I was visiting with an attorney in Florida recently. He was explaining his frustration in regards to a client of his, a fellow "who's worth about $50 million, and I've never been able to convince him to do any estate tax planning," he said.
I said to the attorney: "You're a pretty sharp guy. You must have shown him strategies that would reduce the taxable estate and leave more money to his family!"
He said, "I have. But I've failed to get him to implement any of them."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
So I asked the counselor, "Did you do a cash-flow analysis showing him how much money he needs to protect his lifestyle?"
"Bruce, he's worth $50 million. I think he knows he has enough money to protect his lifestyle," the lawyer responded incredulously.
"That's why you can't get your client to do any planning. He really likes that," I replied.
"What do you mean?" the lawyer said. "Likes what?"
"Knowing he has enough money to live on—he really likes that. You're showing him all these great ideas that move his money out of his estate and into a trust for his kids where it won't be taxed, and he's not so sure that by the time you're done doing that, he's still going to have enough left to protect his lifestyle."
"And another thing," I continued, "the lifestyle he wants to protect is his lifestyle, not yours. For example, I belong to a nice country club, which costs me about $1,000 per month, on average, for all the things I do there. I have a client who has a condo on a cruise ship. His minimum is $65,000 each month. That's the lifestyle he wants to protect, not mine."
The attorney paused: "I never thought of it that way."
Almost without exception, regardless of the size of the estate, it has been my experience as a financial planner that people's number one goal is protecting their lifestyles. If you're not confident about that, it's very unlikely that you'll have the confidence to do the things necessary to create an effective estate plan.
Many attorneys aren't well-versed at financial planning. So, it's really necessary for you to get all your advisers to work as a team in a framework that seamlessly integrates all of their skills for you. Without a solid financial plan, it's unlikely you'll wind up with the most effective estate plan.
By the way, the attorney in my true story called me a few days after our meeting. "Bruce, you were absolutely right," he said. "He was too nervous about his own financial security to implement the asset transfers required to complete an effective plan. And, for the first time, he's excited about completing an estate plan that protects his financial security and reduces the tax burden on his estate while providing for the people and organizations he cares about."
Amen.
Disclosure: The example presented is applicable to the individuals depicted and may not be representative of the experience of others.
Bruce Udell has more than 40 years of experience in the financial industry. He designs solutions for wealth accumulation and enjoyment for high-net worth individuals.
-
Best Cold Weather Places to RetirePlaces to live Some like it hot; others not so much. Here are the 12 best places to retire if you can't stand the heat.
-
Getting Divorced? Beware of Hidden Tax Traps as You Divide AssetsDividing assets fairly in a divorce means looking beyond their current values and asking whether they'll create tax liabilities — or tax breaks — in the future.
-
Getting Divorced? Beware of Hidden Tax Traps as You Divide Assets
Dividing assets fairly in a divorce means looking beyond their current values and asking whether they'll create tax liabilities — or tax breaks — in the future.
-
A Social Security Storm Is Gathering: Here's Your Safety PlanIf Social Security reserves are depleted by 2033, as predicted, future benefits could be cut by as much as 21%. Here’s how to weather the impending storm.
-
How to Avoid These 10 Retirement Planning MistakesMany retirement planning mistakes are easily avoidable. Here are 10 to have on your radar so you don't end up running out of money in your golden years.
-
Before the Next Time Markets Sink, Do Your Lifeboat DrillsAn eventual market crash is inevitable. We can't predict when, but preparing for the ups and downs of investing is imperative. Here's what to do.
-
This Late-in-Life Roth Conversion Opportunity Spares Your HeirsExpensive medical care in the later stages of life is an unpleasant reality for many, but it can open a window for a Roth conversion that benefits your heirs.
-
Women, What Is Your Net Worth?Many women have no idea what their net worth is, or even how to calculate it. Many also turn to social media finfluencers for advice. Here's what to do instead.
-
Converting Retirement Savings to a Roth IRA? Don't Do ThisYou might want to convert all of your savings to a Roth in one go, but you could end up paying hundreds of thousands more in taxes than you have to.
-
What Is Your 'Enough Is Enough' Number for Retirement?Chasing a 'magic number' for retirement can be anxiety-inducing. Instead, build your plans around a personal number that reflects your individual circumstances.
