It seems like only yesterday we were in the midst of primary debates and a long election season. But with the New Year comes a chance to revisit how we serve our clients and help them deal with the inevitable changes of life. The more we can meet their needs in a holistic fashion – even when that means working to get things done for them that are outside one’s core responsibility – the better and deeper relationships we will enjoy.
To that end, consider segmenting your clients and prospects so you can meet them “where they’re at.” Here are four types of clients you likely serve. Let’s think about how to approach them about estate planning and related needs in 2017…
Your Four Types of Potential Estate Planning Clients
Category 1: People who believe they have nothing to pass to their heirs.
These people might say things like, “I don’t need estate planning because I don’t have an estate.” In their minds, they have disqualified themselves.
Ideas for dealing with these clients: Get them to focus on the future. They want to protect their legacies and leave assets to their kids and grandkids—but they’re unsure whether they have even accumulated enough wealth to need to build a plan for the long-term. They’re probably overwhelmed. You can assist by educating them to think in this way:
- Does a client have children? Ask whether she has appointed a guardian for them. If she gets sick or dies unexpectedly, a guardian nominated by a parent has an easier time assuming responsibility and obtaining legal authorization to care for the child. This conversation can open the door for discussing the many non-tax and non-financial reasons for having a will and trust.
- Offer to strategize to make the client’s income stretch further, creating a surplus that she could save or invest.
- Almost everyone has something they’d like to keep from going through the hassle and expense of probate. Work with us to give these clients insight into how to structure bank accounts, vehicle titles, and other assets so they can pass directly to an heir without being probated.
Category 2: People who think they don’t have enough assets to bother with estate planning.
These people have some assets, and perhaps a will, but they don’t believe their holdings are sufficient to justify comprehensive planning. A common objection: “Estate planning or trusts are for the wealthy, and I’m not wealthy.”
Ideas for dealing with these clients: People in Category 2 have a limited understanding of what constitutes “estate planning” or have a mistaken impression about the importance of trusts. Trust-based estate planning can protect assets against excessive taxes, creditors, probate expenses, or guardianship, unwise spending by beneficiaries, family disputes, and more. In most ways, a trust is a better tool than a will, but many people in Category 2 (and the other categories as well), simply don’t know this. Here are a few suggestions for talking with people in Category 2:
- Coordinate with us to review the client’s will and general long-term financials, and collaborate to suggest changes that improve client results.
- Do they have life insurance coverage? If not, remind the client that this would be an additional asset for the estate that must be coordinated with the estate plan. You can also offer to review the insurance plan to ensure it still achieves their goals, if you offer insurance policies.
- Could tax changes affect the client? Offer to review any investment strategies to recommend ways to lessen the tax burden.
- If you’re comfortable, ask about the client’s beneficiaries’ finances. Do their kids carry a lot of debt? If so, creditors may file a claim on the inheritance or it can be seized by a divorcing spouse or bankruptcy court. Trust-based inheritances reduce this risk and can protect beneficiaries’ inheritances from creditors, divorcing spouses, and predators looking for an easy payday.
Category 3: People who feel estate planning is too difficult or expensive.
People in Category 3 have assets, but they’re either “too busy” or cash poor to address estate planning.
Ideas for dealing with these clients: Educate these people about the costs of a lack of planning. Remember the adage – an ounce of prevention is worth a pound of cure.
- Ask whether family disputes over assets or debts might erupt after the person dies. Even if the answer isn’t an emphatic “yes,” the best way to avoid conflict and family turmoil is through comprehensive trust-based estate planning. Brainstorm with your clients and us to mitigate against risk and identify possible points of conflict. Inaction can result in a client’s children paying the price in the form of a lawsuit.
- Is the estate at risk of high taxation? Although the estate tax is largely no longer an issue for most Americans, the income tax is alive and well. Older or nonexistent estate plans may not be income tax optimized, resulting in unnecessary taxes. Also, stay in touch regularly with us and your clients to recommend tax saving strategies that take advantage of new laws and developments we’re expecting in 2017.
Category 4: People who believe they’ve already done all they need to do.
These people believe they have “finished” their planning. Their set-it-and-forget-it mentality, however, can be dangerous and lead to obsolete estate planning strategies, surprise taxes, and family disputes.
Ideas for dealing with these clients: People in Category 4 have something to lose, and yet they may be operating under a false sense of security.
- Bring up expected changes to the tax laws in 2017 that might affect the estate tax and the income tax. Remind clients that estate plans can become obsolete because Congress, state legislatures, and the Courts are constantly meddling with the law–and equally as likely, client circumstances and goals may have changed–along with their beneficiaries’ goals and circumstances.
- Has it been longer than a year or two since the client assessed the estate plan? We can help modernize old plans so clients can rest easy knowing they have a plan that will work exactly the way they want.
We are here to help.
The beginning of a new year presents a great opportunity for you to reach clients and serve them more fully. We are here to answer questions, address concerns, and provide up-to-date resources to help you serve your clients. Call or email us when you and your clients need insight. Here’s to a healthy and prosperous 2017!
If you or your clients would like to learn more information about estate planning and settlement matters, please call The Levin Law Firm at (610) 977-2443 to arrange a consultation with trust and estate planning attorney Philip Levin, Esq.
Please visit our home page to learn more about the estate planning services provided by The Levin Law Firm. To read testimonials from some of our valued clients at The Levin Law Firm, please click here: https://levinlawyer.com/home/testimonials/
In 2007, British psychologist Richard Wiseman followed more than 3,000 people attempting to achieve New Year’s resolutions including the top three: lose weight, quit smoking, and exercise regularly. At the start of the study, most were confident of success. A year later, only 12 percent had achieved their goals.
To make meaningful New Year’s resolutions that you will really keep, set long-range resolutions for yourself. This way, you can help reach the goals that matter to you in the context of your entire future, not just a single year.
To make holistic New Year’s resolutions, look to the wisdom of Peter Drucker, the father of modern management who died in 2005 at 95. Drucker’s iconic 39 books and countless articles were always forward-focused.
1. Resolve to Embrace Uncertainty Rather than Avoid It –
Do not assume that tomorrow will be like today. It could be, but the future is unknown. And while uncertainty can be unsettling, remember this: we’re all in the same boat.
2. Resolve to Seek Opportunities in Changing Conditions –
We may not like change, but it’s natural, necessary, and something to celebrate. Drucker distinguished between being a change agent (good) and a change leader (better). “The most effective way to manage change successfully is to create it,” he said. To do that, you need to see change as an opportunity, not a threat.
3. Resolve to Stop and Reflect on My Second Act –
Every year, Drucker carved out time to engage in deep, focused introspection. He’d reflect on how the past year had gone compared with his expectations and the adjustments he needed to make going forward.
4. Resolve to Remove and Improve –
Your second act will unfold in part due to what you stop doing. Drucker recommended something called systematic abandonment —intentionally dropping activities and relationships that are no longer productive or useful. He suggested combining this with kaizen: steady and incremental improvement of what remains.
A good starting point for this resolution is to make a list of what and who you can live without and then gradually shed them from your life. Then, use your newfound time to help create a winning second act.
5. Resolve to Make Friends with Risk –
Drucker believed that it was risky to sit back and let the future happen to you. Accept the idea that almost everything carries some element of risk, and you can create a space for risk in your life.
Your second act may involve weighing the risks in going back to (and paying for) school, learning new technologies or creating an entrepreneurial venture. At some point, though, you’ll simply need to take that first step. As the Chinese philosopher Lao Tzu said: “The journey of a thousand miles begins beneath one’s feet.”
If establishing or updating your estate plan is one of your New Year’s Resolution goals for 2017, please contact The Levin Law Firm at (610) 977-2443 to arrange a consultation with trust and estate planning attorney Philip Levin, Esq.
A new Presidential administration can bring sweeping changes in the tax code, new rules for how wealth is taxed, and a litany of other legal and regulatory changes. As a result of Donald Trump’s victory on November 8th, combined with Republican majorities in the House and Senate, we expect that there will be significant changes starting on or soon after January 20, 2017, when President-elect Trump takes office.
Some of your clients may be feeling a bit anxious right now about their financial future, and they are depending on you to be on top of any upcoming changes so they can minimize risk to their portfolios as well as capitalize on potential opportunities for growth. We are also watching the political scene very carefully, and in the weeks and months ahead, we will share with you the latest updates and information you need to know in order to help your clients make informed decisions about their estate plans.
In the meantime, taking a proactive approach with your clients in light of the election, including a review of their current financial, tax, and estate plans, will go a long way toward building trust and bringing peace of mind to your clients.
We’ll go into more detail momentarily, but here’s a quick overview of what we know so far:
- The Trump administration wants to lower taxes, including a possible repeal of the estate tax.
- But, Congressional Republicans have their own agendas regarding taxes, which will probably cause some give-and-take as the final proposals take shape.
Let’s take a closer look at each of these factors.
Donald Trump’s Proposals –
Donald Trump has proposed across-the-board reforms in the tax code, and while he promises to close up some loopholes, the general trajectory of his proposals is toward lowering taxes overall.
You can find the details of his tax plan on his website, but the most pertinent points are as follows:
- Lowering income tax rates across the board, including significant raises to the standard deductions
- Reducing the number of individual income tax brackets from 7 to 3, with a maximum tax rate of 33% (down from 39.6% today)
- Reducing the business tax rate from 35% to 15%
- Eliminating the federal estate tax
Please note that any change to tax laws requires Congressional approval and will not happen automatically. Although Republicans will soon be in control of both the Presidency and Congress, there will still be negotiations and compromises reflected in the “final” tax laws that are decided on Capital Hill. And remember, the rules are only “final” or “permanent” until the government decides to change them in the future.
Strategies to consider, assuming President-elect Trump’s agenda is put into law:
- Recommend Cautious Optimism. The elimination of the estate tax in particular is likely to be welcome news to your higher net worth clients, but the proposal may be subject to opposition or compromise in Congress. This compromise could range from a “sunset” provision to gradual phase-out of the federal estate tax, as well as the imposition of carry-over basis laws for assets owned by a decedent’s estate, or something else entirely. We will need to wait and see.
- Stress the Continued Need for Smart Estate Planning. Although taxes have long received top billing in discussions with clients about wealth transfer planning, there are a tremendous number of non-tax related reasons to ensure that you and your clients have an up-to-date estate plan, regardless of who is in the White House and Congress, and what new legislation is singed into law. This includes planning to make sure assets distribute to beneficiaries in a manner which is protected from the potential claims of creditors, predators, and divorcing spouses of intended beneficiaries, as well as making sure that financial and health-care decisions during an illness, injury, or incapacity are made by appropriate individuals who are capable and financially responsible.
- Stay Tuned for Updates. Political winds often blow in many different directions. Therefore, as tax reform starts being fleshed out in Washington and ultimately enacted, we will continue to provide you with further recommendations on how to best advise your clients.
What to do in the Meantime
While we wait for Inauguration Day, we would urge you to focus on providing responsive service to your clients by scheduling reviews now.
Between now and when President-elect Trump becomes President Trump, your clients should avail themselves of both financial and estate planning services to determine how to make the most of existing rules before they are changed, and how to adapt to any changes once they are enacted into law. Again, we believe that the best method to calm any anxiety facing your clients is to take a proactive approach. Reach out now to recommend a review of your clients’ current financial and estate plans, if not by the end of the year, then certainly during the first quarter of 2017.
No one knows exactly what the future holds, but it is fair to say that significant changes to income taxes, estate taxes, and the overall regulatory environment are coming. Change is really the only certainty in life. The good news is that change does not have to be a negative. By being proactive and adapting to changes, you can continue to help your clients build their wealth while growing your own business. As noted author and leadership expert John C. Maxwell reminds us: “Change is inevitable. Growth is optional.” As a trusted advisor, you have the ability to lead your clients toward financial growth, even during the uncertainty that naturally comes with the change of government.
If you are interested in learning more about the application of well accepted trust and estate planning strategies to help your clients protect their assets, and maximize the transfer of wealth to their families, please call The Levin Law Firm to arrange a consultation with attorney Philip Levin, Esq., at (610) 977-2443.
Many of us labor a lifetime to build up our assets and fight for causes that matter to us. In fact, for many of our clients, few things are more fulfilling than the thought of
sharing their wealth and legacy with their families.
Of course, it is impossible to plan for every eventuality, but careful attention to estate planning goals can mitigate two primary risks:
a) Your intentions regarding the distribution of your estate were not made clear, resulting in the potential for costly and time-consuming conflict.
b) Your family members did not understand, or share your values and wealth management vision, resulting in the possibility of asset dissipation.
The good news is both of these issues can be prevented through honest communication with your family now. While it’s not necessarily comfortable to broach this topic, a family gathering over the holidays might be the best time to have a conversation with your children and loved ones about your estate plan.
Why it is Important to Talk to Your Family
Passing along our wealth is one thing, but what about passing along the values of work ethic and generosity that enabled us to acquire and grow that wealth in the first place? Too many fortunes built by one generation are lost by the next generation, often not due to bad luck or taxes, but due to a lack of understanding of wealth management and preservation. Also, when your family does not appreciate the rationale behind your estate planning choices like the use of lifetime trusts, this lack of understanding can lead to conflict and resentment among family members. In a worst case scenario, your beneficiaries end up in a family fallout and suing one another. No one relishes the idea of family being torn apart over antiques, heirlooms, or who gets the house on the Cape. Nevertheless, it happens far more often than anyone cares to admit.
Should you Tell Your Children about Their Inheritance?
The question of whether to tell children about their inheritance is the subject of ongoing debate. Many people express concern that this information might reduce a child’s incentive to work or cause them to feel entitled, reducing their motivation to seek a career and a “normal” life. Depending on the child’s temperament, this might be a legitimate point. On the other hand, inexperience and lack of understanding about wealth can result in an inheritance being lost or consumed very rapidly, because your beneficiaries were not properly prepared and did not know how to manage property received outright in one lump sum, potentially at too young an age.
The best path for most of us is a “happy medium,” whereby you share your estate planning desires in general terms with your family, without necessarily telling them the total dollar values. You might even entrust some family members with partial responsibility for investment and entrepreneurial opportunities now, before they inherit your estate. In this manner, family members can begin to share your guiding values, and be better prepared to handle, manage, and even grow their inheritance when they ultimately receive it.
Communication Now Prevents Conflict Later
While you may have already put careful thought into which assets distribute to specific beneficiaries in the event of your passing, when the details of and estate plan are placed upon people, especially during a time of grief, differing opinions can create conflict. If your family unexpectedly discovers upon your death there is a significant amount of money to be distributed, and you have not shared your rationale behind the decisions you have made under the terms of your estate plan, then you have set the stage for conflict and infighting – possibly even a costly and lengthy lawsuit.
To overcome these challenges, we recommend that clients frame their estate plans around guiding principles, communicate your intentions thoroughly in your Will or Trust, and explain your vision clearly to your fiduciaries and beneficiaries while you are alive, well, and able to explain your intended desires. By attaching your individual values to your estate plan, and involving your family in the process, your estate plan can become a family plan, minimizing the risk of conflict.
What Should You Discuss at the Family Meeting?
Once you have committed to discussing your estate plan with your family, what should you share specifically? Should you detail the entire plan with them, or just an outline of it? Should you go into detail about who gets what?
The specifics of what should and should not be discussed about your estate plan will depend on the dynamics of your family, your individual circumstances, and your overall level of comfort about how much knowledge they should have about your plan during your life. You do not necessarily have to reveal specific dollar amounts particular assets at this meeting. One big caveat – if there is anything in your plan that might result in controversy, concealing it now may easily invite conflict later. Therefore, a good basic rule of thumb is to share as much as is necessary to get everyone on the same page.
Tips for a Successful Family Meeting about Your Estate Plan
When you arrange a family meeting about estate planning, a bit of awkwardness is to be expected at first—after all, no one in your family (presumably) is eager to discuss what will happen when you die. Likewise, you need to be prepared to talk through some of the choices you may have already made that are likely to generate some pushback. However, the end of the meeting is often much more comfortable than the beginning and the following guidance can help you get there:
- Plan the meeting after the holiday, if possible. If you are gathering the family at a holiday like Thanksgiving or Christmas, try to arrange the actual meeting to take place after the holiday itself, so a potentially uncomfortable conversation does not spoil any planned festivities.
- Schedule the meeting in a quiet place that encourages candid conversation. A public place is probably not appropriate for this discussion.
- Arrange for child care. This meeting should be an adults-only gathering so everyone can participate without distractions from babies and children.
- Set an agenda. Encourage open conversation, especially on any controversial points, but have a clear list of points to be covered, so you do note forget anything in the midst of emotional moments.
- Set a start and stop time. This step will help the meeting stay on track without gravitating away from the main points. If something significant comes up, you can always continue the discussion later.
- Strike an inclusive tone. While you should not suggest that your decisions are open to challenge or discussion (it is your estate plan after all), try to convey that you are inviting the family to share your vision and goals. If you can get them on board with you at the outset, the risk of disputes will be significantly reduced later.
Why Involve Your Financial Advisor, Attorney, and Accountant?
Some people might have misgivings about having a third-party advisor present at an otherwise private family gathering, and it is certainly not a mandatory step in the process. However, you might want to consider inviting your financial advisor, estate planning attorney, or accountant to the meeting for the following reasons:
- The presence of your financial and legal team can add a sense of authority to the conversation, reinforcing that your choices have not been arrived at lightly.
- With your permission, your team can review the structure of your estate plan with your family, highlight its benefits, and make the meeting easier for you to conduct.
- In some cases, there might be questions from your family and your professional advisory team can, with your permission, answer questions, especially those of a technical nature.
In family meetings regarding estate planning matters, we recommend that you tailor the role of your financial advisor, attorney, and accountant to your specific circumstances, along with your personal goals and objectives. Your estate planning attorney should be prepared to provide you, and potentially your family, with a brief presentation of your estate plan as part of the meeting agenda, or simply be present to clarify points. When appropriate, one or more of your professional advisors from your team can even act as a facilitator or moderator during the meeting.
Many of our clients have arranged for family meetings at our office which include the client’s financial advisor and accountant. Sessions have run from high level overview “big picture” meetings to very detailed discussions. Frequently, family meetings about estate planning serve as a starting point for future conversations about your long-term estate planning goals and objectives.
If you would like to arrange a complimentary consultation with estate planning attorney Philip E. Levin, Esq., to discuss effective wealth transfer and business succession planning strategies for yourself or your clients, please contact us to arrange a meeting at (610) 977-2443.
