Making money from estate planning

MAKING MONEY FROM
ESTATE PLANNING
“BURNING ISSUES”

November 2012 Andrew Andreyev

What we will cover
 Why should you be interested?
 What can you do?
 „The process‟
 Understanding the „key issues‟
 Segmenting clients and hitting the „hot buttons‟
 Your role
 Getting client „buy-in‟
 The value to your practice.

Andreyev Doman Lawyers www.adlaw.com.au

What do we know
about making money
from estate
planning?

Why all the interest?
 Intergenerational wealth transfer

 Need to deal with the sophisticated
structures
 Increased awareness of what can go wrong
 Growing demand for sophisticated
outcomes
 Highly competitive market for professional
services

Self-generated „market‟

 33% divorce
 50% re-marry

 600,000 family trusts

 458,000 SMSFs (trillions in
super)
 Million of companies

 60% of people don‟t have Wills

The high-level stuff


What is Estate Planning?

 Protecting, passing on
and managing wealth:
 During your lifetime;
 When you die; and
 After you have died.

 It is fundamentally about

„wealth management‟.


Why should you be interested?
 Estate Planning and
Business Succession
come down to two
things:
 Wealth
management
 Risk mitigation

 It should be central to
your practice

Quick self-assessment


Level of knowledge…
 What is your level of
knowledge?
 Basic understanding of
what it is about in broad
terms
 Good understanding of
issues
 Good understanding of
solutions to issues


Level of activity…
 How much advice do you
actually give?
 Just „check the box‟ each
year
 Talk about the issues with
clients
 Talk about potential
solutions with clients
 Regularly assist in the
implementation of solutions
for clients

Frustrations…
 What is the most
frustrating aspect of your
involvement?
 Lack of knowledge of
issues
 Lack of knowledge about
solutions
 Lack of client engagement
or interest
 Lack of good
complementary advisers Lawyers
Andreyev Doman www.adlaw.com.au
 No money/return for effort

What can you do?


What can you do?
1. Identify a need
2. Raise the relevant key
issues
3. Document objectives
4. Gather the relevant data
5. Project manage the
documents

What you can’t (shouldn’t) do…

Raising the key issues
 Moving from „theory‟ and
„talk‟ to real „need‟
 The good news:
 You don‟t need to know all
the answers
 The bad news:
 You need to know about
the key issues.


Documenting objectives
 Simple „plain English‟
summary of what needs
to be addressed
 How good is the lawyer?
 Why your client should not
care


Gather the data

 Be the central repository for
data
 Work constructively with
others to fill in the gaps
 Develop an „Estate
Organiser‟.
 Use Instruction Sheets.

 Include „soft‟ data:
Objectives/Concerns
 Manage and control the
process.

„Project manage‟ the outcomes

 Identify your value:
 Get appointed, Get paid
 Remain in control of the
process:
 Do not delegate, Get authority
 Understand and manage
pricing
 Identify complementary
experts
 Develop „internal experts‟ Lawyers
 Stick to a simple timeline.

The detailed process
 Preparation
 Understand the key issues
 Understand the client categories
 Segment your client base

 Client engagement
 Raise
the relevant key issues
 Document the concerns and objectives

 Project manage the solutions
 Control the data
 Identify your team.


What are the key issues?


Solve relevant issues
 There are only a limited
number of issues
 Every client has at least
one burning issue
 Your job is to match the
client with their burning
issue
 Use examples.


Identifying need for planning
 Will the telephone  Do you want a say
company talk to you in where your assets
if your spouse is in a end up when you
coma? die?
 Do you want a say  Do you want to
in which hospital avoid costly
your spouse goes disputes?
to?  Do you want to
 Do you want a say ensure the
in who controls your Government is not
asset if you die? in control of your
kid‟s future?.

So you have an existing Will…

Insurance
Policy
Stocks
" and bonds
int
"Jo Home Business Investment
property

Superannuation
Insurance Shares Companies Family trusts
savings
Policy

Surviving spouse Deceased

Buy-Sell
Agreement
Cash Investment Personal
at bank property effects

Nomination Binding
"Trust Will"
Nomination
No
m

"
ate
in

E st
at

"
e"

te
na
Es

mi
ta

No
te
"

Will
Named policy
beneficiary "Dependent" New "controller" of
trust or assets

Beneficiaries under Will/
Testamentary trusts

Personal health and wellbeing
 Are you in good  Are you involved in
health? any current or future
 Is your spouse in activities that
good health? expose you to
 Will you have higher physical risk?
adequate wealth to  Do you want to
sustain you until you transfer some
die? wealth before you
and your spouse
die?.

Asset protection
 Pre-death structuring:  Post death structuring:
 Are you concerned  Do you want to protect
you may be sued the assets you give
before you die? your children from
 Do you want to leave potential claims?
someone out of your  Are you worried that
Will? your children will get
 Are you concerned divorced and their
about someone partner will get a chunk
challenging your of your Estate?
Will, and changing  Are concerned that
who gets what? one or more of your
children will waste
their inheritance?.

Wealth preservation
 Are you concerned that  Do you want your
your spouse will children to preserve
remarry, and your some assets for your
assets will go to the new grandchildren?
bloke or his kids?  Do you want to fund
 Do you want to make your grandchildren‟s
sure your kids don‟t end education pre-tax?
up spending your money  Do you want to pay tax
on expensive drugs if on your super, and CGT
you die early? and stamp duty on your
 Do you want your estate?
spouse to preserve  Do you want your Estate
some assets for your to remain intact and to

“Family Wills”

Andreyev Doman Lawyers

Pre-tax Surviving spouse
Deceased income
“Control, without legal ownership”
Pre-tax
income

Testamentary Trust

DECEASED'S ESTATE

Assets

Child A Child B


Estate administration
 Are your affairs in a  Do not want your
mess, and require children, or
sorting out? grandchildren, to
 Would you like to give receive significant
your spouse/children assets before they are
very wide control and old enough to make
discretions over the wise decisions?
family asset?  Is it important for each
 Do your beneficiary to be
spouse/children have treated fairly?
the necessary  Do you have a child
expertise or interest to who suffers from a
manage your estate? disability and is not
able to look after
themselves?.

$200,000 Property A Property B
Deceased

Property A Property B $200,000

1/2 1/2 1/2 1/2

½ interest in
Property A

Child A Child B
Ultimate Ultimate
Ownership Capital Gains Tax and Ownership
(100%) stamp duty (100%)
considerations

½ interest in
Property B
$100,000 Property A $100,000 Property B

$200,000 Property A Property B
Deceased Exercise of discretion on asset division
(among Nominated Beneficiaries, consistent with overall asset division)

Passes to relevant Passes to relevant
Trustees Trustees

Testamentary Trust Testamentary Trust
(Child A) (Child B)

Owns assets Owns assets
Child A Child B

$100,000 Property A $100,000 Property B


Adjustments for „notional assets‟

Adjustments to reduce tax


Business interests
 How dependent is  Are you concerned
your business on your business
you? partner will try and
 Who will look after jip your spouse
your business when when you are dead?
you are gone?  Are you concerned
 Will your spouse about working for
understand and be your business
able to deal with partner‟s spouse?.
your business and
investment
structures?

Social contribution
 Do you want to empower your
children to make a difference in
the community?
 Do you want to set an example
to your children and
grandchildren about „giving
something back‟?
 Do you want to help you old
school out?
 Do you have a passion that you
want to advance (e.g. art,
medicine, education)?
 Do you have a concern that you
want to help solve (a particular
disease, a disadvantaged
group)?
 Do you want to leave a legacy
within the community?.

Segmenting clients


Different issues, different
„groups‟
 Tier 1:
 Young families
 Mature families

 Tier 2:
 Blended families
 Farming families

 SME business families

 Tier 3: High-net-worth
families.

Tier Client Categories Attributes
1 Young families Low complexity
Mature families/individuals Low value
Moderate potential to sell risk
insurance
Lower potential to sell financial advice
and accounting services
2 Blended families Moderate complexity
Farming families High profitability
SME business families Good potential to sell risk insurance,
financial advice, accounting services
3 High-net worth families High complexity
High maintenance
Moderate profitability
Relationship may be important to
other areas of your business


Parents with young kids
 Guardianship of minor
children
 Funding kid‟s costs
(insurance)
 Not blowing up the children
at 18 (Wealth Preservation)
 Choosing the right
executors and trustees
(Estate Administration)
 Re-partnering of surviving
spouse (Wealth preservation)
 Maximising after-tax
income to family.

Parents with older kids

 Divorce of children
 Super/pensions
spouse
 Educating grandchildren
 Saving tax (for children
and grandchildren)
 Bankruptcy and asset
protection.

Blended families

 Identifying contributions to
family assets
 Dividing assets between
families
 Looking after younger
children (how much should
they get?)
 Divorce of older children
spouse
 Saving tax.

Families with businesses

 Management of business
(key people, family council,
board)
 Control of business –
structures
 Timing of gifts – second
chance trusts
 Complexity of affairs

 Debts

 Buy-Sell Deed (and insurance
funding)
 Asset protection

spouse

Families with farms

 Keeping the farm together
 Keeping the farm in the
family
 Timing of gifts

 Funding gifts to off-farm
family members
(insurance/investments)
 Divorce

 Debts

spouse
 Funding lifestyle of
surviving spouse.

High-net-worth
 „HMI‟
 Emotional counselling
 Businesses v. investments
 Bloodline
 Gradual release
 Family governance
 Family Council
 Family Constitution

 Family Office.


Who needs a Testamentary
Trust?
 When you have a lot of assets to share among children
 “Asset direction”
 A young person with young kids
 Tax benefits and “Second Chance” Trusts
 A middle aged person with a spouse and kids
 Ensuring that assets end up with the kids
 An older person with kids and grandkids
 Tax benefits, “Second Chance” Trusts and capital preservation
 When beneficiaries are at risk
 Asset protection
 When beneficiaries have a high income
 Income splitting
 When beneficiaries are disabled and cannot look after
themselves

Your role – „trusted‟ adviser


Why is this relevant to you?

 You are in the best position to take
a leading role in this area:
 You already know the client

 You know their family and
financial affairs
 Estate Planning is already part of
your periodic review
 Accounting and financial
products are a key component to
achieving outcomes
 Estate Planning is about 'wealth
management' - and that is your role
 Emotional engagement with the

Is it „financial advice‟?

 Strictly speaking it is not
„financial advice‟.
 But there may be
„financial product‟ inputs,
e.g. insurance and
investment
management.

It is a „relationship role‟

Is it „legal advice‟?

 Advising on solutions
 Preparing documents
 Stop at the plain-English
„Estate Plan‟
 Always involve a lawyer

It is a „relationship role‟


Getting things started
 Get some knowledge about the
key issues.
 Analyse your database and
identify need.
 Send out information to raise
awareness.
 Meet with the client to raise the
key issues, and gather any
missing data.
 Get appointed to manage the
solutions.
You don’t need to have all the
answers to get started.

Develop „Internal Experts‟
 Spread awareness
 Concentrate knowledge
 Internal role
 External role (other
advisers)
 Focus and co-ordination


What is your value?
• Minimising relationships
• Translating complex issues

into plain English
• Saving time by coordinating

data (and therefore money)
• Saving money through
coordination of otherwise
uncertain costs
• Getting things done


Getting client „buy-in‟


The problem with Estate
Planning

 Estate Planning is
often associated
with „Wills‟
 People are not
interested in Wills.
They are boring.
They may already
have one.
 So what can you

do?

Creating a sense of urgency

 Position the process within the
client‟s day-to-day life
 Loss mitigation v. opportunity
gain.
 Raise relevant issues
 Give examples
 Expand the frame of reference
before and after „death‟

 Offer to project manage the
solutions.

„Project manage‟ the outcomes

 Identify your value:
 Get appointed, Get paid
 Remain in control of the
process:
 Do not delegate, Get authority
 Understand and manage
pricing.
 Identify complementary
experts.
 Develop „internal experts‟ Lawyers
 Stick to a simple timeline.

What are the „tangible‟
outcomes?
 “Estate Plans”  Investment Strategies
 Wills – Testamentary  Buy-Sell Agreements
Trusts  Land Holding
 Enduring Powers of Agreements
Attorney  Family Constitutions
 Appointments of Enduring  Family Conferences
Guardians
 Savings Plans
 Deeds of Mutual Wills
 Risk Insurance
(„Family Wills‟)
 Super Nominations
 Deed Updates
 Self-Managed Super

Value to your practice?


Value to your practice

 Upfront Estate Planning and
Business Succession facilitation
 Risk Insurance – funding the Estate
on death or other unexpected
events
 Financial Product Advice –
managing the money for the current
generation
 Inter-generational Advice –
following the money to the next
generation
 Family advisory boards – ongoing
facilitation of discussions

How much should clients be
paying?
Attributes Facilitation Fee
 You are saving Level 1 Simple mum, dad and kids. $330-$660
time and cost: No investment structures.

 Data Public offer super.

management
Level 2 SME business owners. $990-$1,650
 Due diligence
Retirees with significant assets and
 Project SMSF/trust structures.

management Blended families.

 Annual
„professional Level 3 People with complex affairs and
sophisticated business and
$2,200 - $4,400

fee‟. investment structures.

 Separate
„facilitation fee‟.

The role of risk insurance

 Estate Planning and
Business Succession
advice is an indirect and
more subtle way of
introducing the importance
of risk insurance
 It can be presented in the
context of a wider concern
for the family and business
objectives
 Debts, legacies, income
gaps and Buy-Sell Deeds.


Working with other advisers

 Take a leading role
 Defining the role of other
parties
 Get the client‟s
authority to speak with
other advisers. This will
put you in control
 Working with the client‟s Control uncertainty
existing advisers, versus
introducing new
advisers. Andreyev Doman Lawyers www.adlaw.com.au

Why things go wrong
 You don‟t identify your value up
front
 You think you need to know all the
answers
 You leave it to the lawyer, and
nothing happens
 You leave it to the client to
contact the lawyer – and it never
happens
 You leave it to the client and
lawyer, and the client gets a bill
they were not expecting
 You leave it to the client to make
decisions (e.g. guardians, etc), and

Useful tools

 Marketing materials
 Information flyers
 Standard letters
 Website content

 Instruction Sheets
 Develop an „Estate
Organiser‟
 Samples at
www.adlaw.com.au
 Documents
www.zumedocs.com

Recap on the value points

 Identify clients with
need
 Raise the key issues
 Get appointed
 Gather and control the
data
 Project manage the
outcomes
 Reinforce the benefits.

What to do next?

 Get an understanding of the
key issues
 Develop a relationship with a
lawyer – they will be
prepared to invest time in
your education to win future
work
 Get your hands on some of
the key tools
 JUST START TALKING TO
YOUR CLIENTS ABOUT
THESE ISSUES.

How we can help?
 Do the legal stuff (i.e. documents)
 Provide you with training on the
issues
 Assist you segment your client
base
 Provide you with materials to raise
issues
 Provide you with systems to
document objectives and project
manage outcomes

Questions?


Making money from estate planning

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