Reassess assets in context of current needs and objectives.
A 2016 survey found that just one in 10 wealthy individuals had given complete information about their estates to their heirs, out of fear that such disclosures would dampen their work ethic. The survey, which was conducted by Wilmington Trust and polled individuals with a net worth in excess of $20 million, also found that two-thirds of the respondents were “apprehensive about sharing inheritance details.”
Unfortunately, this reluctance to talk to children and other loved ones entrusted with an inheritance creates some challenges for wealth managers and estate planners to assist with holistic financial planning.
Open Line of Communication
In a recent report about how the wealthy talk to their children about money, The New York Times noted that “no advisor counsels silence,” but it’s important “to make sure that everyone is ready to receive the information, and that there is a level of trust between parent and child. This may mean speaking more generally about inheritances [or] family commitments that can be met only because of excess wealth.”
Moreover, without an open line of communication between your clients and their children, it may be very difficult to evaluate whether various assets within their portfolio are still serving their originally intended purposes. For example, a commonly overlooked asset owned by most high net worth clients is life insurance.
Take a fresh look at your clients’ whole or universal life insurance policies, especially if they were purchased years ago and use that evaluation exercise as an opportunity to engage your clients in a dialogue with their heirs about whether the policy still aligns with their strategic objective in purchasing it in the first place. You may find a policy was once intended to help heirs pay off estate taxes, but under current estate tax exemptions, it’s no longer needed to achieve that objective. Or perhaps your clients’ heirs no longer require the death benefit from the policy to pay off any family debts. Still, the estate might benefit from turning that policy into a liquidity tool that will provide a charitable gift to a hospital, school, place of worship or charitable foundation.