Estate planning: merely "technical"?

Estate planning: merely “technical”?

A friend of mine is completing the next-to-last semester in her JD–Juris Doctor–degree program. [Juris Doctor: she is studying to become an attorney.] She took the final exam in her Wills, Trusts & Estates class on Monday.

“I did real well,” she said. “I think I may have done better on that than any other tests I’ve taken since I began my studies!”

“That’s great!” I said.

“Yeah. I think it’s because with estate planning, you’re just dealing with straight technical questions. You don’t have to deal with all the messy emotional and relational issues–all the people questions–that are so common in other parts of family law.”

I looked at her in shock. “You’re kidding!”

After all the study I’ve done, it seems to me that if any professional–attorney, CPA, investment advisor, analyst, strategist, or anyone else–ignores the emotional and relational issues involved in estate and legacy planning, he or she is looking for trouble . . . or inadvertently opening the path to create trouble for the family who seeks his or her counsel.

It’s all related to to the issues we’ve talked about in the past:

As Cochell and Zeeb express it in Beating the Midas Curse, the problem of focusing on the family fortune rather than on the family itself; of concentrating on the value of things rather than the things of value, on the family’s valuables rather than on (among other things) its values.
Or, as Hughes notes (Family Wealth, p. 93):

[Advisers who focus on helping their clients minimize taxes] are on the wrong track, because they are serving only the liability side of the family’s balance sheet. Taxes don’t promote the well-being of family members, the asset side of the balance sheet; they are a cost of a family’s doing business.

Any entrepreneur knows she has to spend 70 to 80 percent of her time generating revenue or she will go out of business. And advisers serving the cost side of the family balance sheet is on the wrong side of his clients affairs. Tax reduction is important, but taxes have almost nothing to do with twenty-, fifty-, or one-hundred-year planning.

To illustrate the dangers involved in a “technical-only” approach to estate planning consider what Hughes says (ibid., pp. 183-184):

[I]n order for the recipient to have her or his life enhanced rather than depreciated by a gift, the recipient–the beneficiary of the trust–must believe that she or he is worthy of such a gift. We all know how disempowering gifts, or handouts, from the government have proven to be for the least privileged in our society. Why should we believe that the beneficiary of a trust is any different? . . .

Dependence creates all kinds of behavior; none are behavior choices free people make. . . . Tax planning is a necessity for families with wealth and must be carried out with excellence. However, . . . [a] gift made principally for tax purposes has no life in it for the human beings who are supposed to be benefited. They will properly ask the trustee, “Why was I given this gift? Why am I worthy of it?” Only trouble will follow [if] a trustee . . . says, “Because Grandpa loved you”–when the trustee knows that Grandpa was actually more anxious to take something away from the tax collector than to give something to the beneficiary. . . .

All too often the truth is that Grandpa wanted to take it with him, but since he could not, and since the tax man was there, Grandpa decided to set up a monument to himself that would remind later generations of his family of his success as a wealth creator. In many instances, Grandpa really did not care about the impact of the gift on the beneficiary. . . . [T]he question of his or her personal worthiness to be [a beneficiary] was never considered. Necessarily, this fact leaves the beneficiary in a quandary as to how to view the trust and his or her role in it.

No, my friend, estate planning, wills and trusts are not “merely technical.” They have deep ramifications for every person they touch.

May we approach our estate planning with careful aforethought and consideration of what our decisions will mean for those who they will touch.

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