For the affluent, developing a
comprehensive estate plan with an experienced legal professional can require
days of work and cost tens of thousands of dollars—but not having a plan in
place and operational at death can cost more in time and money in the form of
wealth that is not transferred as desired, unnecessary complications and taxes
for the estate’s heirs. Financial experts generally agree that having an estate
plan represents a thoughtful and pragmatic step toward ensuring that the
greatest amount of assets makes it to the designated people and organizations.
Unfortunately, many plans never become real, getting derailed
before lawyers draft and execute the documents and create the necessary trusts,
partnerships and other legal structures. We spoke separately to
trusts-and-estates attorneys and affluent individuals to compare their views on
this phenomenon and understand why this happens.
In 2003, and again in 2006, we conducted separate surveys with
trusts-and-estates attorneys who had designed and prepared estate plans for
wealthy clients that never reached implementation. Given the amount of effort
and expertise it takes to develop an estate plan, as well as how strongly these
attorneys profess their commitment to the welfare of their clients, we were
surprised to find almost no concern among these lawyers for their clients’ lack
of follow-through. In 2003, just 17 percent of them expressed concern; the
number dropped sharply to about 7 percent three years later (Exhibit
1).
Next we asked about the type of follow-up initiated by the
attorneys to encourage plan implementation. Roughly 80 percent of attorneys who
expressed concern about their clients’ inaction sent letters or emails
suggesting clients come in to sign their documents. Very few—only 13
percent—initiated personal contact, either by calling or arranging a meeting
(Exhibit 2). While these figures seem grim, the lack of follow-up by attorneys
was startling. More than 80 percent of them matched their clients’ lack of
action with their own and did nothing to promote further activity. Just 17
percent sent letters and emails; only 1 percent placed phone calls.
The reasons behind the attorneys’ apathy lie in the very nature of
the trusts-and-estates business. It is largely transactional, meaning that
lawyers work on a specific project or plan. Estate plans are long-term
initiatives—designed to work over a period of many years—so after the lawyers
complete a project or plan, they must find new clients. In effect, they close
the books and move on without dwelling on whether their plan ever comes to
fruition. Furthermore, once a client pays his bill, making sure he signs the
documents becomes less important.
While this seems to be the status quo, it is an unsustainable
situation for both attorneys and wealthy individuals who need estate-planning
expertise.
To understand why many wealthy individuals choose not to follow
through on their estate-planning efforts, we constructed survey samples in 2003
and 2006 with families that had done just that. Each of these families had a net
worth in excess of $10 million.
The overriding reason cited in both studies was that the estate
plan did not satisfy their goals, wants and objectives (Exhibit 3). Many clients
begin the process not knowing exactly what they want—or are unable to express it
clearly—and hope that their attorney will be able to guide them through the
procedures and help them crystallize their priorities and values. In the case of
abandoned estate plans, the trust-and-estates attorneys clearly proved
unsuccessful in identifying their clients’ core issues, but proceeded with plan
development anyway.
|
