisor will have to wait for the court system to establish legal authority for someone to act on your behalf. Such a scenario is less than ideal: Once we've learned there is incapacity, we have to act cautiously—and oftentimes quickly.
