Why Vulnerability Planning is Critical to Proper Estate Planning

If you are someone who considers yourself responsible and prepared when it comes to your finances, you have likely worked with a financial planner, lawyer, accountant or other financial professionals in an effort to properly manage your assets and financial legacy. However, even the most careful planners can’t prepare for something if they aren’t aware of its importance. Whether for yourself or for aging parents if you have not received guidance on vulnerability planning, you are not alone, but it is something everyone should consider while they are able.

What is vulnerability planning and why does it matter?

Vulnerability planning encompasses how you plan to protect yourself in your lifetime, financially and otherwise. The purpose of putting a vulnerability plan in place is to make sure your assets are handled properly in the event you are no longer able and that the quality of care you get is what you want and deserve.

Unfortunately, we can probably all think of someone who has been taken advantage of in their most vulnerable state. Unfortunately, these stories reveal that it is not only strangers who are betraying the vulnerable, but the culprits often include caregivers, a new “friend” who helped fill a lonely void, loved ones and trusted acquaintances. Whether their actions are malicious or simply irresponsible, the harm done can be significant or even devastating.

Too few people carefully consider what could happen, who their caregivers would be, and how finances will be handled. If you don’t protect yourself from vulnerability, it can put you at risk and cause rifts in your family. Sadly, sometimes older or ailing people are aware that they are being taken advantage of or they are aware that their family is feuding, but by then they are not strong enough to do anything about it. All of this can be avoided with a secure plan in place.

How to account for vulnerability in your estate planning

Firstly, having a trusted, competent and able Power of Attorney named for your finances and your care. They don’t have to be the same person, but anyone you appoint to those roles needs to check all three boxes.  But go beyond naming a person, actually, communicate with those people what your wishes are so they can step in and make the decisions you would have made for yourself.  It is very common for a single person without adult children to struggle with who they would name to these roles.  If you don’t have someone that checks all three boxes, there are professional services available for managing your financial affairs, and a Living Will may be an option for ensuring the care you receive is what you want it to be.

Depending on your circumstances, Alter Ego trusts can be an effective tool to help protect yourself from financial vulnerability. An alter-ego trust is a type of trust that enables you to manage your funds while you are still able but can protect you when you are no longer able.  One of the benefits of an alter-ego trust is that it protects you against being pressured by a caregiver, adult child, or someone else you know to change your will in their favour. When it comes time to pass along a financial legacy, the trust documents spell out how all of the assets in the trust will be divided and distributed to beneficiaries, not your will.  Alter-Ego Trusts can work to also bypass probate, saving time and money.

Whether planning for vulnerability for yourself, aging parents, or other loved ones, ensure to consult with lawyers, accountants, financial advisors or other professionals to ensure you make fully informed decisions and structure your affairs properly.  Fortunately, with the help of the right professionals, you have powerful tools and processes available to protect you and put your mind at ease.


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