Weekly Thoughts 25 April 2014

I considered writing about this a while ago but held back from concern that I was alone regarding these thoughts. But then I saw the concept supported in recent financial press so I decided to go ahead – not that every financial journalist is correct either. Most write from no client-practical experience. The newspaper was talking about financial risks when you retire and that pensioners, on average, struggle to manage their investments from the age of 75 due to declining health issues – dementia etc – and that one should ensure that your financial affairs are in order by age 75.

It is two years now since I wrote about visiting a client in his retirement village frail care center while he suffered from Alzheimer’s and Dementia. This client that I was visiting: 90% of his available and income-usable-wealth was already structured in a manner so as to provide a sustainable and growing income stream to him. It did not matter that he could no longer sign for any new investment instruction, because we did not need to do any changes and there was no significant capital sitting in the bank that could still be added to income investments.

I believe that ‘we’ should have most or all of our ‘usable’ wealth placed or structured in income bearing investments and vehicles well before we might contract something like Alzheimer’s when no one can thereafter do any changes. I have seen the benefits of having it done and I have seen the problem of not having this structure in place too. It is not OK that someone has your Power of Attorney for these events. A Power of Attorney (POA) requires that the person who has given it is available to back up this instruction if phoned to verify it. This means that if you have given your child or spouse POA on your banking affairs, for example and they go to the bank to execute something for you, the bank has the right to check that they do indeed have this POA by phoning you and you need to be mentally competent to support this instruction. If you have since begun to suffer from Dementia the POA becomes invalid. Your child, or spouse, would now have to go through the process of getting curatorship of your estate. A lengthy and costly affair as it requires lawyers and going to court. In the meantime, you might need some significant changes to your financial portfolio to provide sufficient income. Problems.

Rather get your usable wealth in place so as to pay sustainable and growing income streams before an event might occur. Remember, there is often someone left who does not have the knowledge that you might have had and neither might the wealth be in their name. I hope it was OK to write this.