Tom West is a senior partner at Signature Estate & Investment Advisors, working with clients and advisers to determine the best financial solution for clients and their families. Many are overwhelmed by the complexities of navigating aging, health insurance, long-term care insurance, Social Security and Medicare/Medicaid regulations. West came up with the idea for the Lifecare Affordability Plan to help clients bridge the gap between health care and finance.
Tell me about the unique challenges facing wealthy families when a family leader is incapacitated for health reasons.
The three general challenges that wealthy families face when a family leader is incapacitated for health reasons are: changing priorities, successor decision-making and shifting of roles and the complexity associated with wealth.
If wealthy families have done a good job aligning their financial and estate plans with their family priorities, issues around incapacity should have at least been considered. With that said, it's very difficult for people to envision themselves as less well in the future. A new diagnosis, particularly cognitive impairment, can come as an uncomfortable shock. Priorities such as maximizing the legacy, tax efficiency, and supporting a comfortable lifestyle for multiple generations can be hijacked and sometimes overrun by new priorities like staying in their own home, no matter the consequences, for financing health care costs at the expense of previously articulated goals.
Successor decision-makers in these circumstances are often surprised by the kinds of challenges they encounter. Of course, the family would hope to have the appropriate authorizations for financial and health care decisions already built out with signed legal documents. Still, the powers of attorney and contingent trustee elections aren't sufficient in many cases. Successor decision-makers must have the time, temperament, information and bandwidth to effectively play new roles when it comes to money in health care.
Sometimes, the sheer complexity of managing a wealthy estate can be overwhelming, particularly if a family leader didn't do a good job of sharing information and explaining the logic behind different financial circumstances. Many times, the status quo financial circumstances for a wealthy family are caused more by inertia than by deliberate decision-making, and there can be additional stress on the part of the successor decision-maker trying to understand why things are the way they are.
How should families go about making decisions, both health care and financial, when faced with this situation?
The first thing families must do is to rapidly identify if they have the legal authority to make necessary decisions. There's nothing like an incapacity to test whether financial institutions will seamlessly honor the family's wishes. Best practices, of course, are always to engage financial institutions in securing successor decision-maker elections before an event.
The next thing that families need to do after securing the authority to make health care and financial decisions is to identify which decisions are urgent and necessary versus potentially being able to put them off for the time being.
Another helpful framework for families thrust into this situation is to try to reduce as much ambiguity as possible in the choices that need to be made. For example, suppose the financial matriarch of the family develops cognitive impairment and needs to be taken care of at home. In that case, there's probably a finite number of care providers that can serve effectively. Good financial advisers can make real-time projections about how to finance such health care costs, reducing ambiguity and enabling more seamless decision-making.
Finally, families facing new roles can readdress the division of labor among family members and professionals, recognizing that a sympathetic but sometimes overstressful tendency is for a small number of family members to take on oversized responsibilities without asking for or accepting help.
What is the best way to bring up the often-delicate issue of succession?
I've always found that two open-ended questions are the best way to bring up succession. First, I'd like to ask, “If something was going to go wrong with your succession plan, what would it probably be?” This line of question often uncovers sometimes unspoken sensitivities that can give families and their advisers a quick identification of weak links in the family's decision-making process.
The next question is, “Who do you think is responsible for successor decision-making with health care and with finances?” By framing a question this way and not, “Who is your power of attorney?” I can get to the strengths and weaknesses of potential successors and match them up as appropriate with elections that have been made in legal documents. Asking who is in charge versus who should be in charge is also sometimes a helpful line of inquiry.
How do you recommend protecting the aging members of the family from financial abuse?
It's very important to normalize the sometimes universal experience that we all face with cybercrime and fraud. Many times, aging family members can be reticent to talk about or admit any vulnerability to fraud or financial abuse because such an admission might lead to doubts about capacity and the older adult’s ability to self-manage their own lives. By using stories — often too real — about how other folks have been victimized, we can engage older clients and older investors to be more vigilant in their day-to-day lives without feeling talked down to, patronized or shamed.
Advantage: Inclusion
By TIM VOLK
Dolly Parton recently gave a master class in emotional intelligence when she congratulated her fellow musician Beyonce on her country music hit “Texas Hold 'Em.” Parton didn’t lose any of her own considerable star power by acknowledging someone else’s talent or by welcoming a new artist into the country music fold. If anything, she enhanced her already elevated stature in the court of public opinion.
Parton also showed personal and professional courage by applauding Beyonce when other public voices insisted that she didn’t belong in country music. But Parton stood her ground and in doing so embraced the true spirit of inclusion: Existing group members remain important even as they also encourage new voices to be heard and appreciated.
We all can learn something from Dolly’s emotional maturity, self-confidence and gallantry — including financial advisers, estate planners and family wealth managers, who understand the need to involve more voices in their businesses and among their clients but struggle with how to do so.
In the United States, wealthy families historically have been run by business founders who typically are older, white, male and straight (at least publicly). These traditional voices still dominate conversations about how family-owned companies are managed and how their wealth will be distributed among a growing number of heirs.
The world, however, is becoming less white; the number of women and men globally is set to reach parity in just a few years; and more people are willing to say publicly that they are gay, lesbian, trans or gender-fluid. The traditional model and the changing world look ready to collide.
That doesn’t need to happen, however, if family wealth advisers understand how to talk about inclusion with clients and family patriarchs who misunderstand the true nature of inclusion. The idea doesn’t mean that the people already at the table must leave, but instead it signifies that families and businesses want to enhance their existing strengths by allowing other voices and new ideas to be heard.
In any industry, the act of embracing inclusion takes personal courage and extraordinary vulnerability. People naturally center their thoughts and actions around their own family, clan or other close group — a habit that leads to homogeneous emotional attachments and associations even in the face of an increasingly diverse world. As a result, many people react with fear when confronted with any new ideas of people who are different from our usual group. There’s no shortcut to resolving this conundrum — no drugs exist to do it for us, and we can’t get emotional intelligence out of a bottle. But solutions exist, for mature personalities willing to tackle this important subject.
To make these changes, people need to change not just intellectually but also emotionally. In my practice, I guide clients toward examining their own feelings, because they need a change of sentiment before they can really change their behavior. I’ve found that many people are surprisingly unaware of their own deep-seated biases. To use another music metaphor, remember the old Michael Jackson hit: “I’m talking about the man in the mirror.”
My own experience as a gay man is that while some people will hide their bias, it's important to remember the bias is still there. I’ve learned to search for common ground so that non-LGBTQ people can relate to you at some level. Maybe you both root for the same sports team or both enjoy the same hobby. In addition, carefully adding humor to the conversation, and helping people objectively see the comedy in our own behavior, helps us set the stage for greater acceptance and inclusion.
I’ve also learned during my dozen years of consulting practice that the quieter voices in a family or business often express the best ideas — they just need the opportunities to speak up and have other family members and managers truly listen. My firm focuses especially on assisting families and their advisers on how best to handle inclusion. We specialize in how to make lesbian, gay, bisexual, transexual and gender-fluid/queer (LGBTQ) kinfolk feel welcome — thus enabling them to speak up, adding their great ideas to help the families and their enterprises thrive.
That reactionary pressure is itself misguided and shortsighted. Even your own firm undoubtedly has LGBTQ clients even if you’re unaware of it because, historically, social scientists found that at least 10% of the U.S. population identifies as LGBTQ. More recent studies, however, have shown that the percentage of adult Americans identifying as LGBTQ has doubled during the past decade. Efforts that discourage engagement with the LGBTQ community and customers ultimately will mean that businesses will lose business and growth opportunities.
Beyond the business reality, there are human reasons to support inclusion even in the face of growing public resistance. In today’s world, more families struggle to stay connected and to embrace each other out of love, rather than whether someone shares their political opinions. Thus, I remain passionate about helping other families with what I've learned from my own experience and from my family, friends and clients.
Moreover, your kindness, emotional intelligence and willingness to listen and include these people as full family members literally could prove lifesaving. You probably know that many of today’s youth contend with mental illnesses, but the crisis is especially pronounced among LGBTQ youth. Suicide is the second-leading cause of death among those ages 10 to 24, and LGBTQ youth are more than four times as likely to attempt suicide than their peers. In families that do not accept or fully include them, LGBTQ youth often end up dropping out of school, living on the streets, enduring bad health, struggling with money troubles, abusing drugs and suffering an early death. As a wealth manager and adviser, you can help clients and their families embrace LGBTQ members and include them in family discussions and decisions.
My friend, James E. Hughes Jr., has written about why it is crucial for families to let all members have a voice in decision-making, but particularly in ultra-high-net-worth families. In these families, one person — usually the business founder or oldest second-generation heir — dominates the process and overpowers new ideas or participation by other family members. Yet in my practice, I often see that the quieter voices, or those people who traditionally have been excluded from the discussions, are the same people who have the best ideas for helping the family and improving the business. By excluding nontraditional voices, families and their businesses harm their own interests and risk squandering their own wealth by failing to nurture their family’s intellectual and human capital.
But the new generations and the rising family members need to have a stake in the game. The alternative leads to a binary outcome where the younger family members are cut off either financially or emotionally. The fallout from not living with inclusion is distrust, poor or no communication among family members, dysfunctional family dynamics, and truly missed opportunities to share and love each other and those whom we have in our lives. This sad outcome could harm not only yourself and your children but also your grandchildren and great-grandchildren.
Most families won’t naturally engage in this work to transform themselves emotionally, yet when they do so, the results are powerful. I’ve found that immensely helpful to “give the floor” to all family members and let them explain their values,and how or whether they have accepted other family members who are different from themselves. Eventually, true acceptance of each other's differences can transform and enhance the emotional, intellectual and human capital of the family.
The real goal of inclusion and diversity is to see a person’s true worth and to accept an individual for who they are and not be blinded by superficial differences or glued to a family’s traditional approach. A person’s gender identity, however, may not be obvious — in fact, even in this modern era, your client or a member of the client’s family may desperately try to hide their real orientation. That gives you two difficult tasks. First, you should help LGBTQ clients or family members grow comfortable with “coming out of the closet” to their own kin; and second, you must guide other family members to accept and include the LGBTQ person.
In my practice, I have developed expertise in handling both these difficult and complex responsibilities, along with a list of published resources that can help you and your client family navigate the strong emotions that usually arise. Further, I have created a series of questions to assist wealth managers and advisers when they approach LGBTQ issues.
For your part, an open mind, and a kindly tone of voice (that also avoids talking down to the person) certainly will help when asking these important but personal questions. Here is a sample:
- Does anyone in your family know that you are LGBTQ? Do they accept you as LGBTQ, or did you encounter rejection?
- Do you have a significant other? Are you married, and if so, in what jurisdiction?
- Do you have a prenuptial agreement or have you set up any trusts?
- Would a family member try to block your LGBTQ spouse/partner from inheriting your assets or exercising power of attorney/medical power of attorney?
- Have you ever been or are you now being blackmailed because of your sexuality? If so, what lawful actions do you need me to take to help you out of the situation?
The list continues, but now you can begin to appreciate the complexity of helping an LGBTQ client or client family member gain acceptance, as well as some of the difficulties that LGBTQ people routinely confront.
The goal of inclusion is to bring everyone to the table, to listen to voices that traditionally were not heard and to accept individuals for who they are. These ideas are, in truth, the foundation of a flourishing family, because acceptance and the beautiful power of listening should be part of any loving family. So, maybe the Beatles had it right: “All you need is love.”
Well, that and an excellent wealth manager and adviser who understands the terrific advantages bestowed by inclusion.