Estate Planning Isn't Just for the Rich

Estate planning for high-net-worth clients can be complex and intricate, aimed largely at reducing tax bills. But what about estate planning for everyone else?

Just because clients may have fewer digits in their total net worth, say advisors, doesn't mean that it's any less important for them to focus on how to successfully pass on the assets they do have.

"There's this myth that trusts and estates planning is just for the wealthy," says Merrill Lynch advisor Stephen Stabile. "That's just not true."

Clients whose wealth doesn't trigger estate taxes still need expert guidance on every other aspect of successful wealth transfer – wills, guardianships, executorships, powers of attorney and a range of health-related issues, including long-term care and disability planning.

"It's not just about tax minimization," says Stabile, senior vice president of the Hirsch Stabile Group in New York. "It's making sure that your finances are taken care of if you become incapacitated, or if there are health care decisions that you want carried out according to your wishes, even if you're not able to make those decisions."

FEWER ASSETS, MORE CHALLENGES

In fact, clients with fewer assets may create more challenges for advisors because they, like their wealthier counterparts, generally want to pass assets on to their children but are likely to have more anxiety about whether they will have enough to support themselves before then.

When advisor Stewart Welch first discusses estate planning, he says he’s concerned about the same things for every client, regardless of their net worth. "I'm going to open by telling the client, 'Don't worry about estate taxes – we're going to talk about that later.' What I want to know about is you and the way you think – and I especially want to know a lot about your children," says Welch, founder of the Welch Group in Birmingham, Ala.

While there may be fewer assets in a non-HNW family, personality issues can be similar. Everyone wants to be heard, understood and treated fairly, says Arne Boudewyn, managing director of family dynamics and education at Wells Fargo's Abbot Downing group.

"While in ultra-high-net-worth families, the discussions may be around things like personal property and real estate, in a family with less net worth, it may be more about personal family effects, mom's jewelry and paintings, some prized family possessions," Boudewyn says. "Some of the issues are the same, but the flavor is different depending on the level of net worth."

TRUSTS NOT JUST FOR WEALTHY

Trusts are not just for the wealthy, say advisors and attorneys. "My recommendation is to not overlook the benefits of trusts," says trusts and estates lawyer and CPA Gideon Rothschild, who is chairman of the trusts and estates and asset protection practices at Moses & Singer in New York.

Trusts not only ensure that a client's wishes are followed but also can offer valuable asset protection in divorce cases, or from creditors.

Advisors can also tactfully step in when clients want to give more to heirs than they can afford, says Welch, who is also a co-author of "J.K. Lasser’sNew Rules for Estate, Retirement and Tax Planning."

"Most people are underfunded for retirement, so they're not in a great position to be making a lot of gifts," Welch says. "If you have $2 million saved, that might feel like a boatload of money. But you can't really be certain, because you don't know how long you’re going to live."

Welch says some people give too much money to their children. "That's where they get their pleasure," he says. "I've seen people who have significantly sacrificed in their own retirement in order to give money to children and grandchildren, in many cases in inappropriate ways."

Welch does what he can to properly advise such clients.

"It's their money – they can do whatever they want with it," he says. "But as advisors, it's our job to advise them of the stop, yield and caution signs."