It’s not a situation that anyone seeks out, but there’s a good chance that over the course of your career as a financial advisor, you will find yourself helping an older client who is terminally ill.
These clients may need assistance with everything from RRSP accounts to pensions to basics such as making a comprehensive list of their assets and liabilities.
Knowing what to do, in advance, will help everyone involved navigate the shoals inherent in end-of-life decisions, whether administrative or emotional.
“You’re nervous because you’re facing someone who is dying,” says Julian Wise, principal of Wise Advisory Group Inc. in Oakville, Ont. “But this is not about your fears of coping with this situation; it’s about the client. This is a time to use your best listening skills.”
Don’t assume you know how your client feels, Wise adds: “Some people have come to terms with the situation, while others have not. You can say, ‘I don’t know what to say’.” Then give the person the opportunity to talk.”
Christine Van Cauwenberghe, director of tax and estate planning with Investors Group Inc. in Winnipeg, notes that following a terminal diagnosis, your client may be in a state of shock and not able to grasp everything you discuss at the initial meeting. “Technical issues, such as changes in the will or changes in investments,” she advises, “should be followed up with an email to double-confirm what the client wants to happen.”
You also will want to obtain your client’s written consent to include other family members or friends in future correspondence. “It’s been my experience that clients want to share information at this time,” Van Cauwenberghe says. “But make sure the client is comfortable with this.”
If your client can no longer make financial decisions, she adds, you cannot discuss his or her financial information with anyone other than the person who holds that client’s power of attorney for financial matters unless you have the consent of the client — preferably, in writing. “And you can’t do that until that person produces a valid POA document,” she says. “Then you can talk to [the POA-holder] as if he was the client.”
If your client still has mental capacity, Van Cauwenberghe says, “review the POA document. Are the designated attorneys still alive and capable of acting? Have they moved away? One may now be living in the U.S., and we cannot accept trading instructions from U.S. residents.” The role of the person with POA is to preserve and protect the assets of your client. “He can’t make a new will for the client, change beneficiary designations or give away the client’s property.”
The advisor’s job, Wise says, is to scrutinize everything in detail to ensure that what a client wants to happen after his or her death actually happens. This task starts with the will.
It’s not uncommon for a terminally ill person to marry, often a common-law spouse, before death, say Margaret Kerr and JoAnn Kurtz, lawyers in Toronto and co-authors of Wills and Estates for Canadians for Dummies. Says Kerr: “So, keep in mind that a marriage will invalidate an existing will and a new one will need to be drawn up.”
On the other hand, if the will was drawn up years ago, parts of it may be out of date. “Are the executors still alive, and do they make sense? Do they get along?” Wise asks. “You’ll want to make sure the decisions they make are what your client would want. If you think there will be disputes, ask the client if he’d like your truthful advice. Chances are that he will. Tell him you think the executors won’t get along, but, if he still wants them, you can put backstops in place, such as appointing a mediator in the event of disputes.”
Check with your client regarding whether the beneficiaries of the will and beneficiaries of specific assets held outside the will are still appropriate, Van Cauwenberghe adds: “We see situations where designations for group [employee] plans were not updated and ex-spouses are down to receive funds from these plans. Check to see whether beneficiaries of all group plans, registered plans and personal insurance policies are up to date.”
Review your client’s will and estate plan if there’s been a change in either the composition or the value of the client’s assets, Kurtz says, such as those that result from a market downturn.
“And make sure specific gifts to beneficiaries still exist, or the client may not be giving them as much as he wanted,” Van Cauwenberghe adds. “Property and other assets may have been sold over the years. That’s why we don’t recommend leaving specific gifts in a will, but rather a certain portion of the estate.”
Wise suggests looking into strategies to reduce the tax bite on the estate and to beneficiaries. RRSPs or RRIFs, for example, can be rolled over tax-free directly to a spouse. But if beneficiaries are minors, it’s better to pass these assets through the estate, using a trust. Otherwise, the minors will not have access to the funds until they reach the age of majority.
Van Cauwenberghe says it will probably make sense to keep your client’s investment portfolio as conservative as possible at this time. “But the client or the POA needs to look at the whole picture,” she adds. “I’ve seen situations where the estate is in equities with large gains, and to rebalance would trigger significant gains; in some situations, the client has provided for large charitable donations in the will to offset these gains.
“If the POA rebalances and triggers the gains, and the client lives for another couple of years,” she continues, “it is possible that the charitable donation could go unused, potentially resulting in beneficiaries questioning why the POA triggered gains before he had to.”
And don’t pretend to be an expert in areas that you aren’t, Wise says: “If you don’t know the tax implications of the will or are unfamiliar with setting up trusts, bring in someone with expertise.”
Also review your client’s personal-care directive, Van Cauwenberghe says: “Does it still reflect the client’s wishes? If not, make sure the client states clearly what he wants. If he’s dictated that he doesn’t want extended life-saving measures, it will be difficult for family members to object.”
Advisors don’t usually get overly involved in funeral arrangements, she adds, but if nothing is in place, it is appropriate to start that conversation. “The client may want to prepay the funeral if it would be a financial strain on beneficiaries,” she says. “You can also encourage him to write down the kind of service he’d like so it won’t be a guessing game for the bereaved.”
This is also an appropriate time to get all your ducks in a row for the period immediately following your client’s death. “Dig up all the client’s documents: birth, marriage and divorce certificates, bank accounts, vehicle registrations, land title registrations, share certificates, minute books for businesses, trust agreements, shareholders’ agreements and partnership agreements,” Van Cauwenberghe says. “This is also a good time to introduce yourself to executors you haven’t met. But don’t reveal any information other than what the client has authorized you to.” IE