Editor's note: To help CPAs meet the needs of older clients, the PFP Section has chosen to focus on elder planning as a thought leadership topic. This is the second in a series of articles about planning for life transitions following retirement, featuring prominent CPA personal financial planners who will appear throughout 2016. To read other articles in the series, and to access other elder planning resources, go to aicpa.org/pfp/elder.
More than 200 years ago, Benjamin Franklin coined a phrase that has been used ever since: "In this world, nothing can be said to be certain, except death and taxes." Unfortunately, while most Americans deal with taxes annually, they often don't take the prospect of their death seriously and don't plan for their retirement years.
"Some people are comfortable talking about death and others are not," said Cynthia Kula, CPA/PFS, director of tax for Walthall CPAs in Cleveland.
Despite the sensitivity of the topic, Kula and other personal financial specialists say elder planning is crucial to discuss with clients who may be in denial about their own mortality. Many people don't think much about planning for old age until their 60s or later, or until a health crisis or other emergency forces them to contemplate it.
But when clients wait too long to plan, they can find themselves scrambling to pay unexpected bills. They may discover that they have miscalculated (or not calculated at all) their living expenses for their remaining years, neglected to buy optional long-term care insurance, or failed to get their financial documents in order for their loved ones. Thus, it is important for CPAs—even those who aren't financial planners—to bring up the topic of elder planning on their behalf.
"A lot of times I shock clients into listening," said Douglas Duerr, CPA/PFS, managing member and adviser at Duerr Financial Group in Montville, N.J. "Some clients are short-sighted, and see themselves as having this large pot of retirement assets. But it's got an ending limit. They will be out of money by age 70 and flipping burgers, barely surviving. It's a hard conversation to have, trust me, but I have it all too often."
CPAs can also help clients tackle such questions as: Will Social Security be enough to help me through my golden years? Do I need to work part time when I retire to make ends meet? Should I worry about medical expenses? Should we stay in our house, or move to a less expensive state? Is it too late to buy long-term care insurance?
Duerr, Kula, and Reina Schlager, CPA/PFS, co-owner of Schlager Schlager & Levin in Fort Myers, Fla., recommend the following strategies for helping CPAs address the vital and complex topic of elder planning:
Be sensitive. It can help to take baby steps when addressing this issue. Tread lightly and introduce the topic gradually. "We're trying to do what is best for the client," Duerr said. "Sometimes, clients may not feel that way if you come at them too quickly on certain topics."
Don't make clients panic about long-term care. "Bring it up in a realistic conversation," Duerr said. "Say, 'It is a tough subject, and not something I like addressing, but it's something that we need to deal with now when there are options for you, compared to 10 years from now when you have no options and significant costs.' " Make clients realize it will benefit them to deal with the issue now—not later—no matter how unpleasant.
Advise clients to organize their documents. If a client faces a sudden health care issue or another crisis, or even dies unexpectedly, it is important that their documents be accessible to a trusted family member, friend, or adviser. These documents include investment accounts, insurance coverages, a will, credit cards, retirement plans, a net worth statement, real estate papers, beneficiary designations, and medical directives, Kula says.
Schlager says she leads into the topic of elder planning by asking clients whether they have their legal documents in place and what they view as their most important document. "Most people respond that they believe a will is their most important document, but in reality, durable powers (financial and health) are more critical. Everyone needs the conversation about who will be next in line to make their decisions if something happens to them," she said.
Kula encourages clients to create a financial journal, which lists things such as a person's net worth, passwords to key accounts, and assets and debts. "At every stage of life, we need to think about what others will need from us to put our affairs in order after we are no longer here," she said. "We can avoid the subject and make it a big puzzle for clients, or we can take it upon ourselves to put most of the pieces together ahead of time."
Convince younger clients to start planning early, when the topic isn't as sensitive. While most early and mid-career professionals focus on jobs, travel, and starting families, it's important to begin retirement planning during these years. "Elder planning should begin when you are young," Kula said. "If you wait until 70, then it is like cramming for a final exam."
Schlager agrees. Young professionals "have the ability to make the greatest impact on their retirement," she said. "Whatever they do in their 20s and 30s will sit and germinate and grow and compound for 30 years."
If you're not comfortable giving elder planning advice, offer a referral. If you are a CPA but not a financial planner or an elder planning expert, consider referring your client to a financial professional you trust. To ensure that your clients receive the best advice, choose a professional who holds a credential such as the Personal Financial Specialist credential, which ensures that they have met certain stringent requirements and have a high level of expertise.
Forming strategic alliances with CPA/personal financial planners can also be beneficial. "CPAs in general are distrusting of handing over clients to advisers as they fear they will only be sold financial products that may benefit the adviser selling them to the clients," Duerr said. "But if a CPA forms a joint venture with a CPA/PFS, this should ease those concerns as they should realize the client's best interest will be put first. I have never met a CPA, regardless of their specialty, that did not do what was best for the client."
Cheryl Meyer is a California-based freelance writer.
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