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I've worked with many estate planners throughout the years—both to organize my own affairs and for business. And I've noticed an interesting phenomena. It seems the financial services community hides behind elaborate jargon in favor of addressing the emotional reasons their clients are sitting in front of them.
They'll talk about non-revocable trusts, captive insurance companies, family offices, foundations, executors, nominees, and on and on. Each structure has it's pros and cons and attorneys will talk in circles about tax implications, asset protection, ease of distribution and control, and so on. And I get it, the U.S. tax code is so long no one could possibly be an expert about every minute detail. It's easy to be sued in the U.S. (the average business owner is sued every 7 years). There's a lot of paranoia surrounding estate planning, as there should be. You never know what land mines you'll run into if your structures are not set up correctly.
There is, however, a glaring element missing from most estate plans. That element is love.
Most people see an estate planner for one major reason: they want their assets to be passed on to their heirs or to benefit a cause they care about. They sit down with an attorney because they are compelled to organize their affairs for the best possible outcome for those they care about.
It's not about saving taxes and making sure your vintage car collection doesn't end up in probate. That's just means to an end. In the end, it's about ensuring your children have the opportunity to build an above-average life. It's about helping fund the cure for cancer or give scholarships to students in need at the college you once attended. It's about meaning.
Although you can distribute your assets in accordance with your values, with traditional estate planning most of your values are lost. What ends up happening is your attorney writes up a document with a long list of stipulations and your daughter, for example, ends up with a trust in her name that doesn't allow her to access the money until she's eighteen and only for educational purposes (or whatever terms you decide on). It's a cold, black and white distillation of your vision for your daughter's future. One she may not fully understand or appreciate.
I recently interviewed philanthropic advisor training expert and the Sallie B. and William B. Wallace Chair in Philanthropy at The American College, Philip Cubeta. "There is a movement discussing what people are trying to accomplish with their life and money that's definitely a trend in wealth planning circles—higher levels of it," Mr. Cubeta said.
People are craving meaning. Mr. Cubeta, however, went on to say that most financial advisors or estate planners simply are not specialized in handling both the philosophical and financial components of creating a holistic estate plan. "Very few people who went into wealth planning have an anthropology / philosophy background," he said.
Cubeta brought up the word LOVE and how that is the core of estate planning and philanthropy. Yet, he said, "It's just really awkward using a word like that on business time.... So, you retreat into all this jargon about passing on your for capitals."
How Do You Address The Emotional Components of Your Estate Plan?
To properly address the emotional and philosophical components of your estate plan, you must first consider your legacy vision. For some, simply adding a well-written legacy letter that explains your principles, viewpoints and feelings is enough. For others, something more elaborate makes sense. Such as creating a family mission statement and constitution, writing a memoir about your life, or designing a family brain trust.
These "soft" components are the heart and soul of your legacy. Your hard assets, the ones most estate planners deal with, are the physical shell. Both are important, but, certainly, your hard assets are much easier to plop into a trust and pass on to the right person. The softer assets are rarely talked about because most financial and estate planners simply don't specialize in it.
So, the next time you visit an estate planner, realize you are only half done. If your love, kindness, and passion isn't recorded somewhere, what you'll end up with is a technically sound, tax-advantaged structure devoid of the care that motivated its creation.