February 28, 2007

For months I have watched the news and followed the financial markets looking for inspiration in writing this personal finance (with a twist) column. There was nothing but a barrage of the same frustrating items---seemingly endless violence in Iraq, presidential hopefuls announcing their intentions to announce their pre-announcement plans, and catastrophic weather stories.  With no juicy bones being thrown my way, in my previous email, I had to reach out to the Miami Dolphins ticket policy (1987 club seat contract price-$800…2007 price, $2800!) in order to illustrate how inflation can make successful financial/retirement planning so challenging.

THEN THE ASTRONAUT, LISA NOWAK STORY HIT

Talk about a salacious story, compelling on so many levels…Nowak decides to take a 900-mile drive from Texas to Florida with duct tape, weapons, rubber tubing, latex gloves, and diapers—you know the rest. Finally, after a long dry spell of at least a few weeks, another headline grabbing, ‘fall from grace’ story begging for analysis and the input of endless experts.

DOES THE LISA NOWAK STORY HAVE RELEVANCE TO YOU & I?

I think it does and I think it should. Astronaut Nowak seemed to plunge from her status as a highly intelligent and functional Astronaut, blessed with that legendary “right stuff,” to a criminal court defendant, charged with attempted murder, in such a short period.  How does a mother of small children with a previously stellar psychological profile, tumble into the world of the criminally insane, in what seems to be a heartbeat?

PERHAPS WE ALL WALK A FINE LINE

Nowak seems to be yet another, albeit more puzzling and dramatic case of a prominent individual, suddenly afflicted with emotional instability and/or mental illness. As with the other recent cases of celebrities, politicians etc.,  “losing it,” there is an instinctive discomfort and uneasiness in our reactions and there is a tendency to poke fun or label the behavior as an aberration.  There is a desire to distance ourselves and to believe that this can never happen to ‘you or I, or my family or my close friends.’ But as the steady stream of sudden meltdowns, of lives destroyed by addictions, compulsions, and inner demons plays out on our papers’ front pages, one has to wonder if there is a cautionary aspect we should not be ignoring. Were there not signs, subtle and then not so subtle, that alerted others to their loved ones’ struggles in these famous cases?

While gradual or dramatic changes in mental or psychological status can and do occur at any age, in South Florida it is of particular concern with our large elderly population. The cognitive diminution that can afflict seniors is a reality that financial and estate planners face, unfortunately, almost on a regular basis. A sharp and vibrant 60-year-old, seeking our pre-retirement planning advice, when we opened in 1979 is now 88 years old. Often, an advisor who has had a relationship with such a client throughout those past 28 years begins to find that he, or she is beginning to make questionable decisions and/or beginning to display signs of diminished cognitive function.

BUT NOWAK IS A YOUNG WOMAN!

But, of course, the example above is not the same as Lisa Nowak scenario, is it? Nowak is a young woman who should not be suffering from the cognitive challenges that are more typical of the aging. Nowak’s case serves as an example of mental dysfunction that can afflict (whether suddenly or gradually) the young, the ‘not so young’, and everyone in between. Those of us with open eyes, ready to actually observe and focus know that there are potential Lisa Nowak’s all around us; friends, family, clients, etc. Many of us, who have had to observe and deal with individuals in our own lives with an existing or newly debilitating disability, whether mental or physical, know the toll that it takes on all parties with vested interests.

Yes, we can laugh at the image of Nowak in a diaper with a roll of duct tape in her hand speeding toward Florida with her nefarious, twisted agenda. But remember who she was, and what she accomplished and how much she means to those who love her. Remember that Lisa Nowak is just like you and me, and everyone that’s close to us---because in my view, we never know what curves life will throw our way…  we all walk the fine line….the fine line between hope and despair, success and failure, health and infirmity, stability and instability.

HOW TO PLAN FOR MENTAL/PHYSICAL DISABILITY—FOR THE OLD AND YOUNG

If proper estate/financial planning is in place should there be an onset of a disability, at least there can be some semblance of order during a stressful time,  and families can better focus their time and energy on their social and mental health challenges.

INSURING AGAINST DISABILITY

1. Mental Health Insurance Coverage—Health insurance providers are notoriously strict (I am being kind) and unbending in their handling of health insurance claims. To make sure you get all you are entitled to, do as much research on your plan’s specifications, and be as prepared as possible when dealing with your provider. There are Mental Health advocacy groups and websites, such as National Alliance on Mental Illness (NAMI.org) you can consult that are actively fighting for pending “Parity” legislation; would require health insurance coverage for mental health problems to be equal to Health Insurance for other illnesses.

2. Disability Insurance—This is income replacement insurance purchased privately and/or at your place of work. In the event of a disability causing you to miss work, the insurer will pay a percentage of your salary or earnings. Disability Policies can be purchased for both short-term and long-term coverage.
                 
 3. Long-Term Care Insurance—While we don’t want to ever think about ourselves or a loved one needing long-term care it is a reality that, if not faced now, could cause emotional and financial devastation in the future. Buying Long Term Care Insurance for yourself or for your parents can provide protection of income or assets as well as flexibility in selecting your future care options.

PROVISIONS IN YOUR WILL FOR FAMILY MEMBERS WITH SPECIAL NEEDS
 
Special Needs Trust /Discretionary Support Trusts-Such a trust is used to provide for a person with a disability, including drug or alcohol addiction, so that trust funds are paid for his or her benefit, but not directly to him or her.  It is called discretionary because distributions are made at the discretion of the trustee and may be suspended, as the trustee deems necessary.

INSURING AGAINST GUARDIANSHIP

Should you be adjudicated incapacitated by a court of law, and you do not have the following plan for disability in place, you may be forced into legal guardianship proceedings.  Any person can petition to have you declared incompetent and/or to be appointed as your guardian.  Guardianships are extremely intrusive and rack up huge legal bills.  A revocable trust, however, along with the appropriate advance directives, can be used to prevent the institution of guardianship proceedings.

1. Revocable Living Trust- Revocable living trusts are used to avoid probate court and to control the distribution of your assets after death.  Most people are not aware, however, of the tremendous disability planning opportunity afforded within the terms of the revocable trust. For example, you may direct that you prefer home care to a nursing home setting, you may require the successor trustee (the person who takes your place in controlling the assets in the event of your disability) to keep you in the utmost comfort with the best quality medical care, even to the extent of exhausting all trust assets.

2. Advance Directives- Advance Directives include a Power of Attorney, a Designation of Health Care Surrogate and a Living Will.  The general purpose of these documents is to empower persons of your choosing to make decisions for you regarding your health and property in the event that you are unable to do so, and, thereby, avoid the necessity of a legal guardianship proceeding should you become incapacitated or disabled.

Durable Power of Attorney           
As “principal” of your Durable Power of Attorney, you empower a person of your choosing - your “attorney-in-fact” - to handle your financial affairs should you be unable to.  The Durable Power of Attorney is effective as soon as you sign it, and you should therefore trust the person you name as attorney-in-fact completely.

Designation of Health Care Surrogate
This directive states whom you designate to make health care decisions for you, should you be unable to. The Designation of Health Care Surrogate document becomes effective at any time in which you are unable to make medical decisions for yourself. 

Living Will
The value of a Living Will cannot be underestimated.  The law presumes that you want to be kept alive at any cost, both literally and physically, regardless of your physical condition and/or likelihood of recovery.  A Living Will declares your wishes regarding the withholding or administration of medical procedures and medication in the event that you are in a persistent vegetative state from which you are unlikely to recover. 

Austin A. Frye, MBA, JD, CFP®

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