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February 01, 2009 at 07:00 PM
During my quarter-century of advanced sales consulting, I’ve heard life insurance agents make some variation of the following statement literally hundreds of times: “I’ve got a guy who’s worth $20 million. I’ve been telling him that he needs $10 million of second-to-die life insurance, but I can’t get him to pull the trigger.”
Some of these advisors (i.e., life insurance agents) seem to approach estate planning as though they are trying to solve a mathematical puzzle. They attempt to disturb clients with horror stories about the bite estate taxes will take out of the clients’ hard-earned wealth. Their fact-finding focuses on assets and liabilities, income and expenses, growth assumptions and life expectancies.
Information on ages and health status is gathered primarily to run product illustrations. The clients’ children are of interest primarily as potential Crummey beneficiaries, while the clients’ parents constitute potential sources of inherited wealth. (I cringe when an agent speaks of the client as being “worth” a 
sum of money. I believe that reinforces the perception the planning process is predominantly about dollars.)
Built into this orientation are questionable assumptions, many of which misconstrue estate planning as fundamentally a mathematical problem. While there is no question that some agents make significant sales based on little more than the simplistic approach noted above, it is also true that many clients refuse to “pull the trigger,” in large part because they need to be spoken to in the language of the heart before they are ready to talk about numbers.
An eye-opening experience
Some years ago, an advisor brought me (the home office advanced sales “guru”) out on a sales call. We met at a couple’s estate-like home in an attractive, semi-rural setting. I had been told in advance that the couple was “worth” about $25 million, and that the advisor had been trying to sell a $12 million second-to-die life insurance policy to them.
So far they weren’t biting. I was brought in primarily to explain the technical aspects of how this would work, but as I had no “feel” for these people, I decided to ask a few questions first. “Tell me about your family,” I began. And then we started to make some progress.
It turns out the couple had only one child, a daughter in her early 30s who worked as a schoolteacher. She had recently gotten married–to a “liberal” (the husband’s word) who was active in the environmental movement and whose employment was closely aligned with that interest. Upon further questioning, it became clear that the parents’ path to action had been blocked for years by 2 concerns:
(1) The impact on their daughter if a large sum of money were suddenly to be dumped on her upon their demise; and
(2) Whether their new son-in-law might have access to their daughter’s new-found wealth, particularly in the event of divorce.
When I explained how a trust could be drawn to address these concerns, it was as if a fresh new day had dawned: They were now able to consider the advisor’s proposal on its economic terms. The sales process continued to a happy conclusion, although they opted for a smaller life policy.
Seven principles of estate planning
1. Don’t assume that avoiding or paying estate taxes constitutes the highest priority for high net worth clients. Many individuals in their 40s and younger are still busy accumulating wealth and supporting children not yet financially independent.
