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3 reasons your senior clients need an estate plan

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Our annual Senior Survey is designed to get a reading on the status and perceptions of seniors and their advisors. One question, in particular, took on greater significance this year: the importance of planning for the inevitable.

We asked participants if they had set up an estate plan. Seventy-one percent replied they had. For those who had yet to piece one together, a rather substantial 83 percent said they had no interest in doing so.

As in any survey, the raw data gives a sky view. But what’s really behind those numbers? What makes an individual answer in the manner they did?

To get a peek behind those stats, we reached out to several of our survey takers to find out why they have constructed an estate plan, and how this helps shape their prospecting efforts.


1. It maintains family harmony.

David Sterling, 63, lives in Sarasota, Fla. He’s a licensed attorney, insurance agent and securities rep. He also chairs the American Bar Association’s trust and estate planning section of the financial planning, estate planning and insurance committee. The focus of his practice is on what he calls “estate management.” So when asked if he has an estate plan locked up, he quips, “I would be awful embarrassed if I didn’t have one.”

Joking aside, Sterling says many individuals make several critical errors when it comes to estate planning. First, they assume an estate plan solely comes into play after death, neglecting to consider the possibility of who is going to oversee their financial affairs if they ever become incapacitated. “It’s not just death,” he says. “The bigger reality is when your health fails.”

Therefore, one of the most important yet overlooked documents is the power of attorney. While he is a great believer in insurance products like life insurance, annuities and long-term care insurance, Sterling says these are very complex products that are sometimes sold without an owner knowing how to fully operate them. That becomes even more of an issue when the policyholder’s mental or physical health deteriorates and they need to access the benefits of those policies to preserve their wellbeing and financial status. In those instances, somebody must drive those vehicles, as Sterling puts it, when they are needed the most. “Today, with demographics and the aging process being what it is, the power of attorney looms large.” If there is no power of attorney, the state may be called in to make decisions about that individual’s financial affairs.

Accordingly, when he works with clients, Sterling gently and respectfully tries to get the client to reach out to one family member in the estate planning process. Usually, he finds that there is at least one child the client feels comfortable having him confer with.

Many clients balk at the cost of setting up a well-drawn, detailed estate plan. But Sterling strives to make client understand the ultimate value of an estate plan. And it’s not all about minimizing taxes, though that is factor for some; it’s also about maintaining family harmony.

“When a client asks, ‘What is it going to cost me?’ I say, ‘It’s going to cost you plenty if you don’t do anything,’” Sterling says, adding he can sometimes be a wiseguy.

“The goal is, will my desires about how I want my assets to be transferred and who they are designed to benefit, will those preferences and desires be followed? They might not be if an estate plan is not in place.”


2. It ensures assets are appropriately distributed.

David Bruen, 73, still works in the insurance business in St. Petersburg, Fla. He started his own estate plan back in the 1960s. Of course, he’s the first to admit that a lot of has changed since then.

“When I first set up my mine, it was very simple because I didn’t’ have anything,” he says. Now it’s expanded to include living trusts and irrevocable life insurance trusts, notes the father of three and grandfather to nine. “An estate plan is a living thing. It has to be updated on a regular basis.”

Estate planning, Bruen emphasizes, is not just for those who wish to minimize federal estate taxes. Instead, the focus should be on ensuring assets are distributed in the way in which the individual desires. This is especially vital today with so many divorces and blended families.

“Right now, most people think of estate planning as planning for estates in excess of $5 million,” he says. “However, if you have $100,000 in your retirement plan, and you want your children to inherit it, you have to set it up in such a way that your spouse and children will benefit without having to go through probate.”

Involving children in the estate planning process can be a thorny issue, Bruen admits. Some clients do not want their children privy to the discussions; they’d rather not have the children know their worth. Some prefer the executor be an attorney or another professional like a trust officer at a bank. Others, however, do bring in their children and appoint a child as the executor.

Perhaps the biggest impediment to estate planning is the mindset of the client, Bruen finds. “Mostly, they don’t want to face their own mortality. That’s the primary reason.” The prospect of setting up trusts can also seem like a daunting task. “People have all kinds of misconceptions. It’s an educational process.”

But with some gradual, gently nudging, they can see the advantage of having an estate plan in place.

He recalls one client who possessed a beautiful portrait of her grandfather. “She said, if my daughter doesn’t want this, I want you to destroy it, do not sell it,” Bruen recalls. “I said, really? We talked about it for a long time, many years. That led into other things and we eventually set up a comprehensive plan that worked out very well.”

That client passed away last year, and the daughter now has the painting. “I was so happy. I really was,” Bruen says.

stress free

3. It protects against stress.

Donna Bryant, 62, is retired from her position with the State of Wisconsin, where her duties included advising people on Medicare. Now, she trying to build up her insurance sales business so she can put together an estate plan, a process that could takes years, she concedes.

“I’m starting from scratch,” says the widowed mother of four and the grandmother of four. “I’m trying to generate income with insurance sales so that I can create an estate plan for myself.”

That plan will incorporate the infinite banking concept popularized by R. Nelson Nash, Bryant says. “With the infinite banking concept, you can spend money, but then you earn it back,” she explains. “I have four grandchildren and I need to be able to recoup the expenses of taking care of them and educating them and giving them the things they need.”

Before she retired, Bryant relates that an estate plan was not high on her priority list. “I had no money left over to do that,” she says. “I had small savings, but all it takes is a couple of major health issues and children having difficulties to drain any savings.”

One product she would consider purchasing is a fixed indexed annuity. “I’m not risk averse, but because I don’t have anything done yet, my first choice would be to do something with very minimal risk but would grow slow and steady. A fixed indexed annuity would be fine because then I would have the benefits of the market but none of the downside.”

See also:

How insurers are solving the retirement crisis

Making estate planning a family affair

10 steps for avoiding estate planning mistakes