As a parent, thinking about the possibility that a day could come when you aren’t able to raise your children can be heart breaking. But building a comprehensive estate plan to protect your minor children is one of the most important things you can do for them. But what do you do if you and your child’s other parent are separated or divorced? Even if the relationship didn’t end harmoniously, for the sake of your children it’s worth setting your differences aside temporarily to discuss these important issues.

Here are five major things to discuss with your ex:

Guardians

In the eyes of the law, if you pass away, even if you had full custody, guardianship of your child will pass automatically to your child’s other biological parent unless it is determined that the surviving parent is unfit or if the parent previously severed parental rights.  Nonetheless, it is still prudent for both of you to nominate a few alternates in the event that both of you are not available. And, it would give both yourself and your child greater security and peace of mind about the future if you and your ex discussed and agree on the same alternates.

Emergencies

Nominating permanent guardians for your child is a great start, but also discuss emergency planning with your ex, especially if you live in different states. Our clients establish Children’s Safeguard Plans that among other things, make sure we have nominated emergency temporary guardians that could care for the children in the event of an emergency and the permanent guardians are not available—friends, neighbors or other family members that could respond within 20-30 minutes and care of the child. If you share custody with your ex, it’s important that both of you have emergency plans in place and that all of your children’s care givers know what to do and who to call in the event of an emergency.

Family Visitation

If it’s important to you and your child, be sure to discuss with your ex the importance of extended family involvement in your child’s upbringing. For example, you may wish to discuss the fact that you would still want your parents actively involved in your child’s life even if your ex is guardian. Within your estate plan, you may even provide instructions to your trustee that it is suitable to pay necessary travel expenses and the like to ensure that such visitation is possible.

Inheritance

While you may feel that your ex could and should be your child’s guardian if something happens to you, if you’re like many divorcees, you do not want your ex having control over any financial assets you leave behind for your child.  So how can you leave your estate to your child without putting it in the hands of your ex? The key is to put your child’s inheritance in a trust and name a person that you know and trust as trustee to manage the assets on your child’s behalf.  Your trust can provide the trustee with instructions on how you want the assets managed, when and how to make distributions to your child’s guardian for the benefit of your child and so on. Note that your trustee and guardian will have to communicate regularly and work together frequently, so if you an your ex can both agree on a trustee that you’re both trust and are comfortable with it will make everyone’s lives easier.

Remarriage

It’s common upon remarriage to commingle assets and finances. And if you don’t properly plan for your child in your estate plan, it’s likely that if you die, all of your assets will end up going to your new spouse—effectively disinheriting your child.  If you or your ex are contemplating remarriage, it’s important to talk to your attorney and make sure there is a plan in place to ensure that your children will be provided for.

I came across a very touching story this morning on CNN.com: If I die, Who Will Teach My Daughters?

When a young author is diagnosed with a rare form of cancer, he wonders who is going to teach various life lessons to his young daughters as they grow older.

Feiler came up with a extraordinary answer. He would put together a group of men and call them his council of dads. Six men from different stages of Feiler’s life who could be Feiler’s voice, and could teach his girls the life lessons he might not be there to teach.

The article is well worth a read and includes a 5-step outline of how to form your own council of moms or dads.

For related ideas on the subject, check out my prior post on Randy Pausch’s Last Lecture.

This article was originally included in our email newsletter on August 21, 2009. It may have been edited somewhat from the version that was originally emailed, so be sure to sign up in the upper right corner of our website to make sure you are getting our email newsletter hot off the press!

With all of the health care talk–as well as the debacles left behind by recent celebrity deaths–we’re hearing a lot about these:

• Will
• Living Trust
• Guardianship
• Probate

While this is a great opportunity for the media to educate the public on these important legal issues, the truth is often getting mangled. Furthermore, for most of the public, the information is confusing, stressful and they would just rather not hear about it.

So let me clear up the confusion, as one who deals with this on a *daily* basis…

Let’s start with the basics. Typically, in North Carolina, when a person with assets over $20,000 ($30,000 in certain instances) passes away, their assets will be handled in one of three ways:

(1) If they had no will, their assets will be distributed as mandated by the state statutory law through a court proceeding called probate,

(2) If the person had a valid will, the estate will still have to go through the probate process, but the court will carry out their wishes as stated in their will,

(3) If the person had a valid living trust (and their assets were re-titled in the name of their living trust–this is called “funding”), their wishes would be carried out in private, without the court’s involvement.

So … why does it matter to you?

The answer to this question depends on how much you care about what your loved ones will have to deal with after you are gone and how much control you want to have as to who gets what, and when and how they get it.

If you do nothing, you get no input on any of these questions and the court and one of your eager family members/friend/creditor who petitions the court will make these decisions on your behalf through a process called probate. Why do you care about probate? Often, the probate process can take 9-18 months and can be extremely costly. Your loved ones may have limited control and access to assets, it’s stressful for your family, and the process is completely public. The probate process can often lead to squabbling between family members and airing of the family’s dirty laundry.

If a person leaves a valid will, it will still have to go through the probate process described above and the headaches that go along therewith, but the court will have the benefit of knowing how you want your affairs handled. Instead of relying on the laws of intestate succession (which is the law that distributes your assets to your family members in the order of their relation to you–you can read more here), the court will pass on your assets to the specific people you have identified in your will.

Through a valid will, you can control WHO gets your assets, but you will have no control as to HOW and WHEN they get it.

A living trust (that has been properly funded!), on the other hand, gives you more control and offers significant protection to your family. If you are working with an attorney who has expertise in this field, you can control WHO gets your assets, WHEN and HOW they get it without the court’s involvement. Even better–with a living trust, it is a private administration and can generally be handled in a short period of time. Furthermore, a living trust can incorporate a lot of other great protections including protection from taxes, creditors, predators, medical catastrophe, divorce, remarriage and more.

You may be asking yourself: why would someone ever do a will instead of a living trust? Typically, a person will choose a will over a living trust for one of two reasons:

(1) they don’t know the difference between the two or
(2) the perceived “cost” of doing a living trust.

There are some obvious advantages to doing a living trust over a will, but starting with anything is better than ending up with nothing. If you are not yet ready to make a leap into the world of living trusts, a basic, will-based estate plan is a starting point. In addition to giving the court direction about how you want your assets distributed, every estate plan should also include:

(1) an advance health care directive, which identifies the person(s) that will make health care decisions for you, if you’re incapacitated, and expresses your wishes regarding health care treatments;

(2) a durable power of attorney, which identifies the person(s) that will make financial and legal decisions, when you can’t; and

(3) if you have children, it should also include a Children’s Safeguard Plan, naming both short and long term guardians to care for your children in the event of an emergency, as well as clear and specific directions to those guardians about how you would wish your children to be raised in your absence.

While we all care about what happens to our assets, every person over the age of 18 needs to have an advance health care directive and durable power of attorney (this includes adult children heading off to college!).

I hope this clears up the confusion…

If you’d like to read a little more about these documents, here are some links to past blog articles that go more in depth:

What Is A Trust?

Parents: 13 Reasons Why Trusts Aren’t Just For The Wealthy

What Happens If I Die Without A Will?

Problems With Intestacy

What Is A Will? Introduction to North Carolina Wills

What Is Estate Planning?

Two Legal Documents Every Adult Needs: Part 1

Two Legal Documents Ever Adult Needs: Part 2

We’re here to help!

The Truth About Estate Planning

Asset Protection Workshop

Tuesday, June 22nd

6:30 pm to 8:30 pm

Discover why most wills and trusts don’t work and what you can do about it.

Is this workshop for you?

This workshop is designed for those…

• Who don’t know where to start
• Interested in protecting their family’s wealth from being siphoned off by creditors, divorce, or taxes
• Who have seen loved ones or friends pass away, leaving a mess and added stress and frustration to those left behind
• Who want to hear about a proven process that will bring true peace of mind
• Who already has a will or trust, but has doubts as to whether it’s the best plan for their family

This workshop will be especially helpful to:

• Those with a will or trust over three years old or that have recently moved here from another state
• Those in a second marriage
• Business owners
• Anyone nearing retirement
• Those wondering if their parents or grandparents have planned effectively

What you will hear at the Truth About Estate Planning workshop…

• How to transfer your financial wealth and “life wisdom” to future generations
• What to consider before meeting and selecting an estate planning attorney
• Why most living trusts do not work and how to assure your trust meets your goals
• How to leave assets to your loved ones protected against divorces and creditors
• How a second marriage puts your assets at risk, even if you live “’til death do us part”
• Probate–why does everyone want to avoid it?
• The hidden costs of a basic will or trust
• Why are many powers of attorney not accepted by financial institutions?
• What is the impact of changing estate tax laws?
• What is trust funding and why it is essential to the success of your living trust
• Why you should have professional counseling on how to fund your living trust
• The estate planning process–who do you meet with and how do you prepare?
• Counseling vs. word processing–what are you really paying for?
• How to make life easier on your loved ones in troubling times
• Do your children know what to do?
• How often should you update your estate plan?
• What is the real cost of an outdated estate plan?

Reservations required. Register now!

The recent death of Gary Coleman brings to light an important issue that is often overlooked: in some states separation does not automatically revoke health care directives, living wills, or health care powers of attorney. It seems that Gary and ex divorced in August 2008, but because he never updated his estate plan, his ex was still named as his agent to make medical decisions and during Gary’s dying hours, his ex was at the hospital and apparently implied that she and Gary were still married.

Fortunately, the North Carolina legislature added a law to the books a few years ago that an ex-spouse will automatically be revoked as health care agent when a court issues a decree of divorce or separation. Of course, if you have separated but a formal decree has yet to be entered, your ex could still be called upon to make medical decisions. Likewise, if you are an unmarried couple, you’ll need to be proactive about updating your plan. Or, if you divorce but still remain friends with your ex and want him or her to still make your medical decisions, you’ll need to update your plan to affirmatively declare your intent.

Finally, even if there is a formal decree of divorce or separation, it’s still a good idea to update your plan so there are no ambiguities. As seen in Gary Coleman’s case, in his dying hours, the hospital did not know that Gary and his ex were divorced and because she was still listed on the outdated document, the doctors were relying on his ex’s authority. We’ll never know whether or not this is what Gary Coleman truly would have wanted, but it does serve as a reminder of how important it is to regularly review and update your estate plan.

Details of Michael Jackson’s Family Trust were leaked to the media recently. My take? Michael Jackson would have benefited from working with an estate planning lawyer that would have taken the time to educate Michael about available techniques to better protect his children. This is just another example of poor estate planning from a celebrity.

Under the terms of the trust, Michael Jackson’s children are in line to receive $33 million each. Michael’s mother, Katherine Jackson, will receive her share of the estate immediately, and any portion remaining when she passes, will be split between Prince, Paris and Blanket. The children will receive allowances until they are 21 and then at age 30, they’ll receive access to one-third of their trust fund, another third at age 35 and the remainder at age 40.

My guess is that if you have a trust, you may have the same exact distribution terms. How do I know this? Because it’s the “standard” that a majority of lawyers use when they don’t take the time to educate their clients about available options and protections that are available.

So what would I have done differently?

For starters, Michael should have been advised to use a living trust to hold his assets and ensure that all assets were properly titled. This could have kept his family out of the probate court. In short, probate generally costs too much, takes too long, and is totally public. It will be interesting to see how long the probate attorneys manage to keep things tied up in court and how much of the estate is eaten away by legal fees and related probate expenses.

Second, I would have taken the time to educate Michael about how he could have protected both Katherine and the children from a myriad of life risks, including catastrophic illness, lawsuits and creditors, divorce, and more.  Once Michael’s children receive their inheritances outright, the funds will be totally unprotected. What if they have creditor problems? It seems to be a pretty common occurrence for the rich and famous, and let’s face it, MJ didn’t exactly set a great example. If the children are sued or file for bankruptcy, the inheritance is going to be totally unprotected once it hits their bank accounts.

Instead, I would have suggested placing the funds in a lifetime asset protection trust. An asset protection trust can be set up in such a way that the children would still be able to receive allowances from the trust for their living expenses, but because the money is held in trust rather than owned by the children outright, it would be protected from lawsuits, creditors and other life risks.

What if one of the children receives their share outright and later gets divorced? There’s a good chance that part of the inheritance will be lost to the ex in the divorce proceeding? Is that really what Michael would have wanted? Most families I work with want to keep the inheritance within the bloodline.

If the trust had included asset protection, Michael could have had the peace of mind that his children would be well provided for, but also protected from life risks and that the assets could have continued to grow and accumulate for future generations.

Want to learn more? Then visit our website and download our new e-book, The 12 Most Common Threats to Your Estate and Your Family’s Future.

Oops! This post was originally scheduled for publication at the beginning of the year, but due to a user error on my end, the post was never published. Better late than never I suppose.

I’m pleased to share the following, posted with the permission of the author, my colleague Attorney Mike Lichterman of Lichterman Law, PLC in Western Michigan, first appeared on his blog here.

Mike makes some excellent points around the New Year’s expiration of the federal estate tax, especially regarding the change in treatment of tax basis for estate assets and the 55% tax rate set to return in 2011 on the then-$1 million federal exemption.

After reading, if you have any questions, please ask away in the comments section and I will answer them as soon as I can.

“Hasta La Vista, Estate Tax” by Mike Lichterman, Esq

As you may (or may not) have heard in the popular press, your favorite news site, or from reading this post at South Florida Estate Planning Law written by my colleague David Shulman, the estate tax is officially repealed as of 12:00am January 1, 2010. Seeing as Congress has mere hours to pass legislation to change that, I see the repeal being a pretty sure thing.

So what does that mean? As it currently stands (for the remaining hours of 2009), an individual has a $3.5 million estate tax exemption (a couple can increase that to $7 million with proper planning). The estate tax is set to disappear for 2010, as stated above. Some are calling it the “throw mama’ from the train” year . . . as in, die in 2010 so that your estate is not subject to estate tax. That’s all well and good, and I’m sure it will benefit many folks who pass away in 2010. However, as Paul Harvey used to say, “now . . . the rest of the story.”

Accompanying the repeal of the estate tax is a change to the “basis” treatment for estate assets. Basis is (typically) what you paid for an asset. As you likely know, when you sell an asset, you pay tax on the “gain” – the amount you sold it for minus what you paid for it (basis) – sometimes more commonly referred to as “profit.” In 2009 (and many years before), you get a “step up” in basis on the assets of someone who passes away. This means that the beneficiaries who receive your assets have a basis in those assets equal to the assets’ value on the date of death. They get to use that basis if/when they later sell the assets. Here’s an example:

Date of death: 12/31/2009
Total asset value: $3 million
Dying person’s basis: $1 million
Estate tax: $0 (under the $3.5 million exemption amount)
Asset basis for beneficiaries: $3 million (”stepped-up” to value on date of death)

If the beneficiaries later sell the assets for $3.5 million, they will pay tax on only $500,000 – the amount the assets sold for minus their basis. With the 2010 estate tax repeal comes a change to those basis rules. For 2010, the stepped-up basis is limited to $4.3 million in assets passing to a spouse and (more importantly, I think) $1.3 million in assets passing to non-spouses. So, the estate doesn’t pay any federal estate tax, but what does it mean for the non-spouse beneficiaries?

Let’s use the same example as above:

Date of death: 1/1/2010 (what a difference a day makes!)
Total asset value: $3 million
Dying person’s basis: $1 million
Estate tax: $0 (estate tax repealed)
Asset basis for beneficiaries: $2.3 million ($1 million basis of the person who died + $1.3 million “step up”)

If the beneficiaries later sell the assets for $3.5 million, they will pay tax on $1.2 million – the amount the assets sold for minus their basis (which had only the limited step up).

As you can probably imagine, the amount of tax on the additional $700,000 is a fairly significant number, especially when you consider that it is very unlikely that taxes will go down anytime soon (sorry for getting a little bit political). On top of that, there is a looming paperwork nightmare. Can you imagine? How are you going to prove what the dying person’s basis was, especially for some of the more uncommon assets? Valuation will become a larger headache than it already is. Sure it can be done, but what an incredible hassle. As a matter of fact, a friend of mine is a supervising attorney in the estate and gift tax department of the IRS and she said that the IRS is sorely prepared to deal with such a paperwork avalanche. For sure there will be a lot of additional searching, researching, and organizing that will need to be done. It will be interesting to see how much additional cost will be associated with this, in professional fees (lawyers, CPAs, financial advisors, etc.) and otherwise.

Oh, and one more thing. Did you catch the missing word? Gift tax. Nope, gift tax is not going away. It stays in full effect throughout 2010. Apparently, Congress was concerned that if the gift tax went away, wealthy taxpayers would make large gifts to family members in lower income tax brackets (a valid concern). So, the gift tax exemption remains at $1 million.

And wait . . . there’s more! The law that put the estate tax repeal into effect (the Economic Growth and Tax Relief Reconciliation Act of 2001) is set to “sunset” in 2011, returning the estate tax and gift tax to what they were before the law was in effect. Curious to know what that was? I knew you would be. The estate tax exemption was (and will go back to) $1 million. That’s right . . . $1 million! And the tax rate will be 55%! Sure, that’s a significant amount of money and you may be thinking “no big deal, it’s a million bucks,” but consider the example above. If all goes as scheduled, if our example person died in 2011, the estate tax on the estate would be $1.1 MILLION (55% of $2 million)! The beneficiaries will miss out on $1.1 million of additional inheritance. Now THAT is a significant number. Keep in mind that this can be “fixed” with proper planning.

So there you have it. That is what is supposed to happen as things stand on the books right now. Will it actually happen? Well the repeal will definitely occur if Congress doesn’t act today. The question is, for how long. Consensus seems to be that Congress will address the issue next year. What will they do? I’m not sure and I don’t think anyone knows for sure. The most common idea I’ve heard is that they will retroactively extend the current $3.5 million exemption and 45% tax rate. We’ll see. 2010 will be a very interesting year for us estate planners, that’s for sure!

One thing I am fairly sure of (cue the Arnold voice) . . . It will be bbbaaaacckk!

In case you missed the most recent issue, Jackie Bedard was honored to write a Financial Focus piece for the current issue of Cary Living magazine. To read the 4 Secrets Loving Parents Need to Know to Protect Their Kids, click on the image below.

*Note: Depending on your web browser, after opening the image, you may need to click on it again to magnify the image to read it.

Parents spend so much time agonizing over who they will leave their kids with when they go to work or when they go out on a Friday night, and yet the majority don’t even have a Will–and even those who do often make 1 of 6 common mistakes!

Discover how to easily name guardians for your kids. Avoid the common mistakes most parents make that leave their kids at risk, and make sure your kids will always be raised the way you want. While the kids eat pizza and play, we’ll discuss the easy steps parents need to take to ensure their children are protected.

This FREE workshop makes legal planning super easy!

Wednesday, May 19th, 2010, 5 P.M. TO 7 P.M
MONKEY JOE’S
1747 Walnut Street, Cary, NC

Space is limited to just 10 families, register NOW!

Full details and registration available at www.CarolinaFEP.com/KidsEvent or complete the form below:

Presented by Attorney and Counselor at Law, Jackie Bedard.  Member of the National Network of Estate Planning Attorneys.

Continuing the series from Scott Farnsworth and Sunbridge Legacy Builder Network. Here is Part 2 in Scott’s series about the power of story-based planning. If you missed Parts 1 and 2, you can read them here and here.

The Power of Story-based Planning  Part 3

“The Siren Call of the Questionnaire”

In an earlier post I wrote that “values-based planning” is founded on the notion that each client has a personal set of values that should be ascertained early in the planning process and then used to fashion a financial plan or estate plan unique to that client.  Most enlightened planners today would concur that financial and estate plans based on client values are far superior to the “one-size-fits-all” cookie-cutter plans that many of us grew up doing.

The question with regard to values-based planning is not whether we should create plans based on client values.  The answer to that one is duh-obvious: Yes.  The issue is not WHETHER we should do values-based planning, but rather HOW to do it so that it actually works.

In other words, how do we respectfully and accurately ascertain each client’s unique and deeply-held values upon which their planning will be based?  What methodology will allow us – and our clients – to look into their hearts, to see there what truly matters, and to then discern how to create a plan with them based on what we have discovered?

Unfortunately, the widely-heralded “values-based planning revolution” has been in my view a case of one step forward, two steps back.  This is largely because in nearly every instance what started out to be “values-based planning” quickly morphed into what I call “questionnaire-based planning.”  Indeed, with a few notable exceptions, virtually every so-called “values-based” approach is designed to be implemented by means of a cleverly designed, carefully worded questionnaire.

I think that is a tragic turn of events, and here’s why:

A.  Questionnaires are blunt instruments that deliver cut-and-dried, categorical answers.  As a result, they seduce planners into seeing clients as cut and dried and categorical.  But that’s not the way we humans are, especially when we drill down to a values level.  We are not pegs to be pushed into differently shaped holes, or colored bobbles to be sorted into different boxes.  We are each unique.  We are full of nuances, contradictions, uncertainties, and places where the lines are blurred.  We don’t fit into four or five neat categories, as most questionnaires require.

Some would argue that being able to offer clients a plan based on which one of several categories they fall into, as determined by their questionnaire responses, is substantially better than the old “one-size-fits-all” method of planning.  While it may be an improvement, it is not true values-based planning.  Offering clients a choice of cookie cutters is still cookie-cutter planning.

B. Questionnaires have built-in biases, which are based on the assumptions and prejudices of their creators. Regardless of whether these biases are accidental or intentional, a biased questionnaire skews the results away from the client’s true values. When you start with untrue assumptions, you always end up with incorrect conclusions.

I have seen long, beautiful, and well-worded questionnaires that were supposed to assess a client’s values and direct the planner to the type of plan the client needed.  Oddly, it seemed that nearly everyone using that questionnaire was steered toward essentially the same plan, one that favored the aims and products promoted by the questionnaire designer.  It seems to me that when everyone gets the same answer, maybe the questionnaire is asking the wrong questions.

C. Questionnaires can be “gamed” by clever clients. The process of answering questions in a questionnaire invites clients to consider not just their answers, but the impact of their answers on the planner and the planning process.  “Will this answer raise or lower the fee?”  “Will this answer make me seem more wealthy or less wealthy?”  “Will this answer cast me in a negative light?”  “Will I appear miserly, judgmental, prejudiced, immature, or short-sighted if I answer that way?”  “Will I be exposing my weaknesses, and will that allow her to take advantage of me in some way?”

Human nature being what it is, the odds are high that clients’ responses will be less than candid and unguarded.  Consequently, there is a high probability that questionnaire answers will be scrubbed, distorted, shaded, or flat-out wrong.  This makes the results of a questionnaire unreliable as a basis for serious values-based planning.

D. Questionnaires lead to dull, inattentive planners.  Questionnaire-based planning doesn’t require planners to listen deeply and attentively to clients, to ask insightful questions, or to employ judgment and wisdom to discern how to weave the client’s life-lessons into the plan.  The “correct answers” or the client’s “categories” just “magically” pop out from the responses.  Yeah, right.

True values discovery requires careful and attentive listening.  Each client and the stories they tell are alive with insight and meaning.  They are full of clues and pieces of answers.  Real people living real lives are like that.  The right answers don’t just pop out; they have to be teased out and then pieced together like a jigsaw puzzle.  But when you make a commitment to discover for yourself – and for the client – a clear and complete understanding of what’s really in their heart, their deepest purposes for planning, you discover that the results are unquestionably worth the effort.

E. Questionnaires don’t lead to values-based planning. Questionnaire-based planning is neat, clean, analytical, and easy, but it is incapable of drilling all the way down to the values-bearing strata deep inside the client.  No matter how cleverly worded, a questionnaire can never respectfully and accurately ascertain each client’s uniquely personal values.  The results are too shallow and mechanical.  The intention may be right but the methodology is wrong.   Thus, whenever planning becomes questionnaire-based, it ceases to be truly values-based.  I call it “faux values-based planning.”

Please understand that I believe there is an appropriate role for questionnaires in the financial planning and estate planning process, which is to help gather data.  I have no problem using questionnaires as fact finders.   They just don’t work to discover and discern significant client values.

So What?

“So what’s the harm,” you may ask, “in doing questionnaire-based planning?   It’s definitely a lot better than the old way we used to do it.”

The most significant harm is that when financial planners and estate planners – even smart, sincere, and well-intentioned planners – think they are doing values-based planning but are only doing faux values-based planning, they stop seeking the real thing.  They become enamored with zirconium and fail to find the acres of diamonds just over the next hill.  They take the shortcut and never realize they just missed the best part of the journey.   As a result, they rob themselves and their clients of the magnificent experience of true values-based planning.

Good is the enemy of great.

The moment earnest planners apply the label “values-based planning” to something that is not and once they start to believe they are doing “values-based planning,” even though it is really only the “faux” variety, they lose the sense of urgency to discover the real thing  and are unable to see the need to do more.  Once they get locked in, it is nearly impossible to unlock them.  As a wise person once said in another context, “the problem is not what they don’t know.  It’s what they do know that just ain’t so.”

Values on the cheap vs. paying the price

While questionnaire-based planning may appear neat, clean, analytical, and easy, it is really only values-based planning on the cheap.  The real process of values discovery – like virtually every other authentically meaningful human endeavor such as nurturing a fulfilling marriage, raising independent children, growing a beautiful garden, or building a success business – can be disorderly, messy, intuitive, and sometimes challenging.  It requires real work.  It requires that we pay the price to come to know, really know, our clients.  It cannot be achieved with clever techniques.

The Solution

To move into the beautiful new world of true values-based planning, the solution is not to try to come up with a more artful questionnaire.  The solution is to recognize that their stories — the oldest and most natural form of human communication – are rich and ripe with the unvarnished truth about our clients’ values.  We just need to ask the right questions and then listen, really listen.

I have found that the best way to genuinely understand our clients and their values is to ask them thoughtful and insightful story-leading questions in an appropriate setting and then settle back and listen to their answers with all the love and attention and encouragement we can muster.  I have learned that who they are and what they deeply value are woven into the stories they tell and can be discovered by a caring advisor.  That is the essence of what I call “Story-based Planning in a Thinking Environment.”

How to do that gracefully, effectively, and affordably is the subject of my next post.

Scott Farnsworth, J.D., CFP is an attorney and Certified Planner with more than 30 year in the estate, business, and financial planning fields. He is the CEO of SunBridge, Inc. and the founder of the SunBridge Legacy Network. He is a nationally recognized author and expert on practical, holistic, family-friendly planning. Scott was recently named one of Financial Advisor Magazine’s ‘Innovators of the Year.’