Are first things first in your estate plan?


Estate planning is confusing for just about everyone who doesn’t do estate planning for a living.  While I like to think people enjoy the time I spend with them on the subject and that my “bedside manner” puts them at ease, you can only clear away so much confusion in a two hour meeting. Moreover, most quality meetings expose important, yet unconsidered, questions and challenges — so the process might seem more daunting at the end of the meeting for many than it did at the beginning. So how can an individual, couple or family have confidence that their estate plan meets their goals?

Step one, in my estimation, is fairly straight-forward — although rarely taken. It’s this: identify what your primary goals are and then make sure that your plan is directed towards those goals.  To put it another way, make sure that secondary goals aren’t the drivers. Let me give you a simple example and explore how things typically go and suggest an alternative regarding how they should go. Let’s say that a husband and wife in their 50’s have three children in their late teens and early twenties. And let’s assume that with insurance, investments, real estate and the like, their combined estate would be worth $6 Million.

Typical Estate Planning Approach

Most estate planning lawyers would discuss the impact of the combined estate being over the Applicable Exclusion Amount (set at $5,490,000 in 2017), the impact of each child having access to $2 Million a piece without appropriate trust protections, how to avoid probate, and the like.  Some more forward thinking estate planning attorneys would discuss eliminating the opportunity for future spouses of the children to have access to the funds in the event of a divorce, protecting assets from creditors, minimizing the hassles for the family associated with managing an estate or trust, how a remarriage of the survivor might put the combined plan at risk, etc.  After an exploration of these matters, the lawyer will draft an estate plan and the husband and wife will sign it and feel that they have done the responsible thing and protected their family.

A Primary Goals-Driven Approach

The typical approach will accomplish a number of goals.  Taxes will be minimized.  Assets protected.  Red tape eliminated.  All of which seem positive — and odds are, they are beneficial outcomes.  However, each of the goals (at least in a healthy family setting) are only worth achieving if they are supportive of more important, primary goals.   Perhaps an extreme illustration will clarify.  Let’s say that without doing a trust plan half the assets would be lost to taxes and costs at the surviving spouse’s death (that’s not how it works — I’m just creating a hypothetical situation for discussion purposes), and that the youngest child would end up as a trust fund baby with a $2 Million trust but wouldn’t with just a $1 Million trust.  If all that’s true, the secondary goal of saving taxes should be abandoned in favor of the primary goal our couple likely has that each of their children become productive, virtuous adults.

Primary goals are broader and more personal in nature.  To have them drive the process requires an especially thoughtful advisor or an especially thoughtful client (ideally, both!).  Because most advisors are paid based on solving secondary goals, however, the task unfortunately will often fall to the client to keep first things first.  I do serve clients with respect to such matters separate from legal representation and I hope I help all clients that I serve focus on primary goals when I assist them with estate planning directly — but know that there can be barriers to having a similar experience in many situations.  So to help you identify your primary goals, let me suggest some common ones for your consideration:

  • Provide sufficient financial resources for the client(s) to maintain an appropriate standard of living.
  • Raise quality children.
  • Support the children in raising quality grandchildren.
  • Encourage healthy familial and marital relationships within the family system.
  • Impact society in a positive way.

These are just examples — and as alluded to above, pretty general in nature.  Your initial reaction might be that these goals are too broad to be of much use.  Yet I’ve found time and time again that there is a great deal of power that comes from keeping such goals front and center in a planning process.  The client who knows that the impact on the next generation is more important than the impact on the trust’s size will not be overrun by his or her attorney’s insistence that only the most protective trust structure will do.  Besides, focusing on the personal nature of primary goals reduces the confusion that accompanies the generally more technical nature of secondary goals.  They’re simply easier for the client to get their arms around.

I’ll leave you with this before inviting your feedback: if you’ve found yourself unable to complete your own estate planning, or if you aren’t really sure that your plan reflects your needs, could it be that you’ve never identified or focused on your primary goals for you and your family?  If you’re an advisor, might a client’s delay be attributable to the fact that they can’t connect your recommendations to their primary (even if unspoken or unidentified) goals?

As always, I’d love to hear what you think!




About Author

Mark initiated this blog due to his passion in assisting and equipping families to manage their wealth and their families well.

1 Comment

  1. Rodger Premeau on

    Excellent points. We should never allow the technical override the vision. Just like with an Apple device, the technical should serve in the background to the primary goal and experience.

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