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Financial Planning > Trusts and Estates > Estate Planning

It’s Never Too Early to Think About Estate Planning

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What You Need to Know

  • The pandemic has been a wake-up call for younger investors to realize the importance of proper estate planning.
  • Organizing intentions is key: Do they want to spend savings, leave it to heirs or donate it to charity?
  • Many young ultra-high-net-worth investors are eager to engage in philanthropic endeavors at an earlier stage.

The uncertainty of the past year due to the COVID-19 pandemic has been a wake-up call for younger investors to realize the importance of estate planning and how it can play an integral role in managing and preserving assets in an era of unpredictability.

As the pandemic continues to weigh on the economy and potentially significant tax and social reforms loom, helping young investors see that it is never too early to create an estate plan has never been more important.

Start the Conversation

For many young investors, the pandemic has caused a shift of their financial goals. Many now see the need to take control of their finances and make solid plans.

Is your client considering a career change, rethinking their housing situation or becoming interested in impact investing?

While many young people may have previously considered estate planning something to address later in life, that has changed. Many now see that having a carefully thought-out estate plan is the key to building and maintaining generational wealth.

For advisors, now is the time to encourage younger high-net-worth clients to plan for the future.

Organize Intentions

An estate plan that inadequately reflects your client’s intentions is not a good plan, so getting their financial goals organized is the most important next step.

Ask the question, “what do you actually want to do with your estate?” For most investors, four simple options form the broad outline of what they can do:

  • Spend it.
  • Give to heirs.
  • Donate it to charity.
  • Pay in taxes.

Get a Plan in Place

Having an estate plan in place, even if it is a simple will and revocable trust, is of profound importance in case something occurs before a detailed estate plan is completed. Many younger investors fail to consider how disability or medical directives can come into play at any stage of life.

Details can be refined over time, but young HNW investors need to have the large building blocks of their plans in place to avoid the risk of subjecting their estates to public disclosure of assets (probate) or an inefficient distribution of capital.

Roll With the Changes

Communicating how today’s low-interest-rate environment affects estate planning and philanthropy is important for young HNW investors. The devastating impact of the pandemic has driven the social justice movement and increased awareness of the need for philanthropy and charitable giving.

For many young entrepreneurs and the next generation of family business owners, social accountability is a business imperative. Employees and consumers have higher expectations of companies to drive social change through their culture and values.

While ultra-high-net-worth individuals of past generations generally considered philanthropy only as retirement approached, advisors should now be asking how their younger clients feel about giving back.

Today, many of the new generation of ultra-high-net-worth investors are eager to engage in philanthropic endeavors at an earlier stage than their predecessors.

Is your client motivated by the value propositions behind sustainable and impact investment strategies? Do they wish to drive impact initiatives with their own or family businesses? These are questions that will be important to factor into your client’s estate plan from the outset.

The Only Constant in Life Is Change

For younger investors, an estate plan needs flexibility to evolve with life events. Marriage, children, moving and starting a business are some of the life changes that will affect younger clients and alter their financial goals. Encourage younger clients to review their estate plans regularly to ensure that their current life goals are reflected.

Estate plans are fluid and need to be constantly optimized to meet your clients’ preferences and to account for the changing value of the assets in the estate. Estate planning laws continually evolve, and tax and gifting regulations can adjust with any change of administration.

Advisors must communicate openly and frequently with clients on updated wealth protection strategies and plan adjustments.

Encourage Communication

Although often overlooked, family communication, education and discussion are an important aspect of successful estate planning. In most cases where families fail in passing wealth to the next generation, it is due to lack of communication or clearly defining financial goals with family input.

Young ultra-high-net-worth investors may feel like they have plenty of years ahead of them to consider how their wealth will impact their family, but it is never too early to begin discussions.

Successful estate planning for younger investors takes organization, open communication, and a measured, step-by-step approach to build a dynamic estate plan that accurately reflects their goals and intent.

More time spent on the details of an estate plan ensures an ability to be proactive in the face of changing laws and an increased level of success when transitioning wealth from one generation to another.

Mike Yelverton is managing director and head of Tiedemann’s West Coast Advisor Team.


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