Over the years we have all heard that we can do more with much less effort by understanding the power behind leverage. In this month's column I would like to shed light on some powerful leverage options that you may want to be considered during the estate planning process with clients.
Pose a problem and ask for a solution from four different advisors (Insurance professional, Investment professional, Attorney and an Accountant) and you will get four different solutions, each from a different perspective. This is because different advisors have different opinions it's difficult to know who's right. When this occurs, more often than not, the end result is …. NOTHING! The client does nothing, because he or she isn't sure who or what is correct. "This is why estate planning doesn't work! That's right, traditional estate planning does not work." This is exactly what Gordon a successful planner in the wealth creation and preservation field said during a recent meeting we had with mutual clients. As they sat listening intently in our office as Gordon successfully recreate the thinking behind their dad's decision to create a wealth preservation plan that modeled his life values.
"Didn't our dad already have an estate plan?" David's son and daughter asked. They just couldn't understand why their dad, as a retired small business owner, had engaged in wealth planning at age 78, after he had already done estate planning when he had retired from his business over 13 years ago.
As I listened to their questions and concerns. Gordon answered, "David, your dad wanted to leave his family an inheritance of more than just his money. He wanted to pass on his ethical will and values and he wanted to leave a lasting legacy to his community."
"It's all about dreams and fingerprints. That's what people want to use their wealth for. Gordon continued." Have you ever said, 'One day when I have more money I'll do this and that?' Well, those are dreams. Fingerprints are those things that you want to leave your mark on even after you are gone, the people, causes, and institutions you care deeply about. "
"Even at age 78, your dad still had dreams he wanted to accomplish. Unfortunately, nobody had ever asked him about them. Did you wonder why all of a sudden he bought a new boat, looked up his old high school friends and started visiting the grandkids every month from Florida? " Gordon asked. "Well, those were some of his dreams."
As Gordon went on, he related David's passion, "You know that your dad's Great Ante had made it possible for him to be the first in his family to go to university. It was important for your father to make that same opportunity available for each of his grandchildren, as well as other deserving students. And you know how much he loved his community. Those were some of the things he wanted to leave his fingerprints on. Traditional estate planning never addressed the things that were nearest to his heart. "
"This new approach goes way beyond traditional estate planning. It begins where traditional estate planning leaves off. You have heard about some of the living results; let us outline some of the financial results."
"Your dad was able to increase his financial security by reducing his exposure to BCE stock, which made up one third of his total wealth. He was able to reduce the capital gains taxes normally due on the sale of that stock, increase his after- tax cash flow by $ 40,000 per year, increase the inheritance to heirs by almost 20 percent, create and leave $ 1,000,000 to charity. "
"Oh!" they interrupted. "One million dollars to charity! Wow, that's allot!"
I jumped in and said "besides the benefits to him personally, let's review the impact on you and the family again. Under traditional estate planning, CRA would have received $ 1 million, you would have received $ 3.3 million, and the charity would have received nothing . "
"Now, CRA will only receive $ 300,000, you will receive $ 3.9 Million – instead of $ 3.3 Million and the charity will receive $ 1 Million."
It took them a few times to understand the power of leveraging, using planning vehicles and financial tools to create more wealth at the end of the process than ever before. Finally, the light bulb went off! The reasons their dad, at age 78, chose to transform his traditional estate plan were becoming clear for his peace of mind, a richer life, increased financial security, more inheritance for his children and grandchildren, and tax dollars directed to his cherished charities.
As we continued, "The problem with traditional estate planning is that it is one dimensional and narrowly focused on just the financial dimension.
"As we travel around the country," I said, "teaching accountants, lawyers, and other financial professionals about advanced wealth creation and wealth preservation options, I'm surprised how few know the real problems or the real solutions! people don't want "planning," estate or any other kind. They want to simplify their financial lives; they want to stay in control of their money and their decisions; they want to know they have enough for the future; they want to give their heirs more and yet ensure that their wealth doesn't hurt them; and they want to leave a legacy that makes a positive difference. "
Gordon and I couldn't help but smile as we thought about David, how during the last few years of his life he saw some of his dreams come true and how happy he was when he talked about the students who would go to school because of his planning and the lives of the people who would be touched through his local charities.
I can't help smiling as I write this today about how all of that will continue long after he's gone because of David's desire to leave his fingerprints. I am sad that David is gone, but deeply satisfied knowing that his influence is not and we had some small part in making this happen.
What about you and your clients? Are there any dreams you and your clients would still like to accomplish? Will you leave your fingerprints on the people, causes, and institutions that you really love? There are over one hundred tools, tactics, strategies, options, and opportunities to help you and your clients live out your dreams and leave your fingerprints.
If, as a client's primary financial advisor, you are not comfortable with starting the conversation leading to what is involved in the essential estate planning process perhaps you might want to direct your clients to work with a CERTIFIED FINANCIAL PLANNER ™ (CFP®) who specializes in this area. The CFP® is an internationally recognized professional certification owned by both the Financial Planners Standards Council. Through education, training and experience CFP® Professionals are called upon to be 'financial psychologists' who understand the life and what clients want to create for themselves, their families and charities in the future and the life they live today. Through training in the Six Step Financial Planning process CFP® Professionals are able to help their clients' bridge their estate planning gaps.
Remember if a client has an estate planning need and if that need is not being addressed, the client will eventually find a way to satisfy that need. So think and be a proactive and creative force in your clients 'lives by providing solutions for your clients' very real planning needs, today by being a legacy maker.