It’s hard to believe that just a few (very long) months ago, we were all ringing in the new year and the new decade with excitement and hope for the future. With a strong economy, the Olympics and a presidential election, 2020 was sure to be full of noteworthy, history-making moments—we just didn’t yet have any idea the degree to which that would be true.
It’s now barely June, and our world looks completely different. This pandemic has created a whole new mindset in our clients. As advisors, we need to find new ways to position our conversation with clients to meet them where they are. During times like this, our clients need to hear from us and know we care. Now’s actually the perfect time to do estate planning. What can we say to help them convert their fears and confusion into action?
Our clients are in uncharted territory, fighting an invisible enemy, and uncertainty abounds. In the midst of these unusual times, however, estate planning remains a steadfast tool to prepare for what Benjamin Franklin sardonically referred to as life’s only real certainties: death and taxes. Although logic dictates that our practices should be thriving, the reality is that many of our clients are frozen. The one-two punch of both a threat to our physical lives and a threat to our economic livelihoods has left our clients reeling. Understandably, the pervasive feeling among clients now is a general hesitation to spend money. Even those with large $100 million-plus estates have seen large chunks of their wealth disappear, and feelings of financial loss, regardless of the size, lead people to question the prudence of engaging in more planning in the midst of so many unknowns.
But, now is exactly the time for estate planning. When the economy tanks, the lower asset valuations combined with low interest rates make it the perfect time to use freeze planning to move wealth outside of our clients’ estates for estate tax purposes. Moreover, once the threat of the pandemic has passed, the focus will inevitably shift to the now astronomical deficit. That money will have to be repaid, which in all likelihood will mean higher taxes, lower exemption amounts, higher interest rates and fewer planning opportunities.
Window of Opportunity
As our clients work through feelings that resemble grief and gradually accept the new reality, all of us in the estate-planning field need to encourage them to take advantage of this window of opportunity for planning. While it’s certainly easy to become paralyzed by fear, those who remain focused on the practical actions that can be taken today will be the ones reaping benefits in the future. Remember that Winston Churchill once famously remarked, “Fear is a reaction. Courage is a decision.”1
Hindsight is always 20/20, but I’ve had many clients express to me their regret over not taking advantage of the planning opportunities that existed during and immediately after the 2008 financial crisis. Indeed, in his 2016 letter to shareholders, Warren Buffett said: “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.”2 Now’s the time for our clients to take their respective washtubs outside, albeit while maintaining an appropriate social distance.
For many of us, an unforeseen, frightening aspect of this crisis has been the sudden realization that those of us age 60 or older are now, in fact, considered “elderly.” As we push our shopping carts around during the “early shopping” hour offered to those at higher risk, we can no longer delude ourselves that we’re as young as we care to believe. Yet tragically, even the young haven’t been immune from this relentless virus, pushing to the forefront of our collective psyche the sobering reality of our own mortality. Now, more than ever, clients can appreciate the importance of having their affairs in order. Moreover, this is a wake-up call that our adult children need estate-planning documents too.
We must educate clients on what it means to be prepared. Beyond simply having a will in place, are your clients’ ancillary documents up to date? Medical and financial powers of attorney, HIPAA waivers, directives to physicians and declarations of guardian all make up part of the foundation of a sound estate plan. We should encourage our clients to review their current plans, checking designations to ensure all is as they wish it to be. It’s also a good time to create a Red File, which provides clients’ loved ones a roadmap of their wishes on incapacity or death, along with information about assets, passwords and key contacts.3
For our business-owning clients, we must stress the significance of creating a business succession plan to protect and facilitate the continuity of the business in the event the leader of the company is suddenly gone. Succession planning for a business is a frequently neglected area of estate planning, but the businesses of our clients are often their most valuable assets (both financially and emotionally) and should accordingly be granted significant planning attention.
Another interesting result of the pandemic is its effect on family relationships. Social distancing has birthed a new reliance on video communication. Many are becoming adept at maintaining contact with family members and initiating conference calls and video calls to replace a conventional family gathering. Estate planners should recognize the value this brings to family governance and family legacy planning. During this time when our clients have pushed the pause button in their lives, let’s encourage them to write an “ethical will” or love letter to future generations. Not only should our clients take time to pause and reflect on family values, life lessons and their legacy, but also they should take the opportunity to schedule that first family (video) meeting and get the ball rolling on opening up communication and establishing best practices for the family. We’ve always known how difficult it is to get all members of a family in one room, but now we know that it can be done easily, “Brady Bunch” style, via the Internet.
We’ve yet to fully understand all the ways in which this experience has changed our practice, but we do know the changes will be profound. Michael Hyatt, author of the recent book The Vision Driven Leader, takes a unique approach to reflection and asks: “When you look back on this episode ten years from now, what will you be most proud of?”4 My goal is to be able to say that I inspired my clients to seize the opportunity and take actions that will benefit them in the long run. Whether through tax savings, business succession planning, a family legacy plan or a Red File, I hope my clients will look back on this time and be able to say they used it to set their families up for success.
3. See Marvin E. Blum, “Filling in the Gaps,” Trusts & Estates (February 2017).