Rich in America Secrets to Creating and Preserving Wealth PHẦN 9 doc

informed when they make these kinds of decisions. Eventually, after

hearing about the difficulties that can occur with court-appointed

guardians, he rethought his plan and made a sensible guardian selec￾tion. But he continued to refuse to leave his children any money.

Another wealthy couple who came in to see us recently had a dif￾ferent attitude. They had begun their estate planning many years ago

with another advisor and appreciated the power of giving money to

their two children while they were still alive (currently an individual may

give up to $11,000 and a couple may give up to $22,000 per recipient

each year without incurring a gift tax).

This couple couldn’t have been nicer and more considerate. Their

only problem was that they had given away so much of their money

that they now had to ask their kids to give some of it back. It wasn’t

that they needed the money to live on because they had already taken

those expenses into consideration. But this couple had established a

lifetime habit of donating to charity, and had come to realize that

they no longer had enough money to continue giving as they wished.

The situation was embarrassing for them, although their children—

grateful for everything their parents had done for them—had no

problem with the request. The couple just hadn’t thought through

their planning carefully enough to determine the cash flow they really

needed to give to charities in the manner to which they had grown

accustomed.

The Importance of Estate Planning

As these stories illustrate, estate planning is the most subjective of

the wealth management and financial planning disciplines. Decisions

often must be made without the benefit of empirically correct answers

that are available when balancing issues surrounding, say, income

taxes or retirement. Think of all the personal questions that must be

addressed:

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• Do I leave my assets outright to my spouse or in a trust? If I

don’t leave them in a trust, how do I know my spouse will leave

my assets to our children?

• At what age should my children receive their inheritance?

Should it be in a trust or outright?

• Who should be my executor and trustee?

• Who should be the guardian of my minor children?

For estate planning to be successful, you must be able to answer these

and other difficult questions as you work with your estate planner to

draw up a plan that is both sound and tax-efficient.

As mentioned earlier, many people procrastinate when it comes to

financial planning. They procrastinate even more over estate planning

because it’s uncomfortable to focus on death. They’re involved in run￾ning their lives, building their wealth, and advancing their careers. Few

people look forward to taking the time out to discuss their mortality.

But if you don’t attend to estate planning, all those assets you’ve spent

your life accumulating may wind up somewhere that might make you

turn over in your grave.

Good estate planning begins with a few dispassionate questions

asked from an appropriate distance. Think of it as if you were standing

on top of a mountain, looking down on your life. From this perspec￾tive, ask yourself:

• What are my assets?

• Who are the objects of my affection?

• What are my goals and objectives?

Once you understand the answers to these three general questions, you

can work out the specifics of what else needs to be done. If you can’t

answer them yourself, any good estate planner will sit down with you

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and try to gain some insights into who you are, what you care about,

and what your concerns are. For example, are you philanthropic? What

type of relationship do you have with your family? What do you think

money should be used for? Your response to these subjective issues will

help your estate planner home in on more concrete objectives.

Each family has distinct concerns that will affect its estate plan￾ning choices. For instance, one of our clients, Ben, emigrated to the

United States as an impoverished young man. With the help of a gov￾ernment agency he’d been able to set himself up in a small business;

eventually, it grew to the point that Ben became a terrifically wealthy

man. He felt very indebted to the government for his success and as a

result, Ben didn’t think there was enough he could do for this country,

and paying taxes was the least of it. This sentiment had a powerful

impact on his estate planning, because every time we showed him how

to lessen his tax bite, he objected. Ben did want to make sure that his

children and not the government received his business, but he didn’t

care how much they had to pay in taxes to get it.

Then there was the case of Dolores, a single mother who had lost

her husband many years ago and never remarried. She had two chil￾dren, a son with whom she remained on good terms, and a daughter,

Christina. Dolores and Christina had fought many years earlier, and

outside of a frosty exchange of Christmas cards, they had barely any

contact. Dolores was wealthy enough to leave a significant estate.

She knew her son could handle the money well—he was a successful

lawyer with a family of his own—but she was worried about Christina,

who never had any money, and whose soft heart might make her an

easy mark once she inherited Dolores’ wealth.

Dolores had never given her children as much as a penny. So, as

part of her estate planning, we suggested that she should give her

daughter cash gifts to the maximum allowed, which at the time

was $10,000 a year. This way she could see how Christina handled

it. Dolores did as we asked, and she received a gracious thank-you

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