As the founder and president of a wealth management firm, I spend a majority of my time helping clients accumulate enough wealth to enjoy a secure and fulfilling retirement. Yet as the years pass, I’m eventually charged with an even more daunting task: working alongside attorneys to create clients’ wills and trusts for the time when they are no longer with us.
I’ve worked with many attorneys throughout the years, and have found that we both want what’s best for our clients. Estate planning can be fraught with tensions — especially when it comes to determining which family members receive illiquid assets, be they personal heirlooms or privately held companies, or liquid assets such as stocks, bonds and real estate.
Still, the biggest challenge with estate planning is making sure a client’s wealth can go the distance. According to the Heritage Institute, nine out of 10 wealthy families run through their assets within three generations. Six out of 10 wealthy families run through the money in just two generations.
I myself have seen families spend all the money they receive after an inheritance and suffer significant financial consequences as a result.
Financial advisers and estate attorneys have a unique opportunity to partner together and mutually help clients obtain financial security and peace of mind. The process begins with knowing which questions to ask clients, and what you should encourage them to do before they pass away, in order to avoid the squabbles and in-family fighting that can arise when a will is read.
Here are some key questions my strategic partners and I have found to be helpful in structuring a client’s estate:
• What matters most to the client? Sit down with clients and ask them about their lives thus far. What do they feel they’ve done right? What are they most proud of? What is truly important to them? Be sure to address the issue of hardship, specifically if they feel one family member needs more help than another, as well as the fear that if they leave a young person too much money, he or she may never feel any incentive to work.
• Where do they want to make the most impact? Once the client has his or her priorities in order, now it’s time to brainstorm ways to help him or her make a positive and lasting impact on the world. For instance, I know a man who grew up during the Great Depression, where he saw many people struggle to put food on the table. As such, he now intends to make endowments to organizations that feed the hungry. This is a fine example of a client who looked back on his life, decided what was important and now intends to make a difference.
• Structure the estate to achieve a wide variety of client goals. In my opinion, a person’s legacy is composed of three parts: the personal (values, history and goals), the financial (money and assets), and the philanthropic (what a client wants to give back to the world). Goals should be set in each of these areas, with the accompanying strategies to make those goals a reality. Financial advisers and attorneys can tackle the multitude of monetary and legal issues that go along with accomplishing the client goals, in order to ensure the client’s wishes are fiscally and legally sound, and enforceable.
• Encourage clients to talk with their families. I have yet to come across a client who actually wants to talk about the specific details embedded in his or her wills with family members, and I would expect attorneys have experienced much of the same behavior. Yet it is imperative that financial advisers and attorneys encourage their clients to talk with their family members to share their plans. Clients’ family members should be aware of how to manage the money they inherit as well as how to carry on their family’s values and any social responsibilities that come along with the inheritance.
It may sound cliche, but after more than 28 years of helping clients achieve their financial goals and dreams, I’ve found it’s nearly impossible to separate emotions from money. It simply cannot be done. Financial advisers and estate planners need to discover what is important to a client, where the client wants to make the most impact, and structure the estate from there. And let us never forget that clients’ greatest assets go far beyond their money.
Their history, their values and a strong set of purpose are perhaps the greatest gifts they will leave their heirs. •