We start out with best intentions. Why does it all go haywire?
Poor planning; wishful thinking. The tangle of details, brambles and thorns, eating up all of the hours. We hear good advice – misapprehended, half-swallowed – take some positive steps, avoid the rougher commitments. We know why things fail, it’s a familiar old frameup, the everyday trip-up, the usual suspect: it’s us.
Listen to me, leader of the sad-sack pack. I’m not picking on anyone; it’s just that I know. Self-criticism laid aside, what we need now is analysis and solutions. Let’s try.
Estate planning: oh, we know it all. Clients and providers working in tandem, the ticket to securing a family’s future. Yet often they drift, through no malice or malfeasance. It’s a lack of two things: understanding at the launch; later on, thin communication. We start meaning well, but well-intentioned paths lead – well, you know where, so I’d rather not say.
Let’s start with the team – your estate planning warriors. A basic crew comprises a sharp financial advisor – as a rule, the team leader – a CPA to keep you alert figuratively and figures-wise, and an estate-planning attorney to create the myriad legal documents. Add an insurance specialist, and you’re primed.
Estate planning squads, even dream-team assemblages, share a commonplace problem. They come together like all-stars, high-skilled professionals, yet they’re unused to working as one. They don’t share a playbook, the nuance of association, the locker-room camaraderie of shared office space – now something of a memory, in any case. They may find it hard to coordinate.
They need a coach to whip them together – that’s you. No firebrand speech is needed, as a rule: just tell them what you expect. It’s not easy, creating a vision of legacy. It takes time to form, it needs some alone-time, spousal negotiations, talks with allies who’ve done it. You establish an ideal for winning, and the estate team whips up the plays. Clear-cut, sure, but hard work.
As your life seasons pass, the plan will need altering. Your salary rises: a good time to swap term life insurance for permanent? Ask your team. An indexed-linked universal policy might fit – who knows better than your experts? A fourth child arrives – you’re showing off, now – and a mega-college trust starts to make sense. Don’t build that team and wander off, assuming they’ll run it for you. Talk to them frequently, as inspired by events. The one thing you need particularly is regularity: examine your estate plan, every quarter, at least, and make sensible changes as needed.
Stay on top, don’t let it slide: of course, everyone knows it. Yet, alluring insouciance, a fine companion of youth, can consume even wise, older hearts; ask me about it. We can get lazy, leave it to later, assume all is in hand.
Discipline is foundational in estate planning. Here’s some bedrock: beneficiaries must be promptly updated in two key circumstances – there are others, but these must be addressed without fail. It sounds easy, yet we’ve learned failure is an option, alas.
First, examine your estate plan during major life changes. A grandchild is born, so maybe sonny’s back in the will. A marriage ends: your ex is ‘out’ and a conscience-born charity moves ‘in’. Whether cigar or brimstone, when the smoke clears, sit down for a spell with your estate team and do the needful. It may feel ruthless in that latter, yet you’re not being wicked: simply smart, getting wise. Let it become a habit: note to self.
Second, like slow clockwork, review the list of beneficiaries every four years. Let’s again talk about everything ‘ex’: our callous advice, to act with alacrity, is often forgotten. It falls through the cracks, gets put off on account of happiness – we move on, it gets cleansed, the mind rests easy – but trouble is brewing. One client, apprised of an ‘ex’ lurking among the ‘dear beneficiaries’ in her will, described the revelation as an “uncool spine tingler. You want chills? Watch a Hammer horror film. Fantasy’s fine, but real fangs in your neck are no thrill. Change it!
Here’s some more virtual ice to slip on: estate plans must cover the kids. Traditionally, you whack up the treasure: each child gets an even share. Fashion has shifted and this wisdom is challenged – shares should be tailored to talent and need, you’ll hear. Inheritance itself is now publicly questioned –this is political trending, wisely ignored. Still, what should you do?
My parents went traditional: they cut up the pie, we got matching slices. “You kids get equal shares. We love you equally; that’s how it goes,” pronounced Dad, reclined on his throne. How could you argue? There was grumbling from my sisters, Queenie and Princess, about notions of value and want. Mother always said that life isn’t fair. At age six, this was disgruntling, yet it’s the fairest of assessments, I’ve learned. The ladies from Hades, as I call them from afar, accepted the parental ruling; we were taught to take care of ourselves, anyway. The trad approach works, if the parents explain patiently and then put down the boot. It’s their money, and how can you criticize equitability?
In fact, there are cases. We were all older, past emotions mercurial; you could reason with us. If there’s family trouble – issues of youth, eccentricity of personality, health needs, willful wildness – your estate team has subtle solutions. If children show immaturity – oh, you coddled them! – or a hothouse-flower tendency to inaction, and cannot be trusted with rich assets quite yet, there are fine workarounds.
Some parents like to give tests. Do it with stealth, so as not to raise ire and breed expensive therapy sessions in future. Employ your annual tax-free gift allowances – for married couples, up to $28,000 per recipient today – to provide some largesse, then appraise what the kids might choose to do with it.
If Prince takes five thousand, pays off some debts, buys a nice suit for his job hunt, takes a trip to Frankfurt to examine the bourse (you raised him right!), perhaps he can be trusted with real money. If a flash car appears in his driveway, that’s fine – but it’s something he should pay for himself. He’s not ready for riches as yet or, who knows – perhaps ever.
An incentive trust to the rescue. These are established to encourage ambition. The trust could rule, for example, that every $10,000 salary rise will be matched by an identical outlay. Richer estates can match a full salary: earn $30,000 per year, receive that amount from the trust; make $100k, and that’s what you get. It’s a clever fire starter and the conditions are infinitely customizable for well-advised parents.
One more supple solution: estate payments to children, tied to events. When King (alright, Tommy) reaches age 30 – the first sensible age – he could receive a disbursement, with more coming at intervals. You can key distributions to any terms you want: a degree attained, a marriage concluded, own children born, first down payment on a home. These solutions can be frustrating to heirs at first reading, but as their parents’ care reveals itself over the years, that rarest commodity can arise: gratitude. Love, you big saps, you’ve already earned; this one is the crown.
So: when did you last consult with your estate team? We’re always waiting, like a parent for a young‘un’s phone call. It’s never too late or too early.