Estate Planning is Not a One-Time Event, it is a Life-Long Process

By Mark Schutter,
Miller-Valentine Group

Individuals and families commit a lifetime to building their wealth yet spend very little time managing the very wealth they are creating. In fact, in a study conducted by the Employee Benefits Research Institute, it was found that individuals work on average 40 years to accumulate wealth for retirement yet the average person commits only as much time to planning during this 40 year period as they do analyzing the purchase of one car!

When it comes to estate planning, people think it is only applicable to the affluent. The fact is that families with any amount of wealth need to integrate planning into their lives be it wealth management and/or estate planning. When people begin to see themselves as not owners of wealth, but as stewards of their wealth, the importance of planning begins to take root.

Wealth is often created through the success of a family owned business. What’s interesting is that if you speak to the leader of any successful business as to the keys to the success of the business, you will often hear a story about a business built on a vision, mission and strategy directed to achieve short and long-term goals of the organization. Furthermore, you’ll hear how the business surrounded itself with a great leadership team whose primary focus was on strategic planning and implementation. If such a model is so effective in accomplishing the goals and driving the success of a business, wouldn’t it make sense to utilize a similar model in managing one’s family wealth?

Before delving into estate planning, it is important, first, to understand what we mean by “wealth management.” Although the term “wealth management” means different things to different people, in its simplest form we are referring to a planning process focused on identification of family goals and objectives, development of strategies to achieve such goals and objectives, execution of an implementation plan to achieve goals, and ongoing evaluation and review so that there is accountability to ensure progress toward attainment of family goals and objectives.

Elements of family wealth management may include but are not limited to the following:

Notice that estate planning is but one element of what should be a much larger comprehensive “wealth management” process. Unfortunately, all too often, there is no process in managing family wealth. Rather, it is more a series of reactions involving one or more of the above elements in relation to the occurrence of some short-term event. Without a process to managing family wealth, strategies relative to each of the above elements could very well be in conflict with one another and not in synch to achieving family goals and objectives.

So how does one get started utilizing a “wealth management” approach to managing family wealth to achieve their goals and objectives? Like any great business, you start by surrounding yourself with people who have the skills and traits to assist you achieve your family vision. Ideally, your lead advisor (quarterback of the advisor team) should be someone who is trusted, objective, licensed, and committed to understanding you and your family and what you are trying to achieve. Individuals best positioned to take the lead role in the planning process are typically CPAs, attorneys, and fee based independent financial planners. These professionals have nothing to sell other than their time and expertise. Other very important members of your wealth management advisory team include but are not limited to your insurance agent, banker, and investment advisor. You should view each of these advisors as key members of your wealth management team working together to understand your goals and tasked with bringing creative thought and solutions to developing and executing your wealth management plan.

Managing family goals and objectives within the framework of a “wealth management” process best positions an individual and their family to initiate effective estate planning. Estate planning should focus on three fundamental issues:

1. Assurance – assurance that you can live the rest of your life feeling financially secure and that your heirs have good educations, healthcare, and long-term financial security;
2. Family -- planning to be sure the harmony and functionality of your family is not disrupted because of unintended friction created by lack of attention to planning;
3. Empowerment -- transfer wealth in such a way as to motivate and empower your heirs rather than sapping their will to aspire and succeed.

If you succeed on these three fundamental issues, whatever you might pay in estate tax becomes secondary.

From a technical perspective, estate planning should address the following:

1. Estate Disposition (i.e. Last Will & Testament)
2. Asset Protection
3. Estate Tax Minimization
4. Liquidity to Cover Estate Liabilities
5. Plan Implementation

Depending on the complexity of one’s estate, it is important not to let one area bog down the progress in another area. For example, complex estate tax reduction strategies often take time to develop and evaluate. Analyzing estate tax reduction strategies, however, should not delay updating one’s Last Will & Testament. In addition, the most common mistake made in the estate planning process is not the plan itself but the lack of implementation in executing the plan. When an individual creates a Revocable Living Trust to govern the management and disposition of family assets upon the grantor’s passing, the Trust is only worth the paper it is written on if assets are not transferred into the Trust. Great plans are meaningless if not executed. A strong advisory team with a lead advisor working together in coordinating the estate planning process will help avoid these issues and many others.

It is often said that the only guarantee in life is death and taxes. With proper planning, the latter of the two can be managed and potentially eliminated. What is important to understand is recognizing our responsibility as stewards of our wealth. Effective planning encompasses constructing a valuable financial, family and social legacy that accomplishes one’s goals and objectives. Be proactive and begin your planning process now. Planning, as a life long process will assure you and your family that your goals and dreams will be realized.

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