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.