ESTATE PLANNING
credit card statements. Family should also physically check to see where the client’ s valuables are.
When it comes to naming a power of attorney, every state has different requirements.“ Sometimes you need one witness. Sometimes you need three witnesses,” Gatz says.“ Sometimes you can nominate them without a notary. Sometimes you need a notary.”
She says she likes the Five Wishes document— a legal advanced directive that works in most states.( You can find it at“ FiveWishes. org.”) Advanced directives don’ t need lawyers to be filled out.
Many people who are ahead of the
game will execute power of attorney in different states to avoid problems.“ A Florida hospital may not necessarily take a New York power of attorney,” Gatz says.
Advisors must be cognizant of where they client is going to end up living. Gatz says she’ s seen one case where the powers of attorney were executed in multiple states.“ The patient was a New York resident but was on vacation in Florida and there was a fight over which documents were most the recent and where they were executed. … The hospitals are paralyzed if there are conflicting documents.” They have to get courts involved, she says.
Robert DiQuollo, a senior wealth advisor at Mariner Wealth, says that given the way duties fall on family members and friends in these situations, it’ s often possible that the person who gets the power won’ t be financially savvy. The family member who takes on the responsibility might want to have access to any discussions with the clients’ financial advisors to make sure they get a financial education— and understand the stocks, funds, insurance policies, etc., the client holds.
Power of attorney is also going to have to be recognized by financial institutions.“ A lot of times, financial institutions, big brokerage houses for example, they’ ve got their own set forms,” says West.“ Just because I’ ve got something from my attorney doesn’ t mean it’ s the same as the attorney-of-fact form out of Fidelity or Schwab. So there’ s an extra step that I’ ve got to oftentimes take to make sure that that delegated authority is recognized by financial institutions.”
For instance, some states won’ t allow a power of attorney to sell a house unless the particular property and the lot is listed in the document, he says. You might
Some states won’ t allow a power of attorney to sell a house unless the particular property and the lot is listed in the document, West says. You might have to get a conservatorship instead.
have to get a conservatorship instead.
DiQuollo notes there are multiple types of power of attorney— a durable power of attorney that goes into effect automatically and a springing power that starts as soon as a client loses capacity. But no matter which you choose,“ I think it’ s just as important as a will,” he says.“ I think they should be done in concert.”
Does Money Management Change?
An Alzheimer’ s diagnosis even changes money management, says West, since the job of money has changed for someone who has long-term health needs and senior-care costs. Imagine $ 5,000, $ 10,000 or $ 20,000 a month for senior housing or cognitive help.“ That dramatically changes the job of the money,” he says. Portfolios typically need to be retooled.
“ If you’ re spending an enormous amount of money on medical expenses … right now you can get a very significant itemized medical expense deduction,” says West. And since there’ s no Alzheimer’ s cure and the disease can linger for years, even decades, the person’ s tax situation is going to be materially different.
“ So it’ s important for portfolio managers: If a client is no longer going to be owing taxes because of this deduction, then why are you in municipal bonds? Why aren’ t you taking more money out of the IRA? It dramatically impacts the way that the money used to be managed.”
Tax law says you can deduct medical and dental expenses over 7.5 % of your adjusted gross income( AGI). So if your income is $ 75,000, you can write off medical expenses over $ 5,625.
The liquidity needs will change the role of the portfolio, he says. If someone has to sell a house or prepay to move into a community,“ the amount of liquidity the household needs changes and an advisor needs to be attendant to that,” West says. Withdrawals are going to be a lot lumpier and irregular.
Publication 502 by the IRS lists everything you can deduct as a medical expense, he says.“ You’ ll see overwhelmingly that cognitive-impairment-related care is deductible.”
That means tens of thousands of dollars a year could be written off.( New York State says the average nursing home costs $ 159,000 a year.) That also means you should change your withholding to keep more cash on hand, West says. Which means you can take more than the minimum from your IRA.
Too Late?
So what if it’ s too late— someone has already suffered from serious cognitive issues and doesn’ t have a will and no power of attorney? You might need to seek guardianship( power over their personal care) or conservatorship( power over their assets), says West.
The first thing is to document the incapacity and make sure the legal definition is met.
“ Try to figure out what you know about different stakeholders in the family and identify them,” says West,“ taking a look at existing ownership and how things are titled. Is there any action the investor is making that puts themselves at harm? Do you need to go through the process of freezing or limiting account access?”
52 | FINANCIAL ADVISOR MAGAZINE | JUNE 2025 WWW. FA-MAG. COM