Creating Clarity: An Invaluable Gift to Your Loved Ones

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Stacie Jacobsen: [00:00:00] Thanks so much for joining us today on The Pulse by Bernstein, where we bring you insights on the economy, [00:00:15] global markets, and all the complexities of wealth management. I'm your host, Stacie Jacobsen. On today's show, we're taking a look at end-of-life planning, and I'm pleased to welcome two of my colleagues, Jennifer Goode director for the Institute on Trust and Estates, and Morgan [00:00:30] Campbell, Associate Director of Investment and Wealth Strategies, both here at Bernstein.

First, let's take a pulse of the market. The US equity market is off to a strong start, having entered a technical bull market in the middle of June from the October lows, but the real power in the [00:00:45] rally has come from just a few stocks, we'll call it the AI rally. The market cap weighted s and p 500 increased roughly 15% year to date as of mid-June, while an equal weighted version of the same index increased by around 5%.

This reflects the [00:01:00] stark outperformance in just a few large cap tech names that have benefited from the market's enthusiasm around the recent advances in ai. But what about the rest of the market? Despite this year's rally, there are still many pockets of opportunity where investors can find quality [00:01:15] and value.

Let's take healthcare for example. Some parts of the sector have underperformed recently, even though they're likely to hold up relatively better in an economic slowdown, which we still see looming on the horizon. And make sure you follow the show because our next episode will be [00:01:30] all about AI. Now let's move on to today's episode.

Benjamin Franklin famously wrote that the only two certainties in life are death and taxes. In our previous episodes, we've talked about strategies for lowering your estate tax bill and transferring wealth to the next [00:01:45] generation. And it's safe to say though, that death applies to everyone and planning ahead is critical.

As anyone who has experienced the death of a loved one can testify, the bureaucratic aftermath is often overwhelming and complicated. [00:02:00] Now, although defining and then clearly communicating our wishes for what happens to our assets and our legacy is a task that most of us just do not look forward to, but it is an act of love for those that we leave behind.

And I will repeat that. It is an [00:02:15] act of love for those we leave behind. So what is the best way to get started? Well, leaving it to the last minute is certainly less than ideal, as there is no guarantee that you have time to get it done. Still, while 68% of [00:02:30] Americans agree that it is important to make end of life plans, only 35% of us have done it.

End of life planning is more complex than many people realize. With medical, legal, financial, and legacy decisions in involved, [00:02:45] there may be questions that come to mind once you begin the process. For example, you know, who should you appoint to make all of those decisions on your behalf? Should you die or become incapacitated?

It may seem obvious that a spouse or a child might be that [00:03:00] right person, but they will likely be too distressed to handle all of these decisions. There are also some 21st century considerations like what to do with your digital legacy, all those photos, passwords, and your entire social media presence.

[00:03:15] My guest today will help us answer all these questions and more when we come back. Stay with

us.

Clare Golla: Hi, I'm Clare Golla, host of Bernstein's Inspired Investing, a podcast for those in the nonprofit, philanthropic, and broader social sectors. Check out this month's episode [00:03:30] as we chat with Holly Welch Stubbing.

She is the shining star at the helm of E4E Relief, an organization that is delivering hundreds of millions of dollars in emergency financial relief to workers around the world. Listen to inspired investing on your favorite podcast [00:03:45] platform.

Stacie Jacobsen: Welcome back to the Pulse by Bernstein. I'm here with Jennifer Goode, director for the Institute on Trust and Estates, and Morgan Campbell, Associate Director of Investment and Wealth Strategies here at Bernstein.

Jennifer Goode: Thanks for having us.

Stacie Jacobsen: So, Morgan, starting at a high [00:04:00] level, we're talking about end-of-life planning. Can you help us understand end of life planning and how that is different than the more traditional estate planning?

Morgan Campbell: Yes, that's a great question. End of life planning typically refers to the process of getting your documents and your affairs in [00:04:15] order before you pass away.

And so within that there's really four main components. There's medical, financial, legal, and legacy planning, and, uh, you know, finding a way to fit all of these pieces together in a way that. Articulates [00:04:30] your values are really the, the most important part that we try to help clients, um, you know, bring everything into alignment.

So it's really covering that full range of, you know, everything leading up until your final passing.

Jennifer Goode: I think it's common to think of estate planning as what happens when you [00:04:45] pass away, where do you want your assets to go, um, and who do you want to govern that process. But end of life planning is a bit more comprehensive in that you're also thinking about that period while you're still with us.

But you don't have capacity to potentially manage your assets [00:05:00] to make healthcare decisions for yourself. Um, and in today's world, we're almost. All certain of having some period of incapacity. And it's actually more likely that that period of incapacity is going to grow longer and longer given the medical and um, technological advancements [00:05:15] that we're making.

So it's really important to think not only about what happens when you're gone, but while you're still here. And the other thing that I'll note is that end of life planning can also involve concern and focus on values. So again, not just the mechanics of what happens [00:05:30] when you are gone, but what. Led up to that point.

What parts of your life, your life was important to you? What were the values that you were looking to live by, and how can those be exercised and continued throughout any period of incapacity and onto the next stage? [00:05:45]

Stacie Jacobsen: Right? And if you don't have a plan in place, those decisions still have to be made, both medical and financial, and they'll likely be made by somebody that may not know you all that well.

So can, uh, you walk us through some of the issues that may arise if you don't have a [00:06:00] documented end of life plan in place?

Morgan Campbell: So, the biggest issue that arises is that not having decision makers appointed through your legal documents can result in these decisions being left to the courts. So, this can be a very stressful and cumbersome [00:06:15] process that can ultimately lead to a lot of delays as these decisions are worked out.

And so, through proper end of life planning, you can really mem, memorialize and, uh, ensure that your wishes are known, but also that those people who are ready to step in will be able to [00:06:30] do so in a timely fashion without further delays or costs.

Jennifer Goode: Just to jump in really quickly there, just from my practice, since I was a practicing attorney for 15 years, so having dealt with situations a lot of times, folks I think will underestimate the need to [00:06:45] pave the way for someone to step in for them and to manage their assets, especially if they're married.

Um, but the thing to know is that a spouse can't necessarily exercise legal authority over your assets for you just by virtue of being your spouse. And I had a situation in which, [00:07:00] um, couple, you know, wife unexpectedly, um, had a, a major stroke was incapacitated, and husband had them to go to court to be appointed as guardian and conservator before he could do things like manage their joint accounts, manage their, [00:07:15] their jointly held home.

Stacie Jacobsen: And that's such an important point because the bureaucracy of paperwork is the last thing that a loved one wants to deal with when they're also, um, emotionally handing the demise of their spouse.

Jennifer Goode: Absolutely. I [00:07:30] like to say that estate planning, um, is a gift of love. To your family, to the people you care about, because you can either do it, you can do the thoughtful process of figuring out what you want done and by whom, or they can have to do it during what you [00:07:45] just mentioned during a period of intense grief and worry and anxiety.

So I don't think anybody wants that for their loved ones.

Morgan Campbell: We know it can be a really daunting task, but in our work with clients, we really try to shift the mindset around this process and use [00:08:00] it as an opportunity to evaluate what matters most in your life today and what you want your legacy to look like in the future.

Um, so actually going through this formal process of making decisions, appointing, um, individuals to certain roles and really documenting all of that is [00:08:15] a chance for yourself to reflect on what the principles and, uh, you know, your motivations behind those decisions are.

Stacie Jacobsen: And Morgan, as you said, this is a, a daunting task and it can easily put in the, uh, the, I'll get to it later pile.

So let's start going through [00:08:30] some of that. What, what is the process? What are some of those easier steps that somebody can start to take to get the ball rolling?

Morgan Campbell: So I think the first step is really thinking about. Who the people are that you want to step in and make decisions on your behalf. So on the [00:08:45] medical side, that is your healthcare proxy or healthcare power of attorney.

So this is someone who can step in if you become incapacitated, um, and really make those decisions for you. And this person can act in concert with your living will. [00:09:00] So a living will is a document where you can actually outline. Specific types of care that you do or don't want. So things like artificial, uh, nutrition resuscitation, and you can specify your choices in some of those treatment areas.

But then thinking [00:09:15] about who the actual, uh, decision maker will be to step in is a really important first step

Jennifer Goode: when we're thinking about a healthcare power of attorney. Two things actually. The first that if, when you're thinking about who's gonna make these decisions for you, sometimes. It's [00:09:30] good to think not only about who's closest to you and who knows you the best, but who will have the emotional wherewithal to make what are really, really hard decisions.

So it may be that, um, you know, your spouse or child knows you really well, knows what you would want done, but they may [00:09:45] not be the right person to appoint just because of what, what it will do to them emotionally. I would encourage people to put a lot of thought behind who they name in this position specifically, uh, because I think it requires a very certain emotional.

Intelligence and emotional resilience [00:10:00] in order to be able to make those decisions.

Stacie Jacobsen: One of the things you would like to avoid is having somebody open up the document and say, oh, I'm the one who's in charge of making the medical decisions. We never had this conversation. Right. So, you know, maybe Jennifer, in your practice, have you seen how families have taken [00:10:15] that into place and how do they start those conversations?

Jennifer Goode: Yeah, I 100% agree with you. I always used to tell people, make sure that you ask them cause they don't have to take the role on and it's not gonna do you any good to appoint someone who won't serve. My inclination is always [00:10:30] that transparency is better in terms of at least telling the person kind of what your thoughts.

Are, um, why they were appointed, what you want them to keep in mind as they make these decisions. And that's true both for the financial side of things in terms of the power of attorney and trust and things of that nature. [00:10:45] But also, I, I would actually encourage even further disclosure when it comes to the healthcare stuff because that, again, is incredibly personal and you want them to understand what your thought process was and your intent.

You know, it, it depends on the client in terms of whether or not they [00:11:00] feel really comfortable talking about all of this. But I think that at the very least, reaching out, making sure the person that you're pointing is open to the appointment, they feel up to it, um, is absolutely key. Morgan, do you have any other thoughts on like specific [00:11:15] techniques that are good in terms of encouraging conversation between the principal and the agent that they're looking to appoint?

Morgan Campbell: I think that for those stepping into this role, having those conversations in advance can really prepare them and reduce that burden so that they [00:11:30] don't feel like they're coming into the situation blind. Um, so it is really, really important to express not just your specific medical wishes, but as Jennifer said, what are the, uh, you know, the most important pieces that, that really drove those decisions?

And how do you want, you know, your life to be carried out.

Stacie Jacobsen: Yeah. And I, I think it's also important to have those conversations with those that aren't appointed but may have assumed they would be to explain to them why they are, are not the chosen person to make the medical directions. And, you know, Jennifer, you use the word, it's an act of love, [00:12:00] right?

It's, it, it may be that act of love to not appoint your spouse or not appoint the assumed child in this case.

Jennifer Goode: Yeah, absolutely. But one of the things that I'll note is that sometimes people feel this need to appoint everybody, like you know, [00:12:15] all the kids, all five of the kids are gonna be the agent under the power of attorney.

And while I completely understand the intent there to not hurt anyone's feelings, I think what would better serve you is to probably have a conversation with the kids and say, Listen, [00:12:30] Johnny is just a better fit because of A, B, and C, not because I love him more, but just because he fits this role and having five people try and make a decision is.

Just a tremendously bad idea usually, unless [00:12:45] you have a very unusual family structure. So I think exactly to your point in that letting people into your thought process can actually free you up to make a far better administrative decision. I used to tell people that estate planning and end of life planning, of course, um, [00:13:00] is choose your own adventure.

You can make it as personalized as you want. And I do think that to the extent that you kind of think through your own personal values, your family structure, you're gonna come up with a plan that's gonna facilitate the implementation of your legacy, your goals, um, [00:13:15] and work the best for you and the people you care about.

Stacie Jacobsen: Jennifer, I very much appreciate that we can talk about end of life planning, and you just made me laugh when you said choose your own adventure. So, Yeah, you're certainly, um, lightening up this conversation.

Jennifer Goode: I'm also dating myself to be clear.

Stacie Jacobsen: [00:13:30] Yeah. So we talked about, you know, talking to the loved ones, but I would also say it's important to talk to your professional advisors about what your wishes are so that they understand and, and look quite honestly, they might be the first ones to realize that there is a cognitive.[00:13:45]

Decline occurring, right? If you start to have the same conversation over and over again, you get a phone call to make the same transaction over and over again, that can certainly, um, be an indicator that additional steps may need to be taken.

Jennifer Goode: Yep. It's [00:14:00] fantastic to talk to your advisors because they also might, um, having a plan set up before something happens and before you start to see diminished, uh, capacity allows for them to be more active.

There's not a ton. Unless you provide [00:14:15] for it. I don't think there's a ton of clarity in terms of when they're allowed to do certain things. Cause obviously confidentiality is really important in the attorney client relationship also with your financial advisor. And so they don't wanna overstep and they don't wanna do something that would be, um, an opposition to [00:14:30] your interest.

But at the same time, if they're a fiduciary, if they're trying to look out for you, they wanna take action when they feel like it's as necessary. So to provide clarity in terms of next steps, in terms of a process, you have to talk about it before [00:14:45] the worst happens.

Stacie Jacobsen: So Morgan, when does it actually make sense to have long-term care insurance?

Morgan Campbell: So, considering the stats on just the population today, and as Jennifer mentioned earlier with medical and technological advancements, um, [00:15:00] that's great in terms of extending, you know, longevity and people are living longer, but it's also increasing the likelihood that adults are going to need some type of long-term care.

So today the average 65 year old has almost a 70% chance of needing some [00:15:15] type of long-term care at some point in the future. Uh, for women, the average length of care that they need is typically around three to four years, and for men it's two to three years. But we know with dementia, other cognitive decline that could extend much, much longer.

[00:15:30] So the cost of care can vary widely. So, And it's really important to consider, you know, although you might not know what health circumstances you'll face, you can really think about what you value in terms of your lifestyle, your proximity to family, [00:15:45] whether you have a preference to staying in your home and staying in your community, versus potentially moving to some type of independent living or care facility.

Where you might have more of a built-in social network. And what we see is long-term care insurance can have a very high premium, [00:16:00] but there are different flavors to it. So you could have just a standalone long-term care policy, um, that can provide a daily benefit amount. And typically when it kicks in is when you're no longer able to complete certain daily tasks, um, to essentially live [00:16:15] independently.

Um, but a long-term care policy can cover anything from a home health aide, so someone who can come to your home and help you, you know, stay in your home as long as possible and, and do those kind of daily tasks all the way up to, you know, nursing home full care [00:16:30] facility.

Stacie Jacobsen: That's so helpful. Thank you for that summary there.

I now want to direct the conversation to some of the pitfalls or mistakes that we should avoid, right? We've talked about some of 'em. One of 'em is not communicating your wishes. Um, you know, second one is either [00:16:45] not doing end of life planning or just assuming that you have time. Um, you know, so far we have talked a little bit more about the incapacity part of it, but sudden death is certainly a possibility.

So, don’t put it off. What are some of the other, you know, common [00:17:00] pitfalls though that we should think about avoiding?

Morgan Campbell: One thing we haven't touched on yet is the organizational, uh, tasks and some of just the household items that can be really stressful for someone stepping into the situation to have to deal with and figure out.

We'd like to think of it as, you know, having kind of a [00:17:15] file of all the information that someone might need. Uh, when it comes to, you know, house, um, caregiver instructions for either children or pets, um, and really providing all of that information along with the contact information for financial advisors, [00:17:30] lawyers, accountants, and those professionals who will really be the team to support whoever it is that steps into the role.

Jennifer Goode: I'd say from my experience, one of the biggest pitfalls, um, is not understanding, uh, [00:17:45] How property passes when you pass away. Um, and so if you have something that, and forgive me if I get a little nerdy on you. Um, so if we think about. What's called a probate asset versus a non-probate [00:18:00] asset. So, something that, that you own individually that does not have a beneficiary designation associated with it, is something that will pass under a will or can be added to a trust.

Um, things that have a beneficiary designation, things that you own [00:18:15] jointly with rights of survivorship, um, with someone else. Those are things that are going to pass automatically at your passing. Why am I taking you down this incredibly boring road of. Terminology, I'll tell you because. People think that if you've [00:18:30] got a will or a trust, you sign that document, you walk outside, and everything is now taken care of.

And that's just not the case.

Stacie Jacobsen: You know, Jennifer, that reminds me of an example. Early on in my days at Bernstein, a client of ours passed away and we were helping with all of the assets in his [00:18:45] estate. And a designated beneficiary form for his IRA held elsewhere was sent to us. Um, and when I looked at it, I saw that it actually had his.

Ex-wife from about 15 years ago on that designated beneficiary. Um, [00:19:00] and, you know, that just caused a lot of unnecessary drama and additional loopholes that needed to be, you know, jumped through in a time when that's really the last thing that a family wants to deal with.

Jennifer Goode: Mm-hmm. Yeah, absolutely. And unfortunately, that happens more times than it should.

[00:19:15] Certainly. Um, you know, following a divorce is a great time to update everything. Um, ensuring that you are naming, uh, a charity that you're still involved with, um, you know, ensuring that any. Strict circumstances within your family that change are reflected throughout your [00:19:30] plan. So for example, if there is a child or a grandchild who is found to have special needs and will need to qualify for public or private assistance, you wanna make sure that that's factored into

your plan, um, including on those beneficiary [00:19:45] designations. We don't want it to go outright to them and potentially disqualify them from assistance. So it's, you got to just make sure that you're vigilant in terms of making sure that the, all the components of the estate plan are integrated together in a cohesive, comprehensive manner, uh, and [00:20:00] that they are consistently updated.

Um, this is a. For better or for worse, estate planning is a dynamic process and so it because it reflects you and your values and your lifestyle, it's going to change as you change. You just want to make sure that it's always [00:20:15] consistently reflecting the things that are important to you and the ways that you want your family to be taken care of.

Stacie Jacobsen: You know, Morgan, I think that's so important, the point that Jennifer just made about your intended legacy. So, what are some of the ways that somebody can align their documents with their intended legacy?

Morgan Campbell: That's a [00:20:30] great question. So, when we think about legacy, of course, the financial wealth that you leave behind can play a, a big part in that, and it can really go on to accomplish things in the lives of your loved one, whether it's supporting a certain lifestyle, paying for college [00:20:45] education, really whatever your, uh, whatever your financial goals are.

But your legacy is really so much more than that, right? It's everything that goes into how you're remembered. It's really about what were the stories, what were the lessons, what was the impact that they had on your life. We've seen [00:21:00] clients who have, uh, gone as far as recording, um, you know, their life stories.

So, you can save recordings, um, sharing stories with your family members, but it's really, um, You know, there are a few different ways you can also, uh, put together an ethical will. So, this can [00:21:15] be a letter or a document that can go alongside your formal estate planning documents, but it's actually not legally binding.

That really outlines everything that went into the decisions that you made, and it can really provide that clarity to your loved ones as [00:21:30] to why things were set up the way that they were.

Stacie Jacobsen: You know, Morgan, we talked about legacy and I want to ask you about digital legacy in the form of, you know, your iPhone, your emails, your photos, whatever social media accounts you may have, you know, how do [00:21:45] you recommend that somebody really handles the digital legacy aspect?

Morgan Campbell: So, I think now so much of our lives are happening online in, in the cloud, so to speak, and so it's really important that you actually keep track of your usernames and passwords [00:22:00] for important accounts. And it can be really challenging to keep an updated list of all of your accounts, username, passwords.

But there are online, uh, third party tools that can allow your digital executor to access your accounts. So either going directly through certain [00:22:15] apps and profiles, for example, on Facebook, you can set up a legacy contact. Where, um, your executor will be able to log into your profile after your passing and either manage or memorialize or shut down, um, the account, however you have.

[00:22:30] Decided that you want to handle the account, and so importantly, your will becomes public information after your passing. So we don't ever want to see, uh, you know, any passwords or usernames in, in your will, but there should be a separate document that can be passed to your digital executor who [00:22:45] will then have access to those accounts.

Stacie Jacobsen: Quick side note that the other day I got one of those tips on my iPhone that said how you can actually put somebody in your phone with a specific password. So that they can access your phone if you become incapacitated. So I thought that that was a useful tip. I [00:23:00] haven't done it yet myself, but, um, I thought that was quite impressive.

Jennifer Goode: That is cool. I hadn't heard that.

Stacie Jacobsen: All right, ladies, with that, I really enjoyed our conversation today, um, which is hard to say when you're talking about end of life planning but thank you for all of your insights.

Morgan Campbell: Thanks for having us.

Jennifer Goode: Absolutely. [00:23:15] Anytime.

Stacie Jacobsen: Thanks to everyone for tuning in. You'll hear from us again in two weeks when we'll talk about the advancement of AI and its impact on investing.

You won't want to miss it. Don't forget to subscribe to the Pulse by Bernstein wherever you get your podcast. To ensure you never miss a beat. I'm your [00:23:30] host, Stacie Jacobsen, wishing you a great rest of the week.