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You know just a little about estate planning. It’s not on your list of 10 favorite things. If you love your family, and care about the wealth you’ve created, it is not optional. It’s a process, not an event. There is work to be done, but probably not what you think.
Before you get started, consider taking time to get it right. This is what I call Estate Planning for Success. That is, success for you and those you love, building on the success you’ve already created.
You can save your family millions of dollars of unnecessary estate taxes– That is almost a given. You have to be willing to do some things. Engage in a process. Make some decisions. And, it helps a lot if you are willing to live at least another 10, 20, or 30 years!
You don’t relish learning about all of these tax strategies – I don’t blame you. The key problem – I’m sorry – is the advisor community does a terrible job of putting complexity into practical terms. My advice to advisors… Stop trying to sound smart. Stop trying to CYA on every little detail and possibility, at least until later in the process. Grab a giant pad of white paper and a few magic markers. Stay out of the weeds.
Saving taxes is the easy part – There are various structures and alternatives that can be brought to bear to keep your assets from the U.S. Treasury. That is, to redirect them to the heirs of your choice. Those tax structures are what many business owners and other high-net-worth individuals tend to think of when it comes to estate planning. Those are the easy parts.
What do you want your money to do after you are gone? – That’s the real question. Where do you want your assets to go? Who shall be in control? What is your legacy to be? Those are the first questions to tackle. Tax savings and structures come later.
What do you want it to be while you are still around? - That’s kinda important too. I never met a client yet who was interested in borrowing money from the kids. You no doubt plan to be around for a long time. Figuring out how to put things in motion to accomplish what you want to happen after your gone, while accommodating your plans while you’re still alive… Let’s just say there are things to think about and sort out.
How do you take care of those you love? – Beyond giving them a truck load of money. This is really big. I know, you know. But, many estate plans don’t go very far. This is art and science. This is about protecting without being too controlling. This is understanding the kids, the options, the risks, and more. It’s about communicating. It is about doing your best to ensure wealth is a positive force in their lives, not a negative one.
What are the facts? – There is a bit of an effort just to gather up the facts and figures. That is, in appropriate detail for the planning process. This is not something you need to do, although you will have to be involved. This is what accountants and others should be pulling together.
It’s a process, not an event – I said this in the beginning. Would you ever look at the sales function in your business, jump in for a few months and give it a little overhaul, then say: “All done. We’ll check back in 5 or 10 years and see if we need any updates.” Of course not. The facts change. People change. In the context of estate planning for success, the fine points of your thinking, wants, and desires change.
It doesn’t have to be painful – You can put this in the same joy bucket as hip replacement surgery. Or, you can hold it as a chance to do something really valuable for yourself and those you love. If the process is done right, and you participate in the right way, it can all just happen. It doesn’t need to be 12 boring and distracting meetings, fretting throughout an intense year of doing something you don’t want to do.
What a great chance to go places you don’t normally go – I mean this in mental and emotional terms. To really think and be with the meaning of wealth, at this point in your life. Your purpose and your life. Again, now - based on the facts now – not the internal programming that brought you here. What a chance to talk with your children and others, and to really consider them as individuals. What an opportunity to search your own Soul.
Philanthropy and more – As a part of this process, I ask the question again. Where do you want your money to go? How much, and to whom? Why? For what purpose? What will bring you joy and leave you feeling more than fulfilled?Overflowing!
It’s your plan - You see, the automatic wham, bam, thank you mam, $50,000 in fees, fancy estate plan to save some taxes… That ought not be it. It’s easier, perhaps, to just implement something that is more or less off the shelf. I have seen plenty of big shot law firms whose expensive plans all look pretty much the same. Those are for the ones that don’t really care. I know that’s not you.
Getting Ready to be Ready
Consider all of this as a richer, deeper, more powerful, more effective, and more enjoyable way to enter into an estate planning process. Not more complicated. To the contrary, by slowing down it becomes easier, more logical, and more comfortable.
Let me summarize not the entire process, but what I call “getting ready to be ready”. At this point, you are just getting started. Irrespective of what you may have done in the past. What I am suggesting below doesn’t yet have to be perfect, overly detailed, or over-thought. Just a place to start. You will have more questions than answers. But, plenty of opportunity to get answers as you go through the process.
1. Gather the facts – You need a good fair market value balance sheet. Consider all of your assets, how they are owned, a reasonable value for your company, etc. Put together a fact paragraph on each of the players, the kids, etc. Gather up your existing estate planning documents. Get a picture of your current life insurance.
2. Consider who and how much – That is, who is to ultimately end up with your wealth. Not how, trust structures, any of that quite yet. How much is enough for the kids? The grandkids? Others?
3. The meaning of wealth – If you can, hit pause and do some deep thinking. People do things out of guilt, because they are supposed to, because they have always just had it in their heads that way, whatever. Just take yourself back and ask "why" questions?
4. Consider you – It’s your money. If you know “you”, your purpose, the legacy you want to leave behind, the lives you want to impact, what will bring you joy…. Now, we are getting someplace.
5. Lifetime transfers – The tax planning part of estate planning is largely about using creative strategies to shift wealth out of your taxable estate. That is, without paying gift or estate taxes as those wealth shifts occur. How much works for you to shift away while you are still alive? Assume your balance sheet is $50 million today, and growing. To keep it outside the estate tax net, are you willing to shift that future growth, all or part, into trusts for the kids? What about the $50 million net worth you have now? Would you be willing to shift $10 million or $20 million of that off of your balance sheet over the years ahead?
6. Who do you trust? – Your accountant? Your lawyer? Your insurance professional? Do you have the right players? Your potential trustees and the trusted friends or family members that may play a role?
Now, you’re ready! This brief narrative can do little more than hint at how to enter into an Estate Planning for Success process that will impact you and those you love in powerful ways. It’s a process, not an event. It is about looking forward with the wealth you have worked so hard to create. It is making it a positive force for those you care about. It’s about making your wealth a more powerful and fulfilling blessing for you. More than ever before!
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