Is Estate Planning Dead? What Clients are Writing Checks For

I started my estate planning practice in 1992. In those days talking about a Living Trust, was a challenge; to get people educated on what it was and how it benefited them. Over the time, through the 90s’, a Living Trust became an easy sell as the stock market boomed and clients saw the value of avoiding probate to ensure the money accumulated went to the people they wanted without delay. As the 90’s ended, however, a whole new paradigm occurred. Beginning in 2000, with the crash of the tech market and corporate scandals, Enron followed by 9/11, clients, for the first time since the Great Depression, had real losses. Enron stock was not coming back. Followed by the recession of 2003 and the Great Recession of 2008 - 2009, the estate planning landscape has changed forever and what clients are willing to write checks for. In the early 90’s, 100% of my practice was focused on estate planning. As the 90’s came to a close, a great interest began in elder law and Medicaid planning to protect assets from the nursing home. By 2001 Medicaid planning had surpassed my estate planning practice as the number one revenue generator. Subsequent to 2001 with the change of the Bush tax laws that had its first major impact in 2005 with the exemption going to $2 million and later in 2009 with it going to $3.5 million, the estate planning industry entered a whole new paradigm for asset protection. Something I call asset protection for the non taxable estate.

After the most recent market crash in 2008, I literally saw my estate planning practice go to zero! Luckily, by that time my Medicaid and non taxable estate practice had grown to 70% of my business. Diversity shielded me from a more drastic reduction in business that I am seeing with many of the law firms I work with. Most traditional estate planning practices are on life support. Many attorneys I have had the opportunity to train are thriving and reported 2009 as their greatest year in their practice. What is it that clients are writing checks for?

One area of planning that never goes away is the need for asset protection and Medicaid eligibility. Most individuals will do anything to protect their lifetime of savings from losing it all to a nursing home because of an unforeseen illness. Medicaid planning transcends all economies and is always valuable to the client because they can derive immediate benefit that they can measure. Most attorneys are afraid of doing Medicaid planning because they believe it is complicated. This has always intrigued me. As a tax attorney having to deal with hundreds of thousands of pages of tax codes and regulations, the Medicaid planning was always so much easier because it has less than 200 pages of regulations. In reality, Medicaid planning consists of 12 core concepts applied to the variety of fact patterns. Once these 12 core concepts are understood, applying them to the facts patterns becomes fairly routine in a short period of time. That is how many lawyers I work with are able to generate significant revenues within months of completing 3 days of training. In addition to Medicaid planning, clients are writing checks for asset protection, interestingly, the number one protection they seek is from the government. With the growing taxes and regulations there is a tremendous fear of the government positioning itself to take what we have worked for. While the government assures us they will not affect everyday people only “the rich”, most clients are not convinced of the governments’ definition of “rich”. As a result, asset protection planning for non taxable estates has been our number one asset-protection planning strategy.

So what is asset protection for non taxable estates? Well, most of us are familiar with asset-protection planning and the 11 states that have specific statutes protecting individuals who create irrevocable trusts and permitting them some rights to them through trustees or third parties, the most famous being Alaska. Unlike that type of asset-protection planning, which is all related to higher net worth clients, those that have a taxable estate, the planning clients are writing checks for on a daily basis. This is a whole different genre of asset-protection planning; because it does not need the restriction utilized in tax planning and does not need to utilize one of the 11 states with special statutes.

Asset-protection planning for non taxable estates is based in common law. The concepts are simple and well established. In fact, most of us have used all of these concepts already in our practice just not in the context for non taxable estates because we have been so focused on tax planning over the last 40 years as attorneys. Asset-protection planning for non taxable estates has led to the creation of a whole new genre of trusts called IPugs. IPug stands for irrevocable pure grantor trust. Unlike an intentionally defective trust, which is a grantor trust for income tax purposes but not a grantor trust for estate tax purposes, an IPug is a Apure grantor trust which classifies it under the tax code as a grantor trust for both income and estate tax purposes. Essentially, it operates exactly like a revocable trust except that it is irrevocable.

We are not restricted by the tax rules to exclude the assets from the clients’ estate because 99.7% of clients do not have taxable estates so there is no restriction to the grantor being a trustee and maintaining control of the property. In addition, we can retain all rights to modify the trust with the exception of that portion which we desire to protect because as we all know under common law and trust law if a grantor can get at it, so can his creditor and predators.

Not only do these trust work very well in a Medicaid-qualifying context but they are especially revered by business owners and professionals seeking to protect their assets from the growing number of lawsuits without having to give up control. So what are clients writing checks for? In my experience my estate planning practice is near zero not from lack of effort and not from lack of trying but from the mere reality of the economy and the way people now look at planning. There is much more of a need to protect what clients are not willing to give up control.

So traditional revocable-trust planning unlike probate is on life support but new genre of estate planning to protect clients assets from a nursing home and keep them in control is flourishing. How is your traditional estate planning practice going in 2010, I would love to hear of your success stories and challenges alike.

Banks are a Pearl Referral Source

In 19 years of practice, my attitude of working with banks has turned 180 degrees. When I began my practice in the early 1990’s, banks frustrated me. Many of them were unwilling to consider my brilliant ideas as a young practitioner. Furthermore, many larger banks with trust departments had well-ingrained relationships with the old, grey-haired, established attorneys from the large firms. It was impossible to break through those barriers. In my early experiences with banks, I found their biggest push was to ensure every plan you created named it as trustee while in my heart I believed the family members were the best people to make the decisions regarding the family. Over the years, wisdom has taught me they weren’t totally off target and I was not totally on target.

As I sit here now enjoying several wonderful relationships with banks, I felt it interesting to reflect up on the things that have made the relationships most effective. Like all pearls, there are black ones and white ones, perfect ones, and some with blemishes. Banks as referral sources are no different. The biggest cons of working with banks, is they tend to be bureaucratic with many levels and lots of Vice Presidents. National and regional banks have multiple locations and often are controlled “somewhere else”. For smaller law firms it is more difficult to service banks with multiple locations as it tends to stress the internal systems and the time the smaller firms have to devote to their referral relationships.

The pros on the other hand for those willing to conquer the cons, are banks have an unlimited supply of customers and unlike typical financial professionals, the customers come to them. The bank rarely needs to go out and seek the customer. Another powerful aspect of working with banks is they have deep customer relationships. Many times over the years I have created extensive estate plans only to have the client tank them because the teller at the bank told them not do it. These deep customer relationships when you win over the relationship of the individual bankers are critical in building a similar relationship for you with the client. Another very positive aspect of working with banks is the diversity of the customer base. Most banks have many older people, business owners, and professionals as customers. The common theme, they all have money; therefore, they all need some form of estate planning. So what are the elements to working effectively with a bank?

Over the years, I have seen smaller banks be acquired by middle-sized banks and acquired by larger banks. The consolidation of the banking industry has been widespread over the last 10 or 15 years. But one main struggle seems to plague all banks, disconnect between the banking personnel and their financial services division. In many banks, the branches are hurt if they make a referral of the cash assets to the financial service professional to be invested in an annuity or other financial vehicle. This dis‑incentive, in many cases, leads to an ineffective relationship between the banking and the financial services division of the bank. The greatest success I have had over the last five years is having created a system to actually solve that problem with banks. Since most branch managers are hurt by losing deposits, we encourage them to work with us so we can discover through our process other assets of the client to refer to the financial services department. Our client process includes; A vision meeting to identify the needs of the client and the plan they engage us for, and a post-vision and pre‑design meeting to help identify and create a table of all client assets. As part of the design of the estate plan (the attorneys second meeting in the process) we not only design and create the estate plan and all of the associated documents, we also create the funding plan to instruct the client how to fund all the various assets into the different estate planning vehicles we have created for them.

To the bank, the most important column on the funding table is the “transfer to” column. This has become their favorite part of our process because we routinely recommend clients consolidate all of their assets outside of the bank with the bank to hold as many assets as possible in one location to the extent possible to minimize administrative struggles in the event of an unforeseen or anticipated disability or death. It also builds the professional “team” to help ensure their plan actually works. In our process, over 90 percent of the clients that work with us will consolidate 100% of their assets with the adviser that referred them and help build the professional team. This is a very strong statistic the banks love and has created a reason for them to continually flow their clients to us so the assets can be discovered and received from other financial institutions for investment, rather than from their own bank’s deposits. While a common concern of clients is not to put all their eggs in one basket, we advise them while they do not want to put all their eggs in one basket (one investment) they do want all of their baskets in one hen house (easier to watch and protect from foxes). With the diversity of the financial services industry today, banks now can offer full financial services the wire houses traditionally held control of. Obviously, as an attorney, we must be independent and confident of the service of the bank and the integrity and competency of the individual advisers and personnel we work with. The more relationships you can create within the bank the greater the likelihood of a synergistic approach for helping clients ultimately achieve their goals.

Several months ago, I met with a regional business banker for a large regional bank. After conducting my standard Synergy Meeting, I identified her concerns and pains in relation to serving their business clients. After explaining our process and our business protection solutions, she immediately saw the value but was unable to implement any referral relationship because of the bureaucracy. Over the course of the next several months I undertook to meet with every branch manager (all 14 of them) and each financial service professional (7) individually to a Synergy Meeting to identify their needs and share my process. As a result, I started to identify how our firm’s educational process and client estate planning process supports them in what they do more specifically or business owners protection trust. At the end of this three-month period, after over 20 meetings, I had the opportunity to speak with the regional manager again whom smiled and said Everybody wants to work with you. What do we have to do next? Obviously, with a little work, a pearl can become a gem.

When is a Prince Referral Source Really a Frog?

Over ten years ago I met two financial advisors who worked as a team in a national financial services firm. They were top producers and outperformed everyone in their regional office and were even recognized nationally. Over the years we built a relationship, I met with them many times but we always seemed to struggle on referrals. They liked, admired and respected me and I liked, admired and respected them but underneath it all something always seemed to be in the way of us truly creating a meaningful relationship. Everything on the surface seemed like this was a great referral relationship and over the years we continued to work to find out the best way to work together. We began receiving referrals from them but it seemed each referral came at a price. They continually asked why we didn’t send an equal number of referrals back. I had explained most of my clients came from referral sources and the few that didn’t, had to be spread among all my referral sources. They accepted my explanation for a while but always reminded me of their financial goals. They were driven to succeed. I often supported them in many other areas like sharing business ideas, business operations, practice management and even practice development and marketing ideas. They implemented many of the ideas I shared with them but somehow the ideas always ended up being theirs. They became more and more successful as I, but we really never identified how best to work together. The referrals stopped. Recently, they left the national firm and created an independent company and literally moved across the street. After six months of settling in they called me and asked me to see to come visit their new offices and catch up. I was encouraged to see them with hopes to reignite the relationship. When we sat down, I asked each of them their goal of the meeting. They were very clear to say they wanted to build a $300 million book of business and they wanted to know our relationship could support them. Without being asked, I shared, my goal was to identify whether we should give up in trying to find a way to work together or if there was still hope for us to discover a mutually beneficial relationship. This took them by surprise but it was very real for me. Ultimately, I believe it was to them as well.

I began a polite conversation reminding them of the value I could provide their clients and the value of working with us and I shared what I thought the value of working with them was. After discovering their frustrations of working with me in the past, I acknowledged it and shared the new processes I put in place to reduce their concerns in the future but assured them “we were not perfect” and if issues arose again, they should let me know rather than just “complain” to each other as they did in the past. Interestingly, they asked me if I had concerns with working with them in the past. I shared that working with them felt like there was no way to please them and my firm was always under a microscope. I also shared it seemed like they kept a big check list on the wall they were always checking to be sure what we “gave them”. I concluded by telling them, I would love to find a way to work together but I was not committed to it unless I could be comfortable they abandon the “quad pro quo” approach and they be willing to gave up judging us, and start working with us side by side, warts and all. At the end of the hour and a half meeting there was a different air in the room. All of us recommitted to be maintaining our friendship and agreeing that we like, admire and respected each other but we also agreed that we no longer needed to struggle to figure out how best to work together. In fact, we decided not to. Interestingly, in the process we’ve developed a good social relationship, even if we decide not to have a business friendship. No expectations. I feel the best about our relationship as I have in all the ten years of knowing them and I know they do as well. Letting go of this apparent “prince” referral source that was really a disguised “frog” has been very freeing. It now gives me the confidence to focus on those relationships who do appreciate what we do without a “quad pro quo” and without a magnifying glass to micro analyzing any little missed expectations that occurred along the way. So as you read this I encourage you to re‑examine your relationship and identify what apparent “prince” you may be working with that may actually be a disguised “frog”. Take the chance and challenge the relationship into a good one or acknowledge it for what it is, a waste of time. Good luck.

Do Workshops Still Work?

I was speaking with several attorneys recently who said they've stopped doing workshops or seminars. Some said the advisors they work with were concerned clients were no longer willing to attend them. My experience has been the exact opposite. My workshops in the last three months have had double the attendance rate from 2009. Let's examine some of the reasons why I believe this is true.

Chet Holmes International did a multimillion dollar study to identify why people hire you or buy from you. The number one reason people buy is they must be convinced what is being offered will actually derive a benefit for them. Workshops provide a safe environment for the general public to come and learn about you, what you have to offer them (educate to motivate) and how you can help them. Another primary benefit of a workshop, it is a great opportunity to begin creating a trusting relationship with the perspective client.

Interestingly, the Chet Holmes survey indicated the second most important reason people buy from you is they must be convinced you will actually be able to provide the product sufficiently so they will derive the perceived benefit. In my experience, clients don't have a clue whether you know what you are doing or not. What they typically rely on is their instinct of whether you appear trustworthy. A workshop is a phenomenal opportunity to begin to create and build a working trustworthy relationship with potential clients. It is critical you be as personable as possible in your presentations and create an environment where the participants feel important and listened to.

The Chet Holmes survey indicated the third most important reason people buy from you is they are satisfied you will provide good customer service. The survey revealed this was the most difficult to measure because service was from the perspective of the consumer, not the provider. So, in these trying times, we must go above and beyond in customer service. Return calls immediately, get rid of voice mail, and answer the phones directly; increase their confidence by providing stellar client services.

The fourth most important reasons why people buy from you, according to the survey, was consumers must have options, and fifth most important in the buying decision was price. Interestingly, only 14% of the people in the survey cited price as their No. 1 concern. In my experience, most lawyers focus on their price; thus creating a practice that focuses on the 14 % rather than the 86% who want to see the value of what is being offered, be sure you can provide it, be confident in your customer service, and have options.

The workshop, when properly done, illustrates all the factors to get hired. A workshop is a way for you to show your knowledge of general ideas and concepts that impact the participant (identify their pain) and provide solutions to eliminate or minimize it. Show them what is possible, and how they can derive the benefit. Lastly, provide options. I recommend for you to have two platforms, a standard planning and personalized planning. Standard planning can accommodate those people more concerned with price, and the personalized will attract those who are more concerned with solutions. Be sure to distinguish the two and be able to simply identify the impact to the client of each.

Another great advantage of workshops is, it is a time management tool. By bringing groups of 25 people together in one sitting, you are able, in one two hour session, to convey your message, build relationship, and show value which equates to less than spending six minutes per client rather than the one to two hours individually with each client. Therefore, as a time management tool, the workshop not only helps bring in clients to you, but it also helps weed out those that are not ready or do not actually need your services. The good news, it still acts as marketing and branding to inform those not ready; who you are, what you do, and that you are there if ever they need you or if it comes up in conversations with family and friends.

The key elements to a successful workshop are as follows:

Make it about them. When you begin a workshop, you must make it about the participants. I greet them each personally and warmly when I open the workshop. I always personally serve them cookies on a tray to illustrate I am there to serve them when I begin the workshop, I ask them what they want to learn during the workshop, and write it down on an overhead, white board, or flip chart. This helps you immediately get into the participant’s perspective and tailor the conversation during your presentation to accommodate the individual questions of the participants. Do not answer their questions then. Take them down and address them as you go through your presentation. This will demonstrate your commitment to answer their concerns and help them feel listened to and important.

Set Expectations. In your opening, you must set the expectations for the attendees. Review the full agenda and tell them you will be answering all their questions and only ask for one thing in return, their evaluation. I make them three promises. One, the workshop will go quickly, two, they will learn a lot, and three, they'll have some fun, and I ask that if I keep my promises they will agree to complete the evaluation and let me know how I did. I actually get their verbal agreement up front by asking is that acceptable and pause and wait for their collective "yes".

Your presentation. Do not teach the law. Do not teach how trusts work. Do not teach them all your brilliance. Merely, show them, in simply terms and stories, how estate planning impacts their lives on a daily basis. For example, we have a simple story about Biff and Bambi. We simply state that many clients are married a very long time and, at some point, their spouse may die. The question is, when the surviving spouse is grieving, will the Biff, the pool boy, or Bambi, the bar maid, be there to get them thru their grief? Without getting into all the legal technical ramifications of remarriage and the risks, a simple reference to Biff, the pool boy, and Bambi, the bar maid, helps clients appreciate one element that estate planning can do, protect their assets for their children in the event of their passing, and their spouse's remarriage. Over 90 percent of the clients consult with us indicate a desire to protect against a remarriage. Interestingly, they giggle and say, “I don’t want Biff and Bambi get my stuff”. This truly is getting into the client's perspective and showing the value you can do by using simple stories rather than typical legal “mumbo jumbo”.

Identify unforeseen risks. Your presentation must also identify for them the risks that they do not see. Some examples include:

• If a beneficiary became disabled;
• If the client became disabled:
• The children became divorced; etc.

Closing. At the end of the presentation, I go back to the questions they ask, put them on the overhead, and confirm I've answered each one of the questions to their satisfaction. It shows them you are committed to them and you kept your word. I then remind them of the three promises I made, and I ask them collectively if I kept each of the three promises. After they've answered yes, I reply “great” and I ask they keep their promise to complete the evaluation and let me know how I did. At that moment, I also explain how as a thank you they are offered a free consultation and they are able to put that on the evaluation. I have found that this process has had a tremendous impact in building relationships, setting expectations, and giving the client confidence what I am able to provide for him. Overwhelmingly, I have found workshops are working now more than they have in the past, but you must get into their perspective.