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Financial Planning > Trusts and Estates > Estate Planning

Nuances Of Estate Planning

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By Jack Bobo

Estate planning, sometimes called financial planning, can be divided into two broad categories–estate creation and estate conservation. The logic of life insurance in both categories is undeniable.

Absent a winning ticket in the lottery or a substantial windfall from an inheritance there is no other way to create an estate immediately, and waiting for either of these events can be hazardous to your estate planning. Only with the stroke of pen on a life insurance application can one immediately put in place a substantial estate for the benefit of a person’s family or business.

Equally compelling is the role life insurance can play in conserving a complicated estate that may have taken a lifetime to create. A family business or a farm may be preserved intact for the heirs because insurance proceeds were available when the tax people and creditors came calling. The logic is there, but it is not always persuasive enough to secure action. Many times the nuances associated with estate planning dominate the process, causing action to be delayed or forgotten altogether.

Dealing with the subtleties associated with the estate planning process is where the role of the agent becomes indispensable. It is what separates the agent from the order-takers. It is not something that can be done “online” or by mail; it is an interpersonal process. A review of a few of my own experiences in the field wherein I helped people achieve a reality check will, I believe, illustrate the point.

The purchase of cash value life insurance not only creates an immediate estate for the policy owner but is also a valuable saving tool to build an estate for other uses in the future. The value of the savings element is often disputed by prospects on the theory that there are more productive places they can put their money. I can remember a number of people about age 45 using the argument to defer action. On such occasions I usually asked the question, “How much have you saved so far?” Invariably the answer was zero. I then reminded them that they had 240 paychecks left before age 65 and retirement, and that 240 times zero equals zero. In most cases that was enough of a reality check to at least start a discussion about savings that was long overdue.

But the nuances impeding action by owners of significant estates are even more pervasive. First of all, many do not realize they are at risk because they, in their mind, have undervalued their assets or simply do not believe that estate taxes will affect them. The agent can be invaluable in popping those bubbles and creating the notion that some action is required. I always found it was helpful to cite the experience of well-known politicians, even presidents, with the tax people and then ask if there was any reason that they could expect to be treated any differently. After that hurdle had been overcome, then there were usually many other real or imagined barriers to securing action.

I recall a very successful local merchant who was totally frustrated with how to plan his estate. He had moved to our area many years earlier because of a health problem. He arrived in his 20s with few, if any, resources. He started at the bottom of the local labor force but over the years developed his own business into one of the most successful of its kind in our state. His problem was his sons, who showed no interest in traveling down the path he had taken. He thought they were spoiled and did not take his business seriously. As a consequence he had no plan for business succession or real concern about conserving his estate beyond providing for his wife.

My role in this was to point out that it was unrealistic of him to expect his sons to travel the road he had taken. He was the product of a relatively poor family whereas his sons were part of one of the wealthiest families in town. Their legacy was not so much to create something of their own but rather to be good stewards of what he had created. By not having a concrete and adequately funded plan of succession the future was in doubt. If he did not care what happened to the business in the future, then why should his sons care? Happily, a plan of succession did ensue and it worked perfectly when the father retired years later.

By contrast, I worked with another man who had built a large and successful auto parts empire and he had a similar problem with his son. The son had lived in the lap of luxury all of his growing-up years–belonged to the country club, all his friends were from wealthy families and he was very much a part of the local social scene. When he reached age 21 the father decreed that now the son was on his own and it was up to him to make his own fortune the way his father did. I was never able to convince the father that raising a rich man’s son had a different set of problems and challenges than those of most families. No plan emerged, and as near as I can tell, in the end, the estate was just frittered away. The nuances overcame the logic and the concept of stewardship was lost.

Selling the logic of life insurance to either create or conserve an estate is, in reality, the easy part of creating a plan. Dealing with the nuances and idiosyncrasies of people is where the work really begins. The most important aspect of that phase is listening carefully to what is being said, separating fact from fiction and not being afraid to pop a cherished bubble now and then.


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