Once a trusts and estates lawyer has designed and discussed a client's estate plan, the next step is to implement it. Drafting the documents, creating trusts and partnerships, and other planning follow. But some wealthy clients put the brakes on the process before implementation.
The clients pay for the design of the estate plans, but no other action was taken.
In an attempt to understand why some affluent clients choose not to take action, Forbes' article, "Why The Wealthy Do Not Implement Their Estate Plans," describes a survey conducted of 288 wealthy families (defined as those with a net worth of U.S. $10 million or more) who had engaged trusts and estates lawyers to design their estate plans but did not follow through. These folks cited a number of reasons why they didn't act on their estate plan.
Almost 90% said that the estate plan didn't deal with their goals, wants, and objectives. About half think that their estate plan was too complicated. Well, estate planning for the wealthy often requires complex strategies to achieve goals. But this shows that they needed an experienced trusts and estates lawyer to do more than simply create an estate plan. They needed a professional who was equally skilled at gauging the affluent clients' ability to cope with the complexity of the planning and to be comfortable with the plan.
Half of the affluent clients say they didn't implement their plans because they were nervous and that they weren't in control. Based on this study, wealthy and non-wealthy clients should treat communication and client education as an important part of estate planning.
Reference: Forbes (March 22, 2016) "Why the Wealthy Do Not Implement Their Estate Plans"
Suggested Key Terms: Trusts and Estates, Estate Planning Lawyer, Affluent Clients
Life Insurance Needs to Roll with the Changes
"One thing is sure, if our lives change because of unexpected life events, our insurance needs should also change."
As we travel through the phases of our financial life, our needs change. The New York Daily News article, "3 ways to choose the right life insurance plan," speaks to this process.
Young adults have some pretty straightforward insurance needs like obtaining insurance for their first car, a ring for that special someone, and their first apartment. As we get older, our needs in life and in insurance change. Saving for a down payment on the first house, college tuition for the kids, and then down the road, retirement become new priorities. And many of us will be faced with unexpected events, like illness or death of a loved one, divorce or a spouse who is forced to retire prematurely.
Make adjustments. Life insurance is an important financial tool that should never be a "set it and forget it" plan. For example, a couple has life insurance policies on which they're continuing to pay premium payments and then the husband passes away. Depending on the death benefit and her level of concern for their children's financial state, it is possible that the wife does not need to keep her life insurance policy. She could put the dollars she was paying for insurance premiums in her pocket for her desired benefit. Also, many companies have employer-sponsored life insurance plans for their employees that cover about three years of salary. Depending on the level of coverage, you might consider purchasing additional insurance outside of your employer.
Know when to cancel. Don't be afraid to cancel your policy if it makes sense for your financial outlook. By the time many people retire, hanging on to insurance policies and continuing to make premium payments may not make sense. If you have a total estate value that may exceed the federal estate tax exemption amount at your death ($5.45 million), high net worth individuals may use life insurance to help offset estate taxes more than the exemption amount.
Choosing the right plan. Be realistic about the amount of coverage you'll need, especially when it comes to the amount you will pay in premiums. The amount of insurance coverage is typically capped at ten times your annual salary. Insurance providers have strict health and financial guidelines that they use in determining coverage. These may include a health exam and ordering copies of your medical records from your doctor, which help the insurance provider determine your rated insurable level.
Reference: New York Daily News (March 22, 2016) "3 ways to choose the right life insurance plan"