An Important Discussion to Have with Clients

Jun 1, 2017 5:39:00 PM / by Darwin Bayston, CFA

Reassess assets in context of current needs and objectives.









A 2016 survey found that just one in 10 wealthy individuals had given complete information about their estates to their heirs, out of fear that such disclosures would dampen their work ethic. The survey, which was conducted by Wilmington Trust and polled individuals with a net worth in excess of $20 million, also found that two-thirds of the respondents were “apprehensive about sharing inheritance details.”

Unfortunately, this reluctance to talk to children and other loved ones entrusted with an inheritance creates some challenges for wealth managers and estate planners to assist with holistic financial planning.

Open Line of Communication

In a recent report about how the wealthy talk to their children about money, The New York Times noted that “no advisor counsels silence,” but it’s important “to make sure that everyone is ready to receive the information, and that there is a level of trust between parent and child. This may mean speaking more generally about inheritances [or] family commitments that can be met only because of excess wealth.”

Moreover, without an open line of communication between your clients and their children, it may be very difficult to evaluate whether various assets within their portfolio are still serving their originally intended purposes. For example, a commonly overlooked asset owned by most high net worth clients is life insurance.

Life Insurance

Take a fresh look at your clients’ whole or universal life insurance policies, especially if they were purchased years ago and use that evaluation exercise as an opportunity to engage your clients in a dialogue with their heirs about whether the policy still aligns with their strategic objective in purchasing it in the first place. You may find a policy was once intended to help heirs pay off estate taxes, but under current estate tax exemptions, it’s no longer needed to achieve that objective. Or perhaps your clients’ heirs no longer require the death benefit from the policy to pay off any family debts. Still, the estate might benefit from turning that policy into a liquidity tool that will provide a charitable gift to a hospital, school, place of worship or charitable foundation.

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Tags: Estate Planning

Darwin Bayston, CFA

Written by Darwin Bayston, CFA

Darwin Bayston is President and CEO of the Life Insurance Settlement Association (LISA). His charge is to extend the outreach of the Association to all participants of the life settlement industry from consumers to capital providers, including producers, brokers, providers and service providers who are part of the life settlement market. He was previously Managing Director of Life Settlement Consulting & Management (LSCM), founded in 2004 and specialized in life settlement policy and portfolio valuations, and life expectancy analysis. He has published several articles and participated as speaker at a number of life settlement conferences. Previous to that he operated an investment advisory firm. From 1980 to 1993, he served in several capacities, including President and CEO the CFA Institute (and its predecessor organizations). While at CFA, he founded the continuing education program, was editor of the CFA Digest and supervised research projects funded by the Research Foundation of the ICFA. He began his career as an investment analyst with a Midwest life insurance company. Mr. Bayston has been Chairman of the Martha Jefferson Hospital Foundation ($100 million), a member of the Hospital’s Finance Committee and a past member of the Board of the Institute for Quantitative Research and Finance (Q Group).